Since the conclusion of the two-week long COP-26 summit on Nov 13th, there have been much debate whether the overall outcomes of the summit were positive. According to our ESG Base research team, the outcomes were a mixed bag – while there were some positive and hopeful news, there were also some equally disappointing ones. In this article the team summarised their opinion on the top 5 positive and disappointing outcomes from the conference.
The top-5 hopeful outcomes
1. 1.5 C is not dead
Coming into the conference, many were concerned that if drastic reduction in NDC (Nationally Determined Contribution) targets were not achieved in Glasgow, the Paris goal of keeping global warming below 1.5 C would be dead, as it would be too late by the time the next ratcheting up of targets occur in 2025. While the Glasgow talks didn’t go far enough to align the national ambitions with Paris targets, perhaps the most positive outcome was the recognition of urgency of the issue, and the decision to schedule the next ratcheting of NDC targets by 2022. This mechanism of more frequent ratcheting provides a pathway to keep the goal of 1.5 C alive, atleast for now. However, as was widely recognized, the goal of 1.5 C is only just alive, and the countries must ratchet their ambitions significantly before the end of 2022 for the goal to really survive.
2. Increase in Adaptation finance
The Paris Agreement in 2015 called for a balance between the different types of climate finances – mitigation, adaptation, and loss and damage. As is now well understood, climate change disproportionately effects the lives of poor and vulnerable citizens in the global south, and the adaptation finance is atleast an attempt to help these communities prepare better to face the adverse effects of climate change. As such, adaptation finance is an important necessity for a just transition. In the recent years, however, about three-fourths of the total climate finance has been directed towards mitigation, leaving only about $20 billion for adaptation. The Glasgow text to double the adaptation finance by 2025 (to $40 billion) is a significant step toward addressing this issue and to start building some trust between the developed and developing countries. Although this $40 billion of adaptation finance is only a fraction of what is needed (UN estimated that the actual need for adaptation finance is currently $70 billion, and the need will increase to $140-300 billion by 2030), this is nevertheless a small positive step in the right direction.
3. Improved accounting for carbon markets
International market for Carbon trading has big potential, but has lately landed in hot waters, with allegations of overstating or “double claiming”. Currently, “double claiming” occurs frequently, when both the offset generator and the offset purchaser claim the carbon abatement from “avoided deforestation”. After four years of negotiation on the issue, the revised accounting rules will finally settle this issue and enable carbon trading across borders to thrive. As a result of this improved accounting, we expect to see the creation of a new international carbon market for the trade of emission offsets, with both public and private sectors eligible to participate.
4. Partnership to transition South Africa’s economy from coal to clean energy
The conference saw much debate on the language on ending the use of unabated coal (phase-out versus phase-down). However, one thing was clear: it’s only a matter of time before the use of unabated coal comes to an end. To accelerate the transition out of a coal-based economy, the world needs a successful pilot in one country that can be emulated in other countries. The $8.5 billion pledge from a US, EU, and UK partnership to finance this pilot in South Africa is a major breakthrough in this regard, and will create a model for successful transition away from coal in other countries.
5. India’s NDC target
For the first time ever, India announced its target to achieve carbon neutrality by 2070. While 50 years is a very long timeline to achieve this target, it is important to remember that India is the third highest emitter of carbon and projected to significantly increase energy consumption in the next decades. As a result, the significance of this NDC target is substantial. Our analysis confirmed that all other countries’ targets remaining constant, the establishment of this target by India alone reduced the projected global temperature rise by around 0.2 C, more than that achieved from any of the other NDC reductions during the Glasgow conference.
The top-5 disappointments
1. Ambitions fell well short of target - again
A primary objective of the Glasgow COP was to align the NDC ambitions of the countries to the Paris target of 1.5 C. In meeting this objective, Glasgow was a disappointing failure. In a previous article, our ESG Base research team had found that the pre-Glasgow NDCs would lead to a global temperature rise of 2.4 C by year 2100. Although there was a flurry of new NDC announcements at Glasgow, our team estimated that if all of these new NDCs for 2030 were realized, the effective rise in global temperature in 2100 would still be about 2.1 C. Furthermore, if all the long-term NDC targets are achieved, the temperature rise will peak at about 1.9 C before year 2100.
In a previous article leading up to COP-26, we already discussed how in reality policies and implementations are likely to fall short of NDC ambitions. Post Glasgow, the NDC ambitions continue to be far away from the Paris targets, making it virtually impossible for the world to attain Paris targets with the most recent NDCs. This is a major disappointment from the Glasgow summit.
2. Climate finance
Back in 2009, the developed countries had pledged to mobilize $100 billion per year in climate finance for developing countries by 2020. However, that pledge has not been fulfilled. The Glasgow text has now urged the developed countries to meet this goal by 2023.
Furthermore, although an apology from the developed countries was recorded in the Glasgow text, there was no indication that the shortfalls in the years 2020-2022 were going to be made up. This situation creates an environment of mistrust between the developed and developing countries.
A recent UNFCCC assessment has estimated that the developing countries would require nearly $6 trillion of financing up to 2030. The $100 billion being negotiated is therefore only a tiny fraction of what is required. Therefore, the inability to meet even this $100 billion goal is a major disappointment.
3. Low percent of women delegates
According to Alok Sharma, the COP-26 President, “80 per cent of the displaced by climate related disasters and changes around the world are women and girls.”. Yet, the participation of women delegates in COP conferences has continued to remain low. In the first COP, only 12% of the delegation were women. The women ratio has steadily improved in subsequent COP and stood at around 38% since COP-23. However, the Glasgow COP saw fewer (35%) women delegates compared to the last 3 COPs. The inability to engage more women delegates in the summit is a disappointment.
4. Weak language for ending coal
At the start of the conference, there was major momentum built up towards the phase-out of coal. Even major coal exporters such as Australia, Indonesia, and Colombia, were on-board with the language of coal phaseout. Yet, following a signal by Indian environmental minister, the language was watered down from phase-out to phase-down - after a closed-door negotiation between US, EU, UK, China, and India. We think this watering down of the language for ending coal was a lost opportunity.
5. Methane emission cuts
In the first week of the conference, US and EU announced the formal launch of the global methane pledge to cut 30% of methane emissions by 2030, with 105 countries signed up. However, major methane emitters such as Australia, China, Russia, and India were missing among the signatories. Although the announcement claimed that the pledge would deliver reduction of global warming by 0.2 C, our analysis indicates that the 30% reduction by these signatories would lead to less than 0.1 C in reduction. Also, we think this pledge lacks sufficient detail to be adequately enforced. As Politico has pointed out, because there are no individual targets set for the signatories, any country can essentially sign up to become a signatory, “without drawing up a list of policies and goals … or detail on how the 30 percent reduction is meant to be achieved”. While making methane cuts should be an important goal for all high-emitting countries, we think this lack of specificity will make it difficult to realise this pledge.
Irrespective of the outcomes
Irrespective of the outcomes of the COP-26 in Glasgow, there is increasing awareness of the effects of climate change that are already being felt across the world. The pressure from the public to address the adverse effects of climate change are looming large. Due to its large following and media coverage, COP-26 has garnered tremendous public attention on the topic of climate change, and is acting as a catalysing agent, increasing the supply of capital looking for sustainable projects. The GFANZ (Glasgow Financial Alliance for Net Zero) network formed during the conference brought together 450 firms in 45 countries, with combined assets of $130 trillion, to target the alignment of their portfolios to net-zero in the next decades. As these firms try to transition their portfolios, the positive effect on the real economy will be significant.
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