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The goal of the Paris Agreement is to limit global warming to below 2, preferably 1.5 degrees Celsius, compared to the pre-industrial level. Although sustained efforts are being made worldwide to meet that goal, there is a gap between the level of emissions that countries have committed to reducing and the level of emissions scientists predict is necessary to achieve the global warming limitation. In order to close this emissions gap, not only countries, through their governments, must take extensive actions, but also non-state entities like companies.
”According to data by CDP, 80% of the largest global companies already have voluntary emission reduction or energy targets of some form. However, the level of ambition of these targets is seldom in line with the level of decarbonization that scientists indicate is necessary to meet our long-term temperature goal.” (goldstandard.org)
Recent studies show that in the global market capitalization, while more than 64% of public companies report to CDP on climate and environmental impacts, only 1% of private ones do. There is a large gap between private and public companies when it comes to reporting their gas emissions. While 88% of public companies report direct emissions, only 49% of private ones do so. And in what concerns indirect emissions, the gap is even bigger, with 70% of public companies reporting in comparison to only 29% of private ones. Also, private companies are less likely than public ones to set emissions targets.
Closing the emissions gap in COP27
COP27 took place in Sharm EL-Sheikh, Egypt in November 2022 and the conclusions are alarming. Not only we are far from the 1.5 degrees Celsius ambition, but at the pace, things are going around the globe, scientists expect the temperature will rise to 2.4-2.6 degrees by 2100. UN raised an alarm signal for all the countries that signed the Paris Agreement, a signal that goes beyond governments and addresses all entities, private or public, to get more involved in reducing the emission gap.
The Emission Gap Report 2022, made by UN Environment Program, shows that “the world must cut emissions by 45 percent to avoid global catastrophe.” (unep.org).
Of course, even if there are regulations and compliance to follow, challenges may arise concerning carbon markets. Maybe the one that stands out the most is related to transparency in the financial and institutional infrastructure of carbon market transactions. Although the Paris Agreement and its rulebook try to regulate that aspect, countries might not totally respect human rights in their CDM, or even double count the GHG emissions reduction.
