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The Economics of Climate Change

How Climate Negotiations Work

How nearly every country negotiates climate action through annual UN conferences, what the Paris Agreement requires, and why agreements are so difficult.

Because climate change is global, countries negotiate together through the United Nations Framework Convention on Climate Change, or UNFCCC, agreed at the Rio Earth Summit in 1992.

The COPs

Each year, countries meet at a Conference of the Parties, or COP. Decisions generally require consensus among nearly 200 countries, which makes progress slow.

Kyoto Protocol

The Kyoto Protocol of 1997 set binding emission targets for developed countries only, reflecting the principle of common but differentiated responsibilities: all countries share responsibility, but richer countries should lead. The United States never ratified it, and emissions from developing countries, especially China, grew rapidly, limiting its impact.

The Paris Agreement

The Paris Agreement of 2015 took a different approach:

  • Goal: to hold warming “well below 2 degrees Celsius” and pursue efforts to limit it to 1.5 degrees.
  • Nationally determined contributions: every country, rich and poor, sets its own targets, called NDCs.
  • Ratchet mechanism: countries update targets every five years, expected to become more ambitious.
  • Transparency: countries report on progress.
  • Global stocktake: a periodic review of collective progress. The first was completed at COP28 in 2023, which called for “transitioning away from fossil fuels in energy systems”.

Paris targets are not legally binding in the sense of penalties; the agreement relies on transparency, peer pressure and national commitment.

Why negotiations are hard

  • Free-riding: each country prefers others to cut more.
  • Different interests: fossil fuel exporters, small island states threatened by rising seas, fast-growing developing countries and rich countries have very different priorities.
  • Fairness disputes over historical responsibility and finance.
  • Domestic politics: governments change, and commitments can shift. The United States withdrew from Paris under President Trump, rejoined under President Biden, and announced withdrawal again in 2025.
India's position

India argues that it has contributed a small share of historical emissions and that its emissions per person are well below the world average, while it needs energy for development. It has set targets focused on emissions intensity and renewable capacity rather than absolute cuts in the near term, alongside its 2070 net zero goal, and calls for climate finance and technology from rich countries.

Thinking UN climate talks achieve nothing

Progress is slow and often disappointing, but the talks created transparency, common goals and pressure that have helped shift national policies. Projected warming has fallen since the Paris Agreement, though it remains well above target levels.

Key takeaways
  • Climate negotiations happen under the UNFCCC, agreed in 1992, at annual COPs.
  • The Kyoto Protocol set targets only for developed countries.
  • The Paris Agreement of 2015 lets every country set its own NDC and aims for well below 2 degrees.
  • Free-riding, different interests and fairness disputes make agreement difficult.
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