COP26: success or unmitigated disaster?
Andy Howard, Schroders’ Global Head of Sustainable Investment, sums up seven key talking points from COP26.
It’s interesting that the headlines over the weekend alternated between "it was a success" and "it was an unmitigated disaster". Sometimes even within the same newspapers. It’s certainly fair to say that what came out of COP26 was a mixed bag.
This COP – the fifth since Paris in 2015 – was intended to be something of a milestone conference. The plan was that individual countries would come back with more ambitious targets and goals themselves as binding commitments.
To a large degree, that overarching goal of this COP wasn’t met. There were a number of individual areas – for example around deforestation and around carbon markets – which moved forward. But in some ways the headline ambition of COP, which was really to ratchet up the levels of ambition of individual countries, has been somewhat deferred through to next year and next year’s COP in Egypt.
1. “Phasing out” vs “phasing down” of coal
In terms of headlines, much has been made of the fact that for the first time coal and fossil fuels have been referenced in the language. Albeit a well-publicised watering-down of the phraseology from "phasing out" as it started to "phasing down". That’s one half of the caveat, the other half is "in unabated coal power" which does imply there will be some scope for "clean coal" if that’s not a contradiction in terms.
But for fossil fuels to be included in the language for the first time is seen as being a success. I think in reality getting to net zero or a 1.5-2 degree pathway meant that at some point fossil fuels were always going to have to be removed from the energy mix. That’s one of the requirements, certainly of unabated fossil fuels, because net zero means removing fossil fuels in their entirety.
Something like 75-80% of global emissions come from burning fossil fuels. To some degree, whether its "phasing down" or "phasing out", both point in the same direction.
2. $100 billion climate finance for developing economies
The second area was around support for developing economies. Back in 2009 at the Copenhagen conference there was a commitment that developed countries would commit significant climate finance to support countries in the emerging world. That never really happened. It has grown somewhat over the past few years, but it’s always fallen short of the previous targets that were agreed – around $100billion a year from developed economies to emerging.
I thought it was quite interesting that a number of the developing economies, particularly India, made a lot of that. India’s own pledges to reduce emissions were contingent on $1trillion being invested in emerging economies by the developed world to support that transition.
The developed countries have again committed to hitting their previously-set target.
They’ve said that before, but equally a greater focus on the importance of delivering a transition that is equitable across the developed and emerging worlds is still very much a theme from the conference. I think this “just transition” will be important to delivering progress going forward and to see those developing countries take further steps.
3. Adaptation: doubling of support to $40 billion
There was also more focus on adaptation. This is essentially where countries have to deal with the actual physical effects of climate change already playing out. A request to double the amount of spending to around $40 billion annually to support developing countries was met. In particular to help enable them to mitigate or reduce the impacts of physical climate change – rising sea levels, increased weather damage – on their economies.
4. Pledge to end deforestation by 2030
A little new and perhaps slightly unexpected pledge was on deforestation. 100 individual country leaders came together, as well as a lot of companies, including Schroders, committing to ending deforestation – certainly commodity-based deforestation, which is deforestation related to farming primarily – by 2030.
That wasn’t actually signed at COP, but it really only came together in the few weeks before the conference. This implies that unlike many of the announcements at COP, this wasn’t simply a restated version of a commitment that had already been reached months ago. This was something which was to a large degree facilitated by the COP and it’s quite a sizeable step forward.
5. Commitments to slash methane emissions
Methane emissions similarly got quite a lot of focus. Joe Biden introduced a pledge to slash global methane emissions by 30%. This was a bit of a theme generally, but some of the developing countries didn’t sign up.
We had a similar situation with a number of other agreements, for example around use of electric vehicles, on which many of the main manufacturers decided not to sign. So, one of the overall themes was that there were steps in the right direction, but it is was difficult to find a comprehensive and global agreement.
6. Carbon markets: efforts to fix the “double counting” problem
Something that didn’t receive as much attention as it might have done was around carbon markets.
The current system of trading carbon offsets has been in place for quite some time. It’s been fairly heavily criticised, in particular for its failure to really account for how we avoid "double counting". That is, so that the country that’s creating an offset, for example through forestry, would count the benefit while the country buying the offset would also count the benefit.
So this double counting problem was undermining that market and there were some major concerns around the standards that were being applied to those offsets.
There was a discussion around how we move that forward to a more robust system to avoid the double counting. I think should set the stage for a significant growth in carbon markets going forward with a more rigorous and robust system behind it.
7. Emission reduction targets: come back next year
Emissions reduction targets were ultimately meant to have been the main point of this COP, and to a certain degree they have been punted to next year. Countries are being asked to come back by next year’s conference to strengthen their 2030 commitments.
It is clear that if you look at the pledges currently on the table, they are still some distance short of a 1.5-2 degree path long-run temperature rise. We need to cut emissions very rapidly to meet that goal. We didn’t really see an awful lot of new progress at the conference in terms of actual commitments being put on the table.
To a certain degree I’d say that, given the main goal of this conference was to ratchet up and strengthen the degree of commitment of individual countries, it has fallen somewhat short.
Overall, the picture appears to be one of some steps forward in areas, and certainly some positive momentum, but probably weaker than many people had hoped for originally.