Analysis

Keeping 1.5 alive – what COP26 achieved and what comes next

  • Global
  • ESG and Sustainable Business
Joseph Smith

Joseph Smith

Keeping 1.5 alive – what COP26 achieved and what comes next


The 26th Conference of the Parties (COP26) to the UN’s Framework Convention on Climate Change (UNFCCC) on 13 November came to a close in Glasgow (UK). We look at what was agreed at the conference, and what will follow.

  • The conference has by no means guaranteed a 1.5 degree future, but it has galvanised the international community in pursuit of this goal and reinforced the mechanisms towards cutting emissions.
  • Many governments will come forward with revised climate pledges each year from 2022, ensuring that emissions reduction policies remain subject to continuous change in the coming decade.
  • Coalitions of countries will continue to expand multilateral commitments for emissions reductions in key sectors outside the UN process.
  • Finalisation of the Paris rulebook will lead to an increase in opportunities for investment in carbon offset schemes.
  • Further fraught negotiations are likely at COP27 in 2022, with climate finance, adaptation, loss and damage, and the future of coal all likely to re-emerge as sources of tension following mixed outcomes on these issues in Glasgow.

Davos on the Clyde

Between 31 October and 13 November, delegates from 197 countries – as well as members of civil society and business representatives – met in Glasgow for COP26. The central aim of the conference was to keep alive the stretch target of the 2015 Paris Agreement to limit global temperature rises to no more than 1.5 degrees Celsius above pre-industrial averages.

During the first week of the conference, the mood in Glasgow was buoyed by a deluge of multilateral commitments, a new climate pledge and net zero target from India (the world’s third largest emitter of greenhouse gases) and the positive spin of host UK Prime Minister Boris Johnson.

However, sobering research published on 9 November by watchdog Climate Action Tracker indicated that temperatures are still on track to rise by 2.4 degrees Celsius by the end of the century even if official 2030 emissions reduction commitments are fully implemented. The remainder of COP26, therefore, needed to jolt national and global ambitions to preserve the possibility of the 1.5 degrees Celsius target.

Two tales of one city

Events in Glasgow unfolded on two separate tracks.

The first track was a highly choreographed drip feed of multilateral (and in some cases bilateral) announcements and commitments. Most were stage-managed by the UK presidency to cover its core conference priorities including those around “coal, cars, cash and trees”. Many of these announcements were not the product of negotiations at the summit and have no enforcement mechanism nor are they yet enshrined in binding national action plans. However, they reflect the ambitions of “coalitions of the willing” that are keen to press for stronger action on key climate goals alongside the UNFCCC framework. These coalitions are likely to continue to gain supporters in the years ahead, while other ones emerge. They are likely to drive political ambition in key policy areas, though some will remain toothless without the support of major emitters or effective enforcement.

Commitment Overview Analysis
Global Methane Pledge More than 100 countries joined the EU-US initiative to cut global methane emissions by 30% by 2030. The initiative was unveiled in September. The pact does not place requirements on governments to cut emissions in specific sectors, though regulatory efforts are most likely to target quick wins in the oil and gas sector. China was notably absent from the list of supporters, though Beijing did commit to reduce methane emissions as part of a separate joint initiative with the US.
The so-called Breakthrough Agenda More than 40 countries committed to the so-called Breakthrough Agenda to align standards and investments to accelerate development of green technologies and make them more affordable and accessible than alternatives that rely on fossil fuels. As well as the EU and US, notable endorsements came from China, Japan, South Korea, Australia and India. Their initial focus will be on power, electric vehicles, steel, hydrogen and sustainable farming.
Ending overseas fossil fuel finance Twenty countries including the US, the UK and Canada (as well as five development institutions) pledged to end finance for “unabated” fossil fuel projects overseas by the end of 2022, and committed to redirect the funding into clean projects. No country has made such a pledge before 2020. The UK, US, Canada and Denmark are on the list. Although no Asian countries signed up, China, South Korea and Japan (the largest financiers of overseas coal) have made commitments to end support for overseas coal power in recent months (a commitment reinforced at the G20 in October).
Coal phase-outs More than 40 countries committed to phase out coal power, with developed countries doing so in the 2030s and developing countries in the 2040s. Separately, the US, EU, UK and others announced plans to support South Africa’s transition away from coal with USD 8.5bn of funding , the first partnership of its kind. Major coal users to join the agreement include Poland, Vietnam, South Korea, Indonesia and Canada. However, overall, the signatories account for a minority of global coal power generation (the top three coal consumers China, India and the US did not join). Furthermore, the UK had hoped to secure more ambitious commitments from developed and developing countries to end coal power by 2030 and 2040.
The Glasgow Financial Alliance for Net Zero (GFANZ) The GFANZ – an alliance of more than 450 financial sector organisations – committed to move USD 130 trillion in assets into investments committed to net zero by 2040. The members account for 40% of global financial assets. However, the initiative is voluntary and will be hard to enforce. The funds are also already invested so cannot be deployed immediately to green projects.
Leaders’ declaration on forests and land use More than 140 countries (covering more than 90% of the world’s forests) committed to halt deforestation by 2030. More than 30 financial institutions also pledged to eliminate deforestation from their portfolios by 2025. It remains unclear how the pledge will be enforced. Deforestation has increased since a similar pledge was made in 2014. There are question marks over the ambition of some supporters, most notably Brazil and Indonesia (the foreign minister of which criticised the deal within hours).
Accelerating the transition to 100% zero emission cars and vans More than 30 countries as well as dozens of cities and regions committed to end the sale of internal combustion engine (ICE) vehicles by 2040 (with leading markets pursuing a more ambitious target of 2035). Automotive businesses also signed the pledge to commit to develop strategies towards a zero emissions portfolio by 2035. The three largest car markets (US, China, and Germany) did not sign the declaration, though some of their major automotive manufacturers are transitioning to electric vehicles. That said, four of the largest global manufacturers did not sign up.
Beyond Oil and Gas Alliance (BOGA) Costa Rica and Denmark officially launched the BOGA. So far, it has eight members who have committed to end new oil and gas exploration and production. Although only attracting a small number of members, a growing number of countries will likely establish phase out dates for oil in the coming years. While many of the pledges were spearheaded or at least endorsed by the UK presidency, this one was not.
US-China climate pact The US and China on 10 November issued a surprise joint declaration on close cooperation to cut emissions in the next ten years to keep warming within 1.5 degrees. Among the centrepieces was an agreement on joint action to cut methane emissions. Although the details of the agreement remain unclear, it represents a significant positive step just weeks after Beijing announced that climate issues could not be treated separately from other faultlines in US-China relations.
Control Risks 2021

