The world concluded four years of negotiations on Saturday with the first universal agreement on climate change. Nearly 190 countries pledged national climate action, and all countries agreed a global long-term goal to phase out greenhouse gas emissions this century, suggesting a turning point in the use of fossil fuels.

The Paris outcome has two parts.

1. A 12-page “Paris Agreement”, which sets out new commitments for climate action beyond 2020, and potentially through this century.
2. A 20-page “Decision”, which describes what countries have to do before the Agreement enters into force in 2020.

Following is an attempt to decipher what all the wonky language means.

A legally binding agreement

The Paris Agreement is legally binding. The Decision states that it “decides to adopt” the Paris Agreement, under the 1992 UN Framework Convention on Climate Change (Paragraph 1). It uses the critical language, “entry in force” (Paragraph 8), which signals that countries consent to be bound by it under international law. And in the Paris Agreement, Articles 20 and 21 made it clear that this is a legally binding document, “subject to ratification, acceptance or approval” (Article 20.1). The Paris Agreement will come into force when at least 55 countries accounting for at least 55 percent of total, global greenhouse gas emissions have approved it (Article 21.1).

However, domestic, national climate action targets are not included in the Paris Agreement. Countries have a legally binding obligation to put together domestic targets (called nationally determined contributions, NDCs), and prepare policies to achieve these (Article 4.2). But the targets themselves are in a “public registry” separate to the Agreement (Article 4.12). Some countries, led by the European Union, had wanted national targets to be legally binding, inserted into the agreement. But that was always unlikely: it would have made the Agreement more subject to parliamentary approval, a risky move. A Republican-dominated U.S. Congress would have to approve any specific commitments binding the United States, and may have rejected the Agreement.

Preamble of Agreement

Both documents have an initial “preamble” of non-binding paragraphs which reveal some of the pinch-points in the negotiations. The Agreement preamble acknowledges the importance of a “just transition of the workforce”, for example to help coal mining communities adjust to a low-carbon transition. It also refers to the importance of protecting “Mother Earth”, favoured by Bolivia, which has previously tried to blocked UN climate agreements. And it recognises that “sustainable lifestyles” are important to tackle climate change, which India will like, to remind everyone that it has much lower, per capita carbon emissions tham the developed world.

Temperature target

The global long-term goal of the Agreement is to limit global average warming to “well below” 2 degrees Celsius (2C), above pre-industrial levels (Article 2). That is an advance on the non-binding, Cancun Agreement in 2010, which aimed to hold warming to “below 2C”. The Agreement also aims “to pursue efforts to limit the temperature increase to 1.5C”.

The temperature target was a big issue in Paris. Scientists say that at 2C warming, there’s a greater chance that polar ice sheets will melt more, faster. The Greenland icesheet alone contains enough ice to raise global sea levels by seven metres. Not surprisingly, some low-lying and small island states supported a more ambitious limit of 1.5C. But some fossil fuel producers, notably Saudi Arabia, opposed that. Global temperatures have already risen by 1C; limiting warming to 1.5C would imply rapid cuts in carbon emissions and use of fossil fuels.

Differentiation between rich and poor

A big hurdle in climate talks over the years has been agreeing how to share responsibility between developed and developing countries. Under the 1992 climate convention, developed countries were listed in an Annex 1. That has led to a binary division of responsibilities between Annex 1 and non-Annex 1 countries for more than two decades. Developed countries are fed up with this, especially because some are now less well-off than “developing countries” like South Korea and Saudi Arabia.

The Paris Agreement broke the impasse. It has no reference to “Annex 1”. There is now more flexible sharing of responsibilities, “in the light of different national circumstances” (Article 2.2). Different responsibilities for rich and poor still pervade the Agreement, but not as a fixed list of countries. Article 3 stresses that “all parties are to undertake and communicate ambitious efforts”.

A long-term emissions goal

The Agreement may be most remembered for its long-term goal to phase out greenhouse gas emissions, which suggests a turning point in the use of fossil fuels. The key phrases are that countries “aim to reach global peaking of greenhouse gas emissions as soon as possible”, and “to undertake rapid reductions thereafter … to achieve a balance between anthropogenic emissions by sources and removals by sinks … in the second half of the century” (Article 4.1). This wonky wording means that, after a certain point later this century, any emissions (“sources”) will have to cancelled out by equal withdrawal of greenhouse gases from the air (“by sinks”). One way to do this might be by planting trees. Some analysts suggest that it may be easier to cut greenhouse gas emissions from burning fossil fuels than from other sectors like agriculture. As a result, a goal for net zero GHGs after 2050 may imply an even earlier global for phasing out CO2 emissions, and fossil fuels, by as early as 2050.

