Introduction
Nearly 200 countries signed the Paris climate agreement. The project's main objective was to reduce harmful gases released into the atmosphere. To restrict global average temperature increases to 1.5 degrees Celsius or less beyond pre-industrial levels, the agreement's stated goal is to address and fund the global warming problem. When it comes to combating global warming, it is up to each country to set and report on its objectives and achievements. Other than diplomatic pressure, there is currently no way to force a country to set targets freely. The European Union and China were particularly critical of President Trump's decision to remove the United States from the Paris Agreement in 2017.
Who Stands to Benefit?
Despite the absence of penalties for noncompliance, many view the Paris Agreement as a positive first step toward a world where fossil fuels are used less, and renewable energy sources are more widely used. Hydrocarbon investment may be reduced if the shift from conventional energy sources and the development of renewable energy sources are sped up. Research and development (R&''D) costs should be high to help with this transition. The high upfront costs of renewable energy are cited by those who are sceptical of the Paris Climate Agreement as proof that it is not cost-effective. It is not practical when compared to the use of fossil fuels.
According to many Paris Climate Agreement supporters, the cost of renewable energy should be compared to the cost of climate change. The Gross Domestic Product suffers when fires and hurricanes strike (GDP). Increases in weather extremes can be directly attributed to global warming. Data collected by the National Oceanic and Atmospheric Administration shows 290 severe weather events in the United States between 1980 and 2021. (NOAA). A total of over a trillion dollars was lost directly from them. Since the turn of the millennium, their frequency has skyrocketed from an annual average of about seven. Average annual events will increase by 100% from 2016 to 2020. In 2020, 22 weather-related disasters in the United States will each cost more than $1 billion.
Potential Investments
Adding more renewable energy sources to your portfolio can help ensure you have enough power to meet your customers' needs even as demand increases. Exchange-traded funds (ETFs) facilitate easy access to these markets. What they provide is instant diversification for a holdings portfolio. Think about putting your money into countries that have ambitious renewable energy plans. If investors pour in, GDP growth could accelerate beyond expectations. The long-term cost of using this alternative energy source may be lower than that of using hydrocarbons, and there may be fewer political risks.
The United States Withdrawal From the Paris Agreement
On June 1st, President Trump officially withdrew the United States from the 2015 Paris Agreement. The Paris Agreement, in Trump's view, would have a terrible impact on the American economy and put the United States at a disadvantage for the foreseeable future. To comply with Article 28 of the Paris Agreement, the United States must not withdraw from the accord before November 2, 2020. Until then, the United States must comply with the pact's requirements, such as reporting annually to the United Nations on its greenhouse gas emissions.
Structure of the Paris Agreement
Not until at least 55 countries representing at least 55% of global emissions had signed on could the accord go into effect. From April 2016 to April 2017, the parties received formal commitments to the agreement. When a nation's leader decided to join the pact, the country had to get government approval or pass domestic law to join formally. Since the pledges made by states to reduce their carbon emissions are not adequate to fulfil temperature goals, scientists have cautioned that the deal is insufficient to avert a global climate catastrophe.
The agreement's ability to compensate for climate change-related harm in the world's poorest and most at-risk places has also been called into question. Parts of South and Central America, as well as much of South Asia and sub-Saharan Africa, fall under this category. Every five years, governments must report their steps and plans to reduce greenhouse gas emissions. When the Paris Agreement enters into force in 2020, wealthy countries must donate $100 billion to developing nations yearly. The total amount will increase with time.
Conclusion
Several countries have pledged efforts in recent decades to lessen the impact of climate change. Despite increased diplomatic efforts, the world may soon face horrific consequences of climate change. Over two hundred countries have finally agreed on a global strategy to reduce and stabilise greenhouse gas emissions, and that plan is the Paris Agreement. There has been a lot of criticism of the agreement, but it may ultimately result in more funding being allocated to renewable energy. Ultimately, this could provide investors with more leeway in their choices. In particular, exchange-traded funds (ETFs) that invest in renewable energy and nations with similar economies may be of interest to track.
