What Does it Mean for the U.S. to Rejoin the Paris Climate Agreement?

January 20, 2021

Joe Biden took office as the 46th U.S. president on January 20th, 2021. As part of his campaign, Biden has signed an executive order that the U.S. will rejoin the Paris Climate Agreement and that he will lead aggressive action on climate change mitigation. But what does the U.S. re-entry into the Paris Agreement really mean for global organizations in 2021 and beyond?

While mostly symbolic, symbols matter

The historic Paris Agreement was ideated in 2014 and agreed upon by nearly 200 countries in 2015 as a result of COP21—the largest and most sweeping agreement of its kind ever negotiated. According to the agreement, each participating nation is required to set emission reduction plans every five years with the goal of limiting global temperature increase to below 2 degrees C. Further, the accord calls for developed nations (including the United States), the largest emitters, to financially assist developing nations in achieving their goals.

The non-binding agreement did not create specific mandates for countries to achieve this goal, nor did it include formal penalties for non-participation/non-achievement, which led to criticism of the effectiveness of the agreement by some parties. As such, the agreement itself was largely emblematic, leaving individual nations to determine how to reduce their carbon emissions, and what policies to implement in support of these efforts.

While the agreement was a historic - if mostly symbolic - achievement, symbols can be incredibly powerful. In 2020 and 2021, we have seen the impact that symbols can have, driven by cries for social justice and the Black Lives Matter movement, as well as the outcomes of the 2020 U.S. elections and other global civil unrest.

The U.S. officially exited the Paris agreement in 2020, but there are still 188 participating countries that account for 79% of global emissions; the U.S. has been the only nation to withdraw to date. Many of these nations are working collaboratively to address climate change and reduce greenhouse gas emissions, with the European Union’s Green Deal as the prime example. While the United States continued to make strides toward combatting climate change through state and locally driven initiatives, public-private partnerships, and corporate commitments, the U.S. exiting the agreement sent a clear message to the rest of the world: that it would no longer lead international efforts or work collaboratively with other nations towards this end.

By rejoining the Paris Agreement on his first day in office, Biden is sending a clear message that his administration will aggressively tackle carbon emissions and support a national transition to a clean energy economy.

Aggressive action on climate change

Although rejoining the Paris Agreement is mostly a gesture of goodwill, Biden has committed that “by 2050, the United States will be a 100 percent clean-energy economy with net-zero emissions,” with enforcement mechanisms in place by the end of his first term to make sure the U.S. stays on track to reach this goal. Biden was free to rejoin the agreement without Senate support; however, there is broad-based, bipartisan momentum for action, driven by the voluntary We Are Still In movement that began in 2017 as a result of Trump’s decision to leave the agreement.

Biden’s administration has also committed to decarbonizing the power sector by 2035, and aims to invest $1.7 trillion in clean energy initiatives. The administration may also implement more stringent standards for energy procurement to stimulate the economy, and local and federal governments are likely to see mandates for the increased adoption of performance contracting to increase resource efficiency. Biden has also promised to encourage electric vehicle (EV) adoption by installing 500,000 new public charging stations by the end of 2030, and will also likely support EV infrastructure expansion via legislative and regulatory measures.

Biden has also indicated that he will look at new standards in fuel economy to drive EV adoption, ensure that U.S. government buildings and facilities are more efficient and climate-ready, and require new green standards for appliances and building efficiency. Legislation requiring public companies to disclose climate risks and greenhouse gas emissions in their operations and supply chain is also on the horizon.

Globally, the United States’ re-entry into the Paris Agreement will “up” the expectations on climate action, spurring global competition, both in emission reductions and innovation/economic development. At COP26 in Glasgow in 2021, it is expected that countries—including the U.S. —will submit more ambitious targets, which will become binding under a new accord requirement on reporting and progress disclosure.

In anticipation of these increasing goals, and to remain competitive, global organizations and corporations or private businesses can plan for increased pressure to act on decarbonization and will likely need to look at Scope 3 emissions and disclosure, seeking to improve sustainability practices across their entire value chain. Socially and environmentally responsible business operations will become “table stakes” for all organizations seeking to be in compliance or to compete.

The U.S. clean energy & electrification transition will create new jobs

The clean energy transition is already underway, but economic concern exists for those whose jobs may be displaced as a result of lower fossil fuel consumption and demand. Enormous fluctuations in the oil market in 2020 have already resulted in the loss of more than 100,000 jobs, while U.S. coal jobs have decreased by 24% since 2016. Biden has stated that he will not ban natural gas hydraulic fracturing (“fracking”) nationally without a transition plan, and he estimates his clean energy plan will create more than 10 million jobs, putting the U.S. at the center of the clean energy economy as part of post-pandemic recovery and growth. Globally, it is estimated that renewable energy could potentially employ more than 40 million people by 2050.

To support these efforts, Biden has already begun filling his climate cabinet and task force. The cabinet will focus on green energy and electrification as a means of facilitating U.S. post-COVID economic recovery, employment, and helping communities affected by fossil fuel generation loss, as well as holding polluters accountable for damages to low-income communities and communities of color, and for black lung disease contracted by coal company workers. Biden and his climate cabinet will also allocate R&D investments in clean energy technology to enable the U.S. to compete effectively as a leading exporter.

Global climate breakthroughs will continue

The planned re-entry into the Paris Agreement demonstrates that the world’s largest economy is doubling-down on investing in the clean energy transition as a means to “build back better” from the COVID-19 pandemic. Not only will this bring the U.S. in line with other global leaders in terms of their carbon neutrality commitments (including the European Union, the United Kingdom, Canada, Japan, and China), but resurging U.S. leadership will also put pressure on other nations to take their commitments more seriously and act more aggressively on decarbonization and electrification.

Given the likely increased momentum from governments, corporations have an even greater role to play in the global effort on climate action. Meeting the aims of the Paris Agreement will take an “all of the above solution,” and corporations are often more nimble than governments, capable of making the transition to efficiency, clean energy, electrification, and circularity more quickly without regulation. Additionally, corporations are historically more innovative and rich in subject-matter expertise that will help to advise and inform public policy, legislative and regulatory solutions that are sure to expand and pass into law in even more countries over the coming years.

To learn more about climate action in 2021, watch our recent webinar featuring speakers from Faurecia, Charles River Labs and WBCSD to see how organizations are working to avoid irreversible and catastrophic climate-related risks, with actionable steps to accelerate the climate journey and build resilience.

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