As host of COP26, the UK’s focus was summarised in Boris Johnson’s mantra “cash, coal, cars and trees”. While key initiatives were launched around these four pillars, multiple coalitions were also announced which were not part of the official agenda. In this article, we briefly unpack some of the key outcomes of COP26. For a more comprehensive summary of COP26 event, please refer to this Carbon Brief article.
Commitments by countries
Emerging from COP26, 151 countries strengthened their 2030 targets, setting us on a course for 2.4°C by 2100 rather than the previous 2.6°C- 2.7°C. Bold promises for net-zero by 2050 were also put forward by 140 countries, bringing the world to 1.8 degrees of warming if met – the first time we’ve seen the possibility of meeting the Paris Target of well below 2°C of warming.
The real milestone moment of COP26 was a global agreement to ‘phase down’ the use of unabated coal. While initial drafts of the agreement proposed the ‘phase out’ of coal, China and India stepped in with a last-minute intervention to change the wording. This turn of events was a reminder to the rest of the world that China and India will not compromise their interests when developed counterparts did not have to. Still, the Glasgow Climate Pact is the first to explicitly mention coal, making it an ultimately successful outcome for the UK and other countries that have curtailed their use of coal. At the same time, India and China have given themselves breathing room to undertake the massive task of shifting their economies away from thermal coal.
Fossil fuel producers like Australia, China, Saudi Arabia, Brazil, and Russia were requested to revisit their existing 2030 emission commitments next year at COP27 to be in line with the Paris target. Australia, however, has indicated that their existing 2030 target of a 26-28% reduction in emissions relative to 2005 emissions remains fixed.
Developing nations were provided with assurances (but not commitments) for greater access to climate financing for both mitigation and adaptation, including greater support beyond the USD 100 billion annual funding currently promised (but not delivered). As this is only a fraction of the investment required for the climate crisis combined with the fact that developed nations have failed to thus far meet existing financing promises, poor and vulnerable nations face an uncertain path to adaptation. Further, the failure of COP26 to secure a 1.5°C world has left small island nations already facing the impacts of climate change understandably worried about their future existence. South Africa, however, did successfully secure USD 8.5 billion in transition funding from the UK, US, France, Germany, and EU – although what proportion of this will be grants and what proportion loans is still unclear.
Development by sectors
COP26 resulted in a promising outcome for the end of coal use. Even for developing countries like India, which fought to keep wording to the ‘phase down’ of coal, existing commitments to renewable power are likely to result in the inevitable decline of domestic coal use. While there were no agreements made to phase out oil and gas, the formation of the Beyond Oil and Gas Alliance during COP26 suggests it is not far behind coal. The alliance, which comprises of France, Greenland, Costa Rica, Denmark, Ireland, Sweden, and Wales, is the first of its kind to commit to the end of new licensing rounds for oil and gas production and exploration. Solar emerged better off than its fossil fuel sector with the launch of the Solar Investment Agenda, an initiative by the World Resource Institute, International Solar Alliance, and Bloomberg Philanthropies, to mobilize USD 1 trillion in solar investment by 2030.
The decarbonisation of the transport sector made significant progress with 24 countries and leading car manufacturers committing to end the sale of internal combustion vehicles by 2040 or earlier, selling only zero-emission vehicles from this time. While the biggest car markets (China and US) and manufacturers were absent from this deal, its successful implementation will cover a third of global car sales. Combined with the UK’s launch of the Zero Emission Vehicle Transition Council, which includes a group of 20 countries making zero emissions the new norm, COP26 was a positive outcome for the EV market.
COP26 saw the finalisation of the Paris Rulebook, which finally opens the way for international carbon trading and potential alignment of existing markets. In parallel, over 100 countries pledged to end deforestation by 2030 through USD 19.2 billion in public and private funding. Many of the signatories also made commitments under the Bonn Challenge to restore 350 million hectares of degraded forest by 2030.
There was little reference to food and agriculture. The most relevant development for the sector was the Global Methane Pledge made by 109 countries to reduce methane emissions by 30% by 2030. The pledge will be targeted at minimising fugitive emissions in the oil and gas sector, but will also look to reduce the emission intensity of livestock through changes to their feed. Despite agriculture being the predominant source of methane emissions, there was no talk of behavioural changes to reduce meat and livestock consumption.
Outcomes for stakeholders
While world leaders took to the main stage, the corporate sector also looked to forge their own path to net-zero. More than 1,000 companies, representing approximately $23 trillion in market capitalisation, committed to setting 1.5°C-aligned science-based targets to minimize emissions. With this combined with national emission pledges and the commitment of 400 financial institutions to align their portfolio to net zero by 2050, many corporates are likely to feel the pressure of becoming central to delivering on the commitments of others. As such, the IFRS launch during COP26 of the International Sustainability Standards Board, a taskforce created to develop new accounting standards for high quality sustainability disclosure, was a welcomed initiative to support corporates in reporting their progress against climate targets.
Indigenous groups were, for the first time, mentioned six times within the Glasgow Climate Pact. Further, several governments and private funders made a historic pledge of USD 1.7 billion to support indigenous people in advancing their land rights by 2025. Despite these significant movements, Indigenous groups together with other not for profit organisations only had restricted access to the negotiations, begging the question of whether they were sufficiently heard in negotiations.
While historic commitments were made in COP26 to get to a 1.8°C world, delivering on these commitments will require significant effort by countries, sectors and corporates. The overall outcome was a small but positive step in the right direction towards keeping the 1.5°C hope alive.
|This article was originally published by Finity Consulting on 17 December 2021. Read the full post here.
CPD: Actuaries Institute Members can claim two CPD points for every hour of reading articles on Actuaries Digital.