The Nickel Report

On Earth Day, as expected, the Biden-Harris Administration continued its efforts to fulfill campaign commitments on climate change.  The big announcement came on what is called the “Nationally Determined Contribution” or NDC.  The Administration announced that the United States will aim to cut its greenhouse gas emissions from 2005 levels by 50% by 2030.  This reflects an increased commitment from the United States’ prior commitment of cutting emissions by 25% from 2005 levels by 2025.

What is the NDC?  The NDC is an important number the significance of which many people may not understand fully.  It represents the commitment that countries who are signatories to the 2015 Paris Climate Agreement intend to meet.  The Paris Agreement was adopted in 2015 to address the impacts of climate change with the aim of limiting global temperature increases in this century to “well below” 2° Celsius, and pursuing efforts to limit it to 1.5° Celsius, compared with pre-industrial levels.  The Paris Agreement also committed to increasing the ability to adapt to adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, as well as to making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

To achieve these goals, the Paris Agreement provides that each country adopt an NDC that it self-determines.  Under Article 4, Paragraph 2, each country that is a party to the agreement is required to prepare, communicate, and maintain successive NDCs.  NDCs are submitted to the United Nations Framework Convention on Climate Change Secretariat every 5 years and each successive commitment needs to represent progress over the prior one and “reflect its highest possible ambition.”

Why is the U.S. NDC different from other countries?  The Paris Agreement uniquely gives each government the flexibility to tailor its pledge to greenhouse gas emissions reductions.  NDCs must hew to the “highest possible ambition” as noted but also will “reflect [] its common but differentiated responsibilities and respective capabilities, in the light of different national circumstances.”

The culmination of each government’s decisionmaking process is the NDC.  One reason that the flexibility was offered was because the Paris Agreement provides mechanisms to increase the goals over time, in part, based on the need for such reductions.

What supported the new NDC announcement?  First, the Biden-Harris Administration rejoined the Paris Agreement as soon as it took office.  Second, there have been calls from numerous sectors to increase the commitment that was made in 2015.  For example, a group of over 400 businesses sent an open letter to President Biden on April 21, 2021, calling for adoption of the 50% by 2030 commitment for the NDC.  Similarly, back in December 2020, several major companies announced their commitment to “net zero” emissions by 2050.  Together, all of these supported a more aggressive move than the Obama Administration’s prior NDC.

If the NDC announcement does not have the force and effect of law, what difference does it make?  The NDC is a commitment in the Paris Agreement, but the Paris Agreement itself does not create binding obligations on any particular business or even on the government of the United States.  That being said, the NDC commitment will be cited by agencies as they exercise the authorities already given them by the Congress under various statutes, like the Clean Air Act.

What about other countries’ Earth Day announcements?  One of the biggest criticisms levied at the Paris Agreement when the United States withdrew four years ago was that some countries were not carrying their fair share of the load.  China for example had made commitments to net zero emissions by 2060, but the concerns expressed were that the commitment was not enforceable and unlikely to be met, given the lack of detail and that country’s heavy reliance on coal.  Today, China stated that it would “strictly limit increasing coal consumption” in the next 5 years and would phase it down in the following 5 years, reiterating China’s position that the west needed to act faster than the east because of longstanding development and emissions.  Canada announced a greenhouse gas reduction of 40-45 percent from 2005 levels by 2030 and Japan to 46% below 2013 levels by 2030.  But Russia stated it would “significantly reduce” net emissions by 2050, with no firm target and India committed only to install additional renewable capacity, without addressing existing sources of emissions.

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The new NDC fits with the Biden-Harris Administration’s “Whole of Government” approach to addressing climate change.  Actions will go well beyond the Clean Air Act and touch a host of agencies and invoke a range of statutes as the government seeks to meet the aggressive NDC it has established.  To date, we have seen action not only from EPA to move the climate agenda, but also from the SEC, DOE, DOT, Department of State, USDA, Department of the Interior, and more.  In today’s roll-out, EPA Administrator Regan recast it as a “Whole of Society” approach.  While regulatory details will be forthcoming – businesses can expect the results to generate “Whole of Company” impacts on operations, modernizations and expansions, supply and distribution chains, financial disclosures, and hiring practices, to name a few.