RI_COP26: what happens next?

ARTICLE

COP26: WHAT HAPPENS NEXT?

by Gerrit Dubois,
Responsible Investment Specialist at DPAM

After a disappointing first week in Glasgow, the focus shifted to transportation, international carbon market developments, the long-promised financial support to developing nations, and tangible next steps on the climate pledges or NDCs. The second week didn’t start off on a good note, as new research from Climate Action Tracker revealed current policies are projected to result in a global increase of 2.7°C. Even under the most optimistic scenario, we could only limit this to 1.8°C, which is still above the IPCC’s recommended 1.5°C. Let’s have a look at what the second week of COP had in store for us:

- Although the US, Germany and China pledged for cleaner cars, they failed to support the declaration on ending ICE vehicle sales by 2035 in developed markets. Fortunately, Ford, Mercedes, Volvo and Mercedes-Benz joined the declaration. The Breakthrough Alliance will also focus on the affordability of electric vehicles (EV) in all regions by 2030. Several emerging markets, including India, announced an acceleration of their EV markets. Concerning heavy transportation, 19 governments pledged their support for the creation of so called ‘green shipping corridors’. The UK announced a ban on diesel trucks between 2035 and 2040. Finally, several nations (including Canada, France, the UK and the US) signed a declaration targeting 1.5°C-aligned emission targets for the aviation industry.

- Alongside several other resiliency initiatives, a new UN report on climate resilience (‘Adaptation and Loss Day’) was launched with a set of metric systems to assess the climate resilience of countries, cities and businesses’ actions. The announcement is part of a larger UN program, which has already led to tangible results in developing nations.

- The US and China started (effective) talks and pledged to step up climate action. However, China has yet to express its formal support for the US-launched Methane Pledge. However, starting in early 2022, several meetings have allegedly already been scheduled, targeting 2022 NDC updates, methane, deforestation and low-carbon energy.

- Also from the fossil fuel side, the Beyond Oil and Gas Alliance was launched by Denmark and Costa Rica, supported by Wales, France, Ireland, New Zealand, Sweden, Greenland, California and Quebec. The Alliance wants to set an end date for new oil and gas development projects as well as plans to phase out existing capacity.

- Activist set food, hard. Although expected, a lot of activity at the COP came from climate activists, including youth movements, indigenous groups and NGOs. A People’s Decision for Climate Justice was launched, highlighting 10 requests for developed, high-emitting countries. Expect extra protests in 2022.

- There were some minor positive developments on Article 6 of the Paris Agreement targeting the international carbon market. Some of the accounting loopholes in the system were closed through uniform reporting standards. However, its ‘offset market’ approach still relies on simplistic, short-term methodologies.

ALSO DISCUSSED DURING WEEK 2, BUT MISSING THE SPOTLIGHTS

- Research suggests that, in the world’s largest economies, the health care sector accounts for roughly 5% of national carbon footprints¹. Consequently, several nations have agreed to take on the health industry’s emissions.

- Green hydrogen remains in the picture. 28 organisations, on both the supply and demand side, have committed to an expansion of the hydrogen market.

- Nigeria, one of the fastest growing developing countries, also made a Net Zero pledge (by 2060), following India’s Net Zero pledge by 2070. According to Net Zero Tracker, this brings the amount of the world’s GDP covered by countries with Net Zero pledges to 90%.

SOME THINGS YOU WANT TO KNOW, BUT DIDN’T HOPE TO READ

- According to the Global Witness initiative, who reviewed COP’s participants list, 503 people with links to the fossil fuel industry attended the summit. Although this number looks marginal in relation to the total list of 40,000 people, it’s remarkable to note that they represent the largest delegation at the summit. And although we can imagine the answer, why are fossil fuel lobbyists represented at all at an international climate convention?

- The difference in negative impacts of a 1.5°C and 2°C scenario will likely be significant². In fact, a staggering 1 billion people will endure extreme heat stress under a 2°C scenario³.

