The Paris Climate Agreement

Anthropogenic climate change is likely the "wickedest" of our "wicked problems." The term "wicked problems" was coined in 1973 by Horst Rittel and Melvin Webber. See this page from Stony Brook University for a full explanation if you are interested, but as described by Jon Kolko at Stanford University, a wicked problem is one that is "a social or cultural problem that is difficult or impossible to solve for as many as four reasons: incomplete or contradictory knowledge, the number of people and opinions involved, the large economic burden, and the interconnected nature of these problems with other problems." Climate change checks all of these boxes (and then some). For starters, the fact that the issue is global in nature and involves every sector of human activity - in terms of both causes and impacts - makes it particularly difficult to address.

There has been a formal global effort via the auspices of the United Nations since the United Nations Framework Convention on Climate Change (UNFCCC) was formed in 1992. The UNFCCC is a "a framework for international cooperation to combat climate change by limiting average global temperature increases and the resulting climate change, and coping with impacts that were, by then, inevitable" (source: UNFCCC). The UNFCCC is the only global body capable of deliberating international climate-related agreements and protocols. There are currently 197 countries that are Parties to the Convention. The first major agreement resulting from the UNFCCC was the Kyoto Protocol in 1995, which the U.S. never ratified.

On December 12th, 2015 the Paris Agreement was adopted on the last day of the 21st Conference of the Parties (COP 21), aka the Paris Summit. (The COP is the annual meeting of the UNFCCC where they discuss and hammer out climate goals. The first COP was in 1995, when the Kyoto Protocol was formalized. The last COP [COP 25] was held in Madrid, Spain. COP 26 was due to take place in Glasgow, Scotland in 2020 but was postponed until 2021 due to COVID.) The goal of the Paris Agreement is to keep "a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius" (source: UNFCCC). Coming to such a wide-ranging multi-stakeholder agreement inevitably comes with compromises, of which there were many. Despite its flaws, arriving at this agreement was seen as a major accomplishment and encouraging first step toward establishing global climate goals. As you may know, the Trump Administration announced its intention to withdraw from the Agreement soon after President Trump was sworn into office. The Agreement was structured such that it was not possible to withdraw immediately, but the withdrawal process did officially begin in November of 2019. True to his campaing promise, President Biden issued an executive order to re-enter the Agreement in January of 2021.

The Paris Agreement is a major nonmarket action that has the potential to impact international and domestic energy markets at multiple scales. The Agreement will continue to be a consideration in global energy markets moving forward. Please read the articles below to gain an understanding of some of the history, process behind, and implications of this historic Agreement.