The 21st Conference of the Parties to the United Nations Framework Convention on Climate Change concluded last month with the approval of a landmark climate accord that seeks to combat climate change on a global level. The structure of the agreement departs from prior climate agreements and protocols, adopting a “steer rather than row” approach to curbing carbon emissions – the open question is, however, whether countries will row fast enough. For more on the Paris conference and the agreement that came out of it, read on!

In addition to more traditional measures like climate benchmarks and funding commitments, the deal facilitates and encourages the advancement of a low carbon economy for policy makers and corporate actors seeking a competitive advantage. The agreement goes beyond simply beseeching people to change their ways, instead adopting incentive systems for leaders and citizens to make it in their own interest to advance a low carbon economy. It seems more likely now than at any prior time that wide spread carbon pricing will be considered and adopted at many national and sub-national levels. Additionally, the agreement utilizes Intended Nationally Determined Contributions (INDCs) – public outlines of what post-2020 climate actions these nations intend to take under the new agreement – for the first time ever. The flexibility of the agreement, via the INDCs, will account for much of its success.

The 31-page agreement commits nations to reduce greenhouse gas emissions and mitigate climate change beginning in 2020. The accord calls for keeping global warming to below two degrees above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius. Additional measures in the agreement include:

– Achieving carbon neutrality by the second half of the century
– Adapting to adverse climate impacts and fostering climate resilience and low GHG development in a way that does not threaten food production
– Making consistent financing flows with a pathway toward low GHG emissions and climate resilient development.

Some of the agreement’s core tenets are legally binding, while others – including much of the accord’s strongest language – are not. One legally binding portion of the accord requires countries to reconvene and increase their GHG reduction commitments every five years beginning in 2020, and how well countries are meeting their commitments will be examined every five years beginning in 2023. The agreement also addresses loss and damage, and calls on developed nations to increase their financial support before 2020 to achieve the $100 billion annual global climate fund goal for mitigation and adaptation efforts. The agreement further creates a framework for transparency that includes independent monitoring, reporting, and verifying national emissions as means for ensuring countries’ adherence to the agreement.

While most of the significant diplomatic legwork is completed, the agreement must now navigate an official ratification process before it formally is put into effect. The pact now requires ratification beginning in April by legislatures from at least 55 countries representing 55 percent of the world’s emissions or it to enter into force, which must happen by 2020.

President Obama praised the accord, as did Senators Sheldon Whitehouse (D-RI), Chris Murphy (D-CT), Jeanne Shaheen (D-NH), and others on Capitol Hill and in the environmental and public health communities, though Senate Environment and Public Works Committee Chair James Inhofe (R-OK) opposed it, and Senate leadership continues to reiterate that the United States is not legally bound to any international climate agreement without Congressional approval. In particular, Republicans sought to hinder American contribution to an international pool of public and private money directed to help poorer nations prepare for climate change, the Green Climate Fund (GCF). The recently passed spending deal, however, allows Obama to find funding elsewhere in the federal budget, essentially preventing the Republican-controlled Congress from hindering this element of America’s Paris commitment.

While the agreement is certainly a sign of major progress, it is also evident that the world is in no position to rest on its laurels following the success of the Paris conference. Climate Action Tracker released a report on December 8 concluding that if nations follow through on their INDCs to the fight against climate change, the globe would warm by about 2.7 degrees Celsius, suggesting that increasing ambition is necessary to reach the two degree Celsius and below goals outlined in the Paris pact. While the tangible impact of the agreement remains to be seen, one thing is certain: it is primed to have far reaching effects on energy markets for years, if not decades, to come.