The European Commission recently released its assessment of the Paris Agreement, which sets the stage for the global climate agreement’s official signing ceremony on April 22. The assessment illustrates the EU’s strong commitment to achieving a low-carbon economy—in no small part, by expanding the market opportunity for private sector involvement.

The Paris Agreement signaled a transition to a low-carbon economy, and both businesses and investors will need to change their approaches to fully benefit from all of the new policy incentives resulting from COP21. The EU recognizes that businesses and investors are crucial to the implementation of the Paris Agreement goals, and its recent assessment demonstrates this. For example, the EU plans to incentivize the private sector by:

  • Maintaining or creating emissions-reductions regulatory policies that accelerate private investment in innovation and modernization in key sectors.
  • Directing more budget to the 20 countries signed up to the “Mission Innovation” collaboration, which strives to reinvigorate public and private clean energy innovation.
  • Removing barriers to low-carbon investment within the EU.
  • Sharing information on the EU’s carbon pricing experience with other countries, including China, which will help the market standards of emissions trading platforms converge on a unified design, increasing the ease of doing business.
  • Increasing city-level policies that allow European companies to deploy smart-cities technology and innovation in urban environments.

The EU’s assessment of the Paris Agreement confirms its commitment to climate action and is an excellent reminder of the shift occurring in the EU and global economies. The national climate action plans, which were submitted in the lead-up to the Paris Agreement, commit to a decarbonization pathway well before the end of the century. This affords businesses and investors policy certainty, which provides, in turn, a significant investment opportunity.

As the EU improves its climate goals over time, which the EU director of climate strategy says the EU is “open” to doing, the low carbon market transformation will only be expedited. This will allow companies operating in Europe to capitalize on multiple trends. For example, the global investment for new, renewable electric-power generation over the next 25 years is currently US$6.9 trillion. But as we step toward a below-2°C world, this investment opportunity will increase to US$12.1 trillion.

So what can businesses do to take advantage of this historic market opportunity? Businesses can gain a competitive advantage by acting now, and BSR can help them to go further and faster. For example, companies can:  

The world is waiting for governments to formally sign the Paris Agreement, starting on April 22. In the meantime, the private sector must charge ahead to seize all of the market opportunities that will be unleashed when the agreement is confirmed, expediting our transition to a low-carbon economy.