COP21: ‘Miracle’ deal but business as usual


December 14, 2015

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It’s a Christmas miracle!

French president Francois Hollande said in June that it would take a “miracle” to get the 195 countries at the United Nations COP21 climate talks in Paris to reach an agreement. Well, the miracle has happened. On Saturday, France unveiled a new global deal aimed at keeping global warming below 2°C from pre-industrial levels.

The deal has been heralded as a turning point in the battle to keep down global carbon emissions, and US president Barack Obama said it was “the best chance we have to save the one planet we have”. We welcome the fact there has been an agreement.

However, this ‘miraculous’ deal is too vague to drive a major shift from fossil fuel investors towards renewables including wind.

The nations may have agreed to the principle of keeping global warming “well below” 2°C, but the policies here alone do not put the world on track meet this target. We also do not have the interim goals that enable institutional investors to plan long-term energy investment strategies. And there are questions on how nations should meet their long-term goals, and how to track their progress.

This means those in renewables can tout around this agreement to make the case for why wind and other renewables are vital, but the deal itself gives little clarity for investment strategies.

And there is the always-thorny issue about who should foot the bill.

The agreement says that every country with the resources to invest in tackling climate change should do so, and it includes a $100bn climate finance package for developing nations by 2020. Even so, we see little resolution on how exactly this should be split. The large economies in Europe and North America want everyone to make fair contributions, but huge developing economies such as China and India do not want to ditch coal if it harms their growth.

Two weeks of negotiation have not put this fundamental debate to rest. As it happens, both China and India are currently enthusiastic supporters of the expansion of wind power, but that could change — and the COP21 agreement would be powerless to force them.

So now COP21 is over and, for those investing in wind, it is back to business as usual.

For developers and manufacturers, that means continuing to invest in new technology and approaches to asset management that can drive down the cost of wind power. One good aspect of COP21 is that it has shown further investment in technology is needed if we are to keep global warming below 2°C, and storage will be crucial.

For investors, that means continuing to hunt deals in established and emerging markets, depending on risk appetite. The Intended Nationally Determined Contributions documents that countries submitted before COP21 to outline their plans to tackle climate change will give investors some good insights on the governments that are most pro-renewables,

And for corporates, the challenge will be to deliver on the high-profile commitments they made to buying power from renewable sources. Backtracking now would be terrible PR.

But the wind industry as a whole is still reliant on supportive pro-wind policies at national rather than international level. There is little in this COP21 to stop the likes of China, EU nations or the US turning their backs on wind if it no longer meets their policy goals.

So, good to get the deal — but the result is far short of miraculous.

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