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The Paris Agreement signals increased climate awareness and potential changes in the business environment as an economy decarbonizes. Ratification of the Paris Agreement could heighten climate-related transition risks, especially for companies in high-emitting industries. This research analyzes the impact of Paris Agreement ratification on the debt financing decisions of publicly listed companies in Southeast Asian economies. Our empirical evidence shows that, after announcement of Paris Agreement ratification, firms in high-emitting industries have leverage and financial leverage that are an average of 1.8% and 4.2% lower, respectively, than firms in low-emitting industries. Firms in the region also witnessed higher risks 2 years after ratification, and these risks do not differ significantly between high- and low-emitting industries. This finding implies that firms become riskier under heightened transition risks, and this influences their financial decisions. Governments might thus consider introducing policies that facilitate their response to a low-carbon transition.

China has set a goal of reducing its CO₂ intensity of GDP by 60–65% from the 2005 level in 2030 as its nationally determined contribution (NDC) under the Paris Climate Change Agreement. While the government is considering series of market and nonmarket measures to achieve its target, this study assesses the economic consequences if the target were to meet through a market mechanism, carbon tax. We used a dynamic computable general equilibrium model of China for the analysis. The study shows that the level of carbon tax to achieve the NDC target would be different depending on its design features. An increasing carbon tax that starts at a small rate in 2015 and rises to a level to meet the NDC target in 2030 would cause smaller GDP loss than the carbon tax with a constant rate would do. The GDP loss due to the carbon tax would be smaller when the tax revenue is utilized to cut existing distortionary taxes than when it is transferred to households as a lump-sum rebate.

We employ a numerical economy-wide model of India with energy sector detail to evaluate the impact of achieving India’s commitments to the Paris Climate Agreement. We simulate targets for reducing CO₂ emissions intensity of GDP via an economy-wide CO₂ price and for increasing non-fossil electricity capacity via a Renewable Portfolio Standard. We find that compared with the no policy scenario in 2030, the average cost per unit of emissions reduced is lowest under a CO₂ pricing regime. A pure RPS costs more than 10 times the cost of a CO₂ pricing regime. Projected electricity demand in 2030 decreases by 8% under the CO₂ price, while introducing an RPS further suppresses electricity demand. Importantly, a reduction in the costs of wind and solar power induced by favorable policies may result in cost convergence across instruments, paving the way for more aggressive decarbonization policies in the future.

Using an economy-wide model, we evaluate the impact of policies to meet South Korea’s Paris pledge to reduce greenhouse gas (GHG) emissions by 37% relative those under business as usual (BAU) in 2030. Simulated BAU emissions in 2030 are 840.8 million metric tons (Mt) of carbon dioxide equivalent (CO₂e), indicating that economy-wide emissions should be constrained to 529.7 MtCO₂e. Under South Korea’s Emissions Trading System (KETS) and fuel economy standards, a 2030 carbon price of $88/tCO₂e is needed to meet this goal. Without considering benefits from avoided climate damages, these policies reduce 2030 GDP by $21.5 billion (1.0%) and consumer welfare by 8.1 billion (0.7%). Declines in sectoral production are largest for fossil-based energy sectors and chemical, rubber and plastic products, and iron and steel sectors.

“The common but differentiated responsibilities” requires that participating countries in the Paris Agreement need to clarify their national emission reduction priorities and develop practical and feasible plans based on their local conditions. This paper aims to estimate the CO₂ emission efficiency and the potential emission reduction of the Paris Agreement contracting countries and identify the key influencing factors of CO₂ emission efficiency for the period of 1991–2014. A nonradial directional distance function, the metafrontier approach, and the bootstrapped truncated regression model are used. The following are the main conclusions: (1) China makes the highest annual potential CO₂ emission reduction of 2133.13 billion tons. (2) The technology gap appears to be a major contributor to the potential CO₂ emission reductions in the low income group (82.87%) and the lower–middle income group (66.01%), and thus these economies should pursue technological innovation to improve carbon emission efficiency; the potential CO₂ emission reductions in other groups are mainly the result of management inefficiency (with 57.52% and 78.38% of potential emission reductions by the upper–middle income and high income countries coming from management inefficiency). Therefore, some countries in the specific income group exhibit different emission reduction focus. (3) According to a regression analysis on the CO₂ emission efficiency contributing factors, the progress of total factor productivity and improvement of management level can improve the CO₂ emission efficiency. This study might be the first attempt to decompose the potential CO₂ emission reduction of these countries and provides each country with targeted, effective emission reduction priorities.

The Paris Agreement of 2015 uses Nationally Determined Contributions (NDCs) to achieve its goal to limit climate change to well below 2^°C. Article 6 allows countries to cooperatively implement NDCs provided they do not double-count mitigation. We estimate that economic efficiency gains from cooperative implementation of existing NDC goals using Article 6 could reduce the cost of achieving NDC goals in 2030 to all parties by $\sim$$$300\times 10^9$, which if reinvested in additional emissions mitigation could add 9 billion tons CO₂/year mitigation, beyond the 8 billion tons CO₂/year currently pledged in 2030. We estimate that more than half of the 2030 gains could come from nature-based measures, but long-term potential for nature-based measures is more limited. How much or even if this economic potential can be realized is uncertain and will depend on both the rules and their implementation.