The second track in Glasgow was the outcome of official negotiations themselves, thrashed out by delegates after world leaders had left the conference centre and enshrined in a final resolution dubbed “the Glasgow Climate Pact”. On face value the final resolution contains less ambitious commitments than those made by individual countries. However, UNFCCC negotiations run by consensus and operate under the principle of “nothing is agreed until everything is agreed”, meaning that resolutions are inevitably watered down. And still, the Pact included some highly notable achievements and developments that will shape climate policy in the years ahead.

Speeding up the ratchet

The functional significance of COP26 stemmed from the fact that parties to the Paris Agreement – for the first time since 2015 – had to submit new or revised climate pledges (so-called Nationally Determined Contributions or NDCs) before arriving in Glasgow and the vast majority did so. Although this five-year “ratchet mechanism” achieved a modest increase in ambition in the latest round of pledges, the Glasgow Climate Pact “requests” Parties to commit to an annual review of their NDCs. Many countries are likely to embrace annual commitments timed to coincide with future COP summits, but some certainly will not.

Coal and co.

Alongside national commitments by more than 40 countries to phase out coal, the Glasgow Climate Pact commits countries to “accelerating efforts towards the phase down of unabated coal power and phase out of inefficient fossil fuel subsidies” [our emphasis]. With its “unabated”, “inefficient” and “phase down” (rather than “phase out”) loopholes, the text was significantly watered down from the first draft but still marks the first direct reference to reducing fossil fuel use in a COP resolution. While many commentators have remarked on the influence of major coal users in the process, companies should note the speed at which political, public and business opinion on the energy transition is evolving.

Glasgow Climate Pact revisions

First draft - "Calls upon Parties to accelerate the phasing-out of coal and subsidies for fossil fuels."

Final text - "Calls upon Parties to accelerate the development, deployment and dissemination of technologies, and the adoption of policies, to transition towards low-emission energy systems, including by rapidly scaling up the deployment of clean power generation and energy efficiency measures, including accelerating efforts towards the phase-down of unabated coal power and inefficient fossil fuel subsidies, recognizing the need for support towards a just transition."

Source: UNFCCC

Finance

As forecast, climate finance returned as a major source of tension in Glasgow. Despite a flurry of new pledges in recent months, developed countries have failed thus far to meet a commitment to mobilise USD 100bn in finance to help developing countries mitigate and adapt to climate change. Meanwhile, developing countries have started to call for much larger sums. India’s Prime Minister Narendra Modi used a speech in Glasgow to call for USD 1 trillion over the next decade, while African countries said they needed USD 700bn per year. Wealthy nations largely recommitted to their existing financial pledges in the Glasgow Climate Pact, though announced plans to double finance for adaptation. Adaptation projects have long been underfunded compared with mitigation efforts.

Finance will remain a perennial source of tension at future COPs. The sums required to help countries transition their economies and adapt to a changing climate will mount faster than the sums mobilised. And as the impacts of climate change grow, the issue of loss and damage will return as a divisive issue.

Paris Rulebook

The Glasgow Climate Pact finalises the rules governing the Paris Agreement. Although most had been thrashed out at recent COPs, an agreement on global carbon markets (Article 6) had long eluded negotiators. Ultimately, the deal in Glasgow was a compromise and will allow for the trade in some previous credits created under the Kyoto Protocol and considered of lesser quality. However, the finalised rules will add clarity to an otherwise murky and fragmented market and could lead to a surge in investment (including from the private sector) in schemes that offset emissions such as carbon capture and storage, and reforestation.

“More than 6 out of 10”

A politician prone to optimism, Prime Minister Johnson rated success at the conference at “more than six out of ten”. COP26 was never intended to produce a new treaty and was never going to be a venue at which all parties came forward with new national climate plans – especially following the economic and political disruptions of the pandemic. But it made progress towards creating and reinforcing mechanisms to reduce emissions and mobilising requisite political will. COP26’s legacy will be the degree to which it moves the marker in capitals around the world and drives more ambition at future COPs. It will likely accelerate further policy change in the build-up to COP27.

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