Dive Brief:

• Representatives from nearly 200 nations reached a historic agreement in Paris, France on Saturday that aims keep the impact of climate change "well below" 2 degrees Celsius. The deal represents the first time that nearly every nation in the world has committed to lowering greenhouse gas emissions, and includes provisions to limit warming to 1.5 degrees Celsius if possible. 
• Under the deal, the U.S. agreed to cut emissions 26% by 2025. The agreement requires countries to periodically return to the negotiating table to evaluate emissions reduction commitments and efforts and includes legally-binding provisions to compel countries to report on emissions levels using a universal accounting system.
• The agreement is not expected to result in any significant short-term changes for the U.S. power sector, but analysts expect the deal to function as a signal for future carbon constraints and regulations to investors, helping them make better decisions on which assets to invest in today.

Dive Insight:

The COP-21 talks in Paris, which convened on Nov. 30, were the result of nine years of international climate negotiations and were widely billed as the last, best hope of striking a broad agreement to limit the emissions of greenhouse gases that contribute to the warming of the planet. 

Ban Ki-moon, the United Nations secretary general, said there was no "Plan B" if the negotiations did not result in a deal, the New York Times reports, and negotiators worked through the night on Friday to reach a final deal the next day. 

The agreement on its own will not solve the problem of global warming. At best, the Times reports, scientists expect the emissions commitments included in the deal to limit global warming to about half of the 2 degree Celsius target outlined in the agreement. But analysts told Utility Dive that the larger goal was to agree on a framework to allow countries to ratchet down emissions further in the future. 

“The agreement we get in Paris, that’s just the beginning," Rachel Cleetus, lead economist at the Union of Concerned Scientists, said in the run-up to the negotiations. “It's going to create a good framework, one for ratcheting up ambition over time. That’s how you get things done in the real world."

On those aims, the climate deal appears to have been successful. Nations will be legally compelled to return to the table every five years to evaluate emissions cuts and, beginning in 2023,  will be required to publicly report on their plans using a common emissions accounting system. 

Other critical parts of the agreement, like emissions benchmarks and billions of dollars in climate aid from developed countries, were left out of the legally-binding section of the agreement. Any deal that required legally-binding emissions cuts or monetary commitments would need to go to the U.S. Senate for ratification, which led the U.S. to push for those provisions to be made voluntary in the final agreement. 

Early reactions to the climate deal were mixed. President Obama praised the deal as a "tribute to American leadership," and said it establishes an "enduring framework the world needs to solve the climate crisis." Others decried an agreement that they said leaves out critical climate issues and includes only promises, and no concrete action, on emissions levels. 

For the power sector, the deal is expected to give investors an indication of where they should put their money in a decarbonizing world. In the run-up to the conference, Cleetus said utilities and other power companies should be already be thinking about adapting to a future with more carbon constraints, since the investments they make today will set the stage for climate mitigation in mid-century and beyond.

“That long term [emissions] goal needs to set a clear path to where we need to get by midcentury,” she said. “That should send a clear signal to investors about the kinds of assets that right now we will be investing in … whether we’re talking about power plants or pipelines or electricity transmission.”