What Does U.S. Involvement in the Paris Agreement Mean for Shipping Strategies?
March 2, 2021
The commencement of the Paris Agreement in 2015 set a precedent for creating targets aimed at cutting emissions to combat global climate change. This climate change mitigation plan, among others, has contributed to building a common ground that enables nearly all countries to participate in reducing the world’s collective carbon footprint.
In doing so, traditional fossil fuels have been put under a microscope. As strategies down to the individual business level have focused on cleaning up the supply chain, shippers and their transportation networks have been stuck in the middle of a slow transition to a cleaner energy future. This is especially true in the U.S. which, after a short hiatus at the end of 2020, signed to rejoin the Paris Agreement on Joe Biden’s first day in the presidency.
Why Did the U.S. Leave the Paris Agreement?
On paper, the Paris Agreement’s objectives are straightforward:
To limit global warming to 1.5 degrees Celsius compared to pre-industrial times
To competitively implement zero-carbon solutions in industries accounting for over 70 percent of emissions by 2030
The path to achievement, however, is not as black and white.
Some countries, like Canada, have already rolled out national carbon pricing mechanisms and established legislation like the Pan-Canadian Framework centered on the Paris Agreement’s climate ideals. Others, like the U.S., have had a turbulent relationship with the accord and its terms to meet a 25-30 percent emissions reduction target by 2025 (compared to 2005 levels).
Former President Donald Trump thought the agreement would bring headwinds that permanently undermined the U.S. economy, the oil industry, and require an insurmountable financial burden. This ultimately led the U.S.—one of the world’s leading carbon emitters—to file its intent to controversially withdraw in late 2019, which went into effect in November 2020. The U.S. became the only country to officially depart from the Paris Agreement, which is now comprised of countries representing 97 percent of global emissions.
What is the U.S.’ Contribution to the Paris Agreement?
The U.S. withdrawal last November coincided with the 2020 presidential election. With Joe Biden now in office as of January 2021, the U.S. will resume participation due to his more aggressive and progressive green energy agenda. Moreover, the federal government will likely formulate a climate-centric roadmap that aligns to those independently drafted by the corporations and governing bodies that have supported the Paris Agreement all along.
Interested in reading more about what a Biden presidency could mean for shippers? Read more on our blog.
The resumption of the nation’s participation, and the seemingly inevitable push to become a global climate advocate, means the U.S. will continue reporting emissions-related progress to the United Nations and other key stakeholders. Additionally, the U.S. may choose to bring back the funds that were withdrawn by President Trump intended to support smaller countries with fewer resources to transition away from fossil fuels. Further investment in things like renewable energy, large-scale electric vehicle infrastructure, and other alternative energy adoption is also likely, but timelines and an action plan are unclear for the time being.
Keep in mind the Paris Agreement is currently just a framework intended to encourage economies to create actionable plans that progressively lower emissions. It is not a legally binding commitment with concrete agendas that penalizes those that fail to meet certain objectives, but it does foster competition to see which countries pull the most weight.
What Does the U.S.’ Return to the Paris Agreement Mean for Shippers?
Long-standing carbon programs like California’s Low Carbon Fuel Standard have laid a foundation that the federal government may build on if it chooses to implement a national solution. This would lead to incentives for stakeholders—like shippers moving goods to market—and opportunities for captured benefits if they choose to adjust operations to low-carbon solutions that coincide with these efforts. Those shippers that do not change behaviors will face on-costs of fossil fuel usage and potentially restrictive policies for fossil fuel use in certain regions.
The Paris Agreement has been and will continue to be central to many corporate pledges internationally. That said, expect little-to-no change in the immediate term that would have any profound effect on the fossil fuels or commercial transportation industries. The Paris Agreement does, however, set a landscape where the value of energy management is going to increase because shippers will see heightened climate policy action.
Ultimately, rejoining the Paris Agreement signals that the U.S. is on a continued trajectory toward a future of cleaner supply chains and lower emissions restrictions. Shippers that create strategies with today’s policy in mind while investing in making their operations future-proof, will be best-prepared to thrive in a more sustainable future.