What if… Discussing the effects of the Paris agreement on the energy markets

This paper establishes links between energy scenarios, future energy system pathways and greenhouse gas (GHG) emissions on the one hand and the Paris Agreement (PA) on climate change on the other. The PA’s primary objective is to limit ‘the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels’. The energy sector with its overwhelming contribution to GHG emissions plays a crucial role in the UNFCCC’s ambitious drive to reach this objective. Despite the relevance of energy for climate change mitigation, however, historical links between carbon and energy markets have been surprisingly weak, while the lack of a solid demand for GHG emissions reductions has constantly undermined carbon and green energy markets. Only the clean development mechanism (CDM), which was established under the Kyoto Protocol in 1997 to reduce GHG emissions while contributing to sustainable development, has proven comparatively successful in mobilising efforts towards climate change mitigation in the energy sector. Based on these findings, this paper analyses components of the PA with a particular focus on Article 6, which provides the basis for the development of a mechanism similar to the CDM and a legal framework that may potentially guarantee a consistent and durable demand of GHG reductions. Introducing the basics of a reliable policy roadmap based on such considerations the paper suggests that Article 6 and its development will play a crucial role in shaping energy scenarios, future energy system pathways and associated GHG emissions.