- Agriculture was yet again largely ignored at the summit. Although responsible for a significant share of global emissions, the topic is delicate, as countries need to balance SDG2 ‘Zero Hunger’ with SDG13 ‘Climate Action’. 45 nations did however pledge to transform their food systems through sustainable farming.

- Due to lacking legal constraints and mechanisms for monitoring and enforcement, the deforestation pledge ended up with (significant) flaws.

- Several organisations referred to the EU as ‘the missing leader’. Despite the EU’s strengthened ambitions and growing climate-related regulatory landscape, EC’s Vice President Timmermans only raised his voice during the final hours of the conference. Moreover, the EU economy still heavily relies on Chinese imports, hence ‘outsourcing’ its emissions. The announced carbon boarder adjustment mechanism will only cover a marginal amount of emissions.

- Australia, developed economy but still a climate laggard, failed to update its 2030 climate targets and is unlikely to do this by the next COP. Also, its lacking coal phase-out ambitions are also disappointing.

ALL IN ALL: THE FINAL GLASGOW PACT MISSES AMBITION (UNDERSTATEMENT), BUT IT’S NOT OVER YET

- Taking all NDCs into account, the final Pact will not limit global warming to 1.5°C – neither by 2030 nor 2050. Further NDC updates are urgently required in 2022 at COP27. Countries need to come back next year with stronger climate plans, something initially scheduled for 2025 (the so-called ‘ratchet mechanism’). But doesn’t this sound familiar? Isn’t this again wishful thinking? Can we at least get our hopes up following the announced US-China collaboration – a small silver lining to an otherwise disheartening COP.

- Climate scientists agree that phasing out coal is required to meet the climate objectives. However, the final fossil fuel wording of the Glasgow Pact was significantly watered down by some coal nations (incl. India, China, Saudi Arabia and South Africa), not only in terms of timing but also in terms of ambition. As such, ‘phasing out coal’ was replaced by ‘phasing down unabated coal power’ to leave sufficient leeway for these nations in the future. Diplomacy and lobbying at their ‘best’, unfortunately. Still, on a slight positive note, including a commitment on fossil fuels in the final Pact is remarkable and puts an end to a historical taboo. Note that the G20 had also committed to stopping the financing of coal power projects abroad, and over 40 countries committed to a coal phase out (incl. Chile, Vietnam and Poland), including a phase out by 2030 for major economies, and 2040 for the rest of the world. It also puts a halt to all new constructions. In addition, 25 nations committed to stopping public financing of fossil fuel projects by the end of 2022, including France, the UK and Canada. The ‘outsourced’ emissions of developed economies, like the EU, however, were, again, not sufficiently covered.

- Financing ambitions remain below average, and vulnerable countries are largely left out again. Following week 1 announcements from Japan, the EU, the US and the UK, we expected more climate financing pledges towards developing countries. However, we are still nowhere near the promised annual USD 100 billion financing pledge made in Paris, and some wordings in the final Pact were rather vague. Allegedly, this was driven by US concerns: The nation fears a lifetime of climate litigation due to its contributions to global warming. However, the financing need remains a part of the final text, stressing ‘effort doubling’ by 2025 (to USD 40 billion), but omitting the setup of a ‘fund’, focusing instead on ‘technical support’.

- On the positive side, private and public financing for new technologies appears to be high (First Movers Coalition and the Breakthrough Alliance), the deforestation pledge is historic (thanks to its overwhelming support), Glasgow Financial Alliance for Net-Zero (GFANZ) was launched and will hopefully further set the scene for financial institutions, the US-China talks were initiated (finally!), and finally carbon-based arrangement on steel and aluminium between the EU and US brings us one step closer to an international carbon market.

All in all, we’re not sure if the UK’s COP ambition to ‘keep 1.5°C alive’ was reached. Only tangible, direct policy actions in 2022 will tell. Interested in the text of the Glasgow Climate Pledge? Please consult following link.

¹According to the ‘Potsdam Institute for Climate Impact Research’ and ‘Health Care Without Harm’
²According to the latest IPCC report
³According to research from the UK’s national meteorological service

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COP26: WHAT HAPPENS NEXT?