A long-term climate agreement

The Agreement launches a long-term process. Countries agreed to submit new climate action targets every five years, starting in 2020 (Decision, Paragraph 23), suggesting the Agreement may remain in force until the long-term goal of phasing out greenhouse gases is met. Domestic climate action targets are now called “nationally determined contributions” (NDCs). All countries (Article 4.2) will have to communicate new NDCs every five years (Article 4.9), with developed countries taking the lead (Article 4.4). Countries would have to make each round of NDCs more ambitious than the last (Article 4.3), in “a progression beyond the Party’s current NDC and reflecting its highest possible ambition”.

Raising ambition in the short term

Almost all countries (189 to date, out of 195 countries in all) have pledged to take climate action after 2020, either in 2025 or 2030.  Analysis shows that these pledges are too weak to limit global average warming to below 2C. To address this, the Decision says that countries will meet in 2018, to consider whether to increase their ambition (Decision, Paragraph 20). Going forward, countries would undertake these global “stock takes” every five years (2018, 2023 and so on), to keep up the level of ambition in cutting carbon emissions, adaptation and providing climate finance (Article 14.1).

Carbon trading

Many business leaders like the idea of putting a price on carbon emissions, because it is technology neutral. Economists like it because they see carbon pricing as low-cost. The Paris Agreement established two forms of carbon trading; the detailed rules for these will have to be hammered out over the next five years.

The Paris Agreement says that countries can choose to “cooperate” in meeting their national emissions targets (NDCs), by trading emissions rights (Articles 6.2 and 6.3). For example, if a polluter in one country undercuts an emissions cap, it might generate a carbon credit, which it can then sell to a polluter struggling to meet its cap in another country. In this way, these “ccoperative approaches” may encourage countries and regions to link existing national and regional carbon markets. Accounting of trade in carbon credits between capped schemes should be relatively straightforward.

In addition, Article 6.4 establishes a “sustainable development mechanism” which would allow one country to pay for emissions reductions in another country, via a central body, and count these emissions reductions as its own. In this case, the seller of a carbon credit may not face an emissions cap. Instead, it might cut its emissions below a potentially arbitrary counterfactual. Accounting of emissions reductions under such carbon offset schemes is more difficult, raising credibility concerns.

Adaptation, and “loss and damage”

Adaptation refers to the steps countries can take to avoid damage from climate change, for example by building flood defences. Article 7.1 establishes a new global goal for adaptation, which has been missing under climate negotiations to date, and is favoured by poorer, more vulnerable countries. But some climate change may be impossible to adapt to, such as severe storms or sea level rise. And so vulnerable countries also wanted compensation for this damage. Article 8 recognises for the first time this concept of “loss and damage”. However, the Decision (Paragraph 52) makes clear that developed countries will not accept liability for climate compensation.

Finance

The issue of finance has dogged UN climate negotiations for 20 years. The challenge is to strike a balance, between the rights of poor countries to grow their economies, and the obligation of richer nations to pay them to make sure this is low-carbon growth. Developed countries should also pay some of the costs of climate damage and adaptation, in vulnerable countries. Article 9.3 says that developed countries should take the lead in supplying finance, and that such “climate finance should represent a progression beyond previous efforts”, in other words grow over time. Article 9.2 states that developing countries can also voluntarily provide climate finance. Countries agreed that $100 billion annually would be the floor for climate finance going forward, beyond 2020 (Decision, Paragraph 54).

Transparency

Another big thorn in climate talks has been transparency. Developed countries already report their emissions annually. And they report progress towards their emissions targets every two years. Developing countries don’t face such obligations. Developed countries say that without such reporting, for all countries, the Paris Agreement would be meaningless. Article 13.1 introduced an “enhanced transparency framework” both for mitigation and financial support. Under this framework, almost all countries would now “regularly” measure their emissions (Article 13.7), and report progress against their NDCs. Paragraph 91 in the Decision says that this reporting would be at least every two years.

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