What is the Paris Agreement?
The Paris Agreement represents the most comprehensive global climate accord in history. Adopted at COP21 in Paris on December 12, 2015, and entering into force less than a year later, it united virtually every nation on Earth around common climate goals while respecting national sovereignty and differing capabilities.
The Agreement's central aim is holding the increase in global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C. This seemingly small difference has profound implications—every fraction of a degree multiplies risks of extreme weather, sea level rise, ecosystem collapse, and human suffering.
Key Features and Innovations
The Paris Agreement introduced several innovative mechanisms:
Nationally Determined Contributions (NDCs) - Rather than imposing top-down targets, each country determines its own emission reduction pledges based on national circumstances and capabilities. This bottom-up approach enabled near-universal participation.
Ratchet mechanism - Countries must update their NDCs every five years, with each iteration expected to be more ambitious than the last, ensuring progressive strengthening of commitments.
Global stocktake - Every five years, countries collectively assess progress toward Paris goals, informing subsequent NDC updates. The first stocktake concluded at COP28 in 2023.
Long-term strategies - Countries are encouraged to formulate mid-century (typically 2050) net-zero strategies, providing long-term direction beyond five-year NDC cycles.
Transparency framework - Enhanced reporting and review mechanisms enable tracking of progress and build mutual trust through accountability.
Climate Finance and Support
The Paris Agreement recognizes that developing countries need financial and technical support to pursue ambitious climate action while addressing development priorities. Developed nations committed to mobilizing $100 billion annually by 2020 to support developing country climate action, though this target has faced implementation challenges.
Beyond direct finance, the Agreement established mechanisms for technology transfer, capacity building, and loss and damage support for climate impacts already occurring. These provisions acknowledge differentiated responsibilities while maintaining universal participation.
Progress and Challenges
The Paris Agreement catalyzed unprecedented momentum in climate action including national net-zero commitments covering over 90% of global emissions, explosive growth in renewable energy deployment and cost reductions, increased corporate climate commitments and science-based targets, and mainstreaming of climate considerations in finance and investment.
However, significant gaps remain. Current NDCs, even if fully implemented, put the world on track for approximately 2.5-2.8°C of warming—far exceeding Paris targets. The first global stocktake confirmed that the world is not on track and called for accelerated action, particularly on fossil fuel transition, renewable energy scaling, and climate finance.
Implications for Business
The Paris Agreement creates both risks and opportunities for organizations. Companies face increasing regulatory pressure as countries strengthen climate policies to meet NDCs, growing investor scrutiny through climate-related financial disclosures, supply chain disruption from physical climate impacts, and reputational risks from insufficient climate action. Simultaneously, opportunities emerge in clean technology markets, sustainable products and services, green finance, and competitive advantages from early decarbonization. Organizations should align strategies with Paris-compatible pathways, set science-based targets consistent with 1.5°C scenarios, prepare for regulatory evolution as countries strengthen NDCs, and engage constructively in climate policy development.