Asia, particularly China, has been a story of rapid economic growth, rising to a prominent position in the global economy. Continued rapid growth suggests that Asia will be a source of substantial future greenhouse gas (GHG) emissions as well. Despite modest declines in emissions in industrialized countries, such as the United States and the European Union (EU), global emissions will not come close to meeting the Paris targets without substantial mitigation actions in Asian areas. In this regard, we initiated this topical issue and tried to study how Asia can contribute to the global effort to meet the 1.5^∘C and 2^∘C targets, from both national and industrial levels. The papers accepted bring insightful understandings and fresh perspectives to policy making and climate governance in Asian economies. We believe that these studies well contribute to the extant literature on both climate economic methodologies and regional climate policy research.

A general consensus has been developed to proactively address climate change and promote green and low-carbon development in the international community. China, as a responsible major developing country, takes green and low-carbon development not only as its due international obligation to tackle global climate change, but also a priority in the implementation of the “Five Key Concepts for Development” (http://keywords.china.org.cn/2016-03/01/content_37907679.htm) and the realization of the “Two Centenary Goals” (http://www.china.org.cn/china/china_key_words/2014-11/18/content_34158771.htm). In this paper, the author reviews the major progress in tackling climate change worldwide in recent years, explores the nature of climate change based on the experiences of developed countries and China’s choice of development path, and analyzes China’s achievements and future development potential in green and low-carbon development.

The importance of the public finance in tackling climate change has been widely recognized by the global communities. As the operating entity of the financial mechanism of the UNFCCC and the Paris Agreement, the $10.3 billion Green Climate Fund (GCF) holds a potential to be the champion in the international climate finance architecture. Within two and a half years, the GCF approved 76 projects worthy of $3.7 billion and has established partnership with 59 accredited entities. Integrating different concerns into its governance and operational modalities, the GCF maintains an inclusive participation and has profound implication for the international climate change cooperation. While with these achievements, the GCF still faces financial and policy challenges going forward. If the current pace of the project approval continues, the GCF will soon exhaust its resource. The existing policy gaps will also jeopardize GCF meeting its climate goals. To ensure a sustainable and bright future, the GCF needs to take advantage of its opportunities and address the challenges in a wise and strategic way. Given the real scarcity of the public resources available, a top-down combined with bottom-up replenishment modality may be worth exploring.

Climate change has impacts on global society in different aspects, including those on the trade industry. Similarly, the trade industry contributes to global emissions of Greenhouse Gases through different technologies involved, and different rules adopted by the World Trade Organization (WTO) or related agreements. Such circulation of impacts implicates that neither climate change agreements nor the WTO can deal with climate change alone, but through international cooperation. Therefore, this study explores the status of international cooperation between the WTO and the Paris Agreement for addressing climate change in the trade industry. It also assesses different challenges faced by such cooperation, and proposes recommendations to addressing those challenges.

Climate change has been widely recognized as a global challenge that must be addressed in the twenty-first century. As an important step toward a post-2020 climate regime, the Paris Agreement has shown great achievements as well as future directions of global climate mitigation. Although some key features can be found in the mitigation provisions of the agreement, such as dual goals of temperature increase, reliance on “nationally determined contributions,” the blending of market and non-market elements, and ambiguity in financial and technology transfer, yet remaining debates including the allocation of responsibilities and the fairness of international transfer of mitigation outcomes will continue to affect the future of global climate governance. Furthermore, new challenges have also emerged after the Paris deal. Political and economic uncertainties, “carbon leakage” among industrializing countries, and the overgrowth of climate financial institutions will all generate impacts on future climate mitigation efforts. There is no ready panacea to these problems. Nevertheless, a few options of policy and institutional innovation at the technical level should be considered to generate incremental progress.

President Trump’s decision to withdraw the United States from the Paris Agreement on Climate Change is both a major reversal of the Obama administration’s climate policy and a huge blow to global climate governance. The comprehensive regression of President Trump’s climate policy manifests mainly in three aspects: abolition of the clean energy plan, exit from the Paris Agreement, and a return to traditional energy policies, which reflect the cyclical and volatile nature of the U.S. climate policy. With its lasting negative impact, the China-U.S. cooperative leadership in global climate governance is stranded. In this light, China should strive for a bigger role in leading global efforts to address climate change and enhance cooperation through various mechanisms. Under the current U.S. policy environment, China can still strengthen cooperation with the United States in such fields as traditional energy, infrastructure investment, global energy market, and green finance.

