We'll always have Paris
Putting last year's climate deal into action will be the main theme of 2017
The climate focus in 2017 will shift to the national level, as the ratification of the Paris Agreement gives way to implementation. Expect significant developments in carbon trading in China, but not much news from the US.
More than 190 signatories to the treaty must start developing institutions and measures to help achieve the emission-reductions goals they set for themselves. They will, at least, have a little time. The Paris Agreement's provisions come into effect in 2021, after the end of the Kyoto Protocol's second compliance period. By then member states should have written the rulebook and developed the bodies that govern, among other things, international emissions trading, financial assistance and accurate greenhouse-gas (GHG) accounting.
Nationally Determined Contributions (NDCs) spell out how the targets will be met. For some countries, they will mean greater direct regulation; for others, accessing international carbon markets and finance mechanisms. Some smaller nations should submit NDCs in 2017. But the largest emitters, including China, Europe and the US, may not reveal their plans until closer to a scheduled "global stocktaking" meeting in 2018. And the US may not even bother.
Donald Trump's victory in the US presidential election is significant for global climate momentum. He has promised to tear up the Paris Agreement and stop any further US funding of UN climate programmes. He is surrounding himself with climate sceptics such as Myron Ebell who are even more opposed to climate action than he may be.
With hindsight, nations were right to worry about a Trump presidency and work overtime to ratify the Paris Agreement before the election. Under the terms of the treaty, any party may withdraw only after three years, and even then it must give a year's notice. Trump might be able to pull the trigger, but the withdrawal would only take effect after his first term.
The Environmental Protection Agency's Clean Power Plan, unveiled in 2015, aims to give states the option to regulate emissions at source, or to establish emissions-trading systems, to achieve a 30% cut in GHG discharges. Legal challenges have held up the plan and the result of cases being heard in the US District Court of Appeals will set the tone for 2017, at least in America. The losing side will also try to drag it into the Supreme Court. A Trump-led Environmental Protection Agency may try to withdraw the plan, or draw its teeth.
So next year will see some legal squabbles. Many American states already participate in carbon markets and these will continue whatever the outcome of the court fight. But both the northeastern Regional Greenhouse Gas Initiative and the Californian markets are facing opposition as they work to put post-2020 goals in place.
Elsewhere, 2017 will see the launch of the world's largest emissions-trading system. It will also be a year of debate about how climate-related risk affects corporate financial performance. China will get lots of attention. The government will launch a nationwide cap-and-trade system to succeed seven regional pilot systems. The market will place limits on emissions for the power, chemicals, steel, pulp and paper and aviation industries. The sheer size of China's market - and concrete action from the world's largest polluter to tackle emissions - will spur other countries into their own plans.
One topic has the potential to eclipse both the climate negotiations and the implementation of carbon markets in 2017. The Financial Stability Board's (FSB) Task Force on Climate-Related Financial Disclosure should deliver its final report in March. It will provide recommendations for regulators to strengthen rules on corporate reporting to include the financial risks from climate change. The Task Force was established by the G20, and is chaired by former New York City mayor Michael Bloomberg. It will be a victory for the financial and environmental groups that demanded firms disclose how their business will be affected by extreme weather, or by tighter regulations to avoid the impacts of climate change.
In 2017, you'll hear more about stranded assets that must stay in the ground if the world is to keep temperature increases to less than 2° Celsius. The Paris Agreement, and its statement about the world's remaining "budget" of GHGs make stranded assets a real financial matter.
For now, no rules are in place demanding companies reflect this financial risk in their corporate reporting. In 2017, the FSB will change that.
This article is part of Outlook 2017, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here