As the world’s largest greenhouse gas emitter, China has been a key party in global climate negotiation. External perceptions of China’s role in climate negotiation are significant for China’s domestic policy-making process and international climate efforts. Based on the case studies of two most historic climate talks, the Copenhagen and Paris climate conferences, this article attempts to examine the evolution of external perceptions on China’s role in international climate negotiation by three criteria: acceptability, credibility and constructiveness. The study shows that external perceptions of China’s role in international climate talks have changed considerably since 2009. At the Copenhagen conference, China was regarded as a “dead weight” or even a “wrecker,” though it managed to attain most of its negotiating goals. At the Paris conference, however, China was widely recognized as a global climate leader whose endeavor was indispensable for the conclusion of the Paris Agreement.

The 2015 international Paris Agreement called for pursuing efforts to limit the changes in climate to 1.5^∘C above pre-industrial levels. This study uses two approaches to re-examine this feasibility more fully. The observed trends in the temperature record provide one means to estimate when 1.5^∘C will be reached. Examination of the remaining allowed carbon emissions provides another approach. The temperature record and the observed trends in temperature over recent decades suggest that 1.5^∘C will be reached by 2032–2042. Consideration of the equivalent amount of CO₂ reveals the ranges of 266, 366 and 531 GtCO₂-eq still allowed for 67%, 50% and 33% probabilities, respectively, of staying within the temperature limit. At the current rate of emissions, the 50% limit would be reached in eight years. If an emissions reduction of 4% per year beginning in January 2023 is considered, the 67% likelihood for staying within the 1.5^∘C limit is passed in 2030 and the 50% likelihood is passed in 2035. As a result, humanity is very unlikely to meet the identified targets needed to keep the global temperature change to 1.5^∘C and the SSP1-1.9 scenario assumptions for future emissions toward enabling a limit of 1.5^∘C are also extremely unlikely.

In December 2015, 195 countries committed to specific goals on climate action under the Paris Agreement. These goals are pursued to a large extent at the national level, as expressed by Intended Nationally Determined Contributions (INDCs) submitted by countries in the run up to the Paris Climate Change Conference. When ratified, INDCs become NDCs. While diverse in their methodology, composition, and metrics, NDCs represent countries’ commitments to the achievement of the Paris Agreement. NDCs also represent targets for domestic strategic priorities for climate sustainability in the broader context of national long-term strategies, strategic plans, the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs). Hence, the concept of “NDC-aligned finance” is more clearly demarcated than that of “climate finance” in the context of sustainable development. NDC-aligned finance ensures support to the implementation of country commitments to the Paris Agreement and therefore countries’ strategic priorities on climate action. In short, this work looks at how and where funds are flowing from institutions of the like of the World Bank to finance countries’ NDCs. This is to recognize and foster this type of finance and to allow for greater scale and success in averting climate change.

Investing in a Time of Climate Change — The Sequel (the Sequel) documents Mercer’s latest climate scenario model for assessing the effects of both climate-related physical damages (physical risks) and the transition to a low-carbon economy (transition risks) on investment return expectations. The Sequel models three climate change scenarios, a 2°C, 3°C, and 4°C average warming increase on preindustrial levels, over three timeframes — 2030, 2050, and 2100…

The Carbon Tracker Initiative is a London-based non-for-profit independent financial think tank established in 2011 and researches the impact of climate change and energy transition on the financial markets. Its team of financial market, energy and legal experts are focused on raising the awareness of the impact that an energy transition to a low-carbon future will have for fossil fuel companies, investors and the capital markets…

2° Investing Initiative (2°ii) is a global think tank whose mission is to align the financial markets with the goals of the Paris Agreement.

Renewable energy costs are now below those of fossil fuels. Five years ago, fossil fuels were the cheapest baseload. The collapse in renewable costs means that for 85% of the world, renewable electricity is the cheapest source of new baseload. By the early 2020s it will be every major country. Because of the rise of cheap renewables, the fossil fuel system is ripe for disruption. This disruption will be having profound financial implications for investors as a quarter of equity markets and half of corporate bond markets are “carbon entangled”…

The Paris Agreement (UN, 2015) has established a global target of keeping the increase in the global average surface temperature to “well below” 2°C relative to preindustrial levels, and to pursue efforts to limit the temperature rise to 1.5°C. There are numerous scenarios for greenhouse gas (GHG) emission trajectories that are consistent with the climate stabilization at different levels. Many examples are included as part of the scenario assessment by the UN Intergovernmental Panel on Climate Change (IPCC, 2014) that summarizes the results from the scientific literature from different modeling groups. Fossil fuels are a primary source of human-induced GHG emissions and fossil fuel producers recognize the importance of energy-related emissions (Shell, 2013; BP, 2018; ExxonMobil, 2018). To provide an assessment of the temperature implications of the latest Shell scenario called “Sky” (Shell, 2018), we apply the MIT Integrated Global System Modeling (IGSM) framework (Sokolov et al., 2018) that combines a representation of a global economy and the Earth components (land, ocean, atmosphere).