COP26: Takeaways and Outcomes to Watch
The UN Climate Conference (COP26) has ended after two weeks of multilateral discussions among 197 countries, resulting in a series of agreements and commitments by national governments, corporations, financial institutions, subnational governments and civil society organizations.
From the onset, COP26 was focused on two core objectives: Accelerate the reduction of global carbon emissions across countries and industries towards meeting the 1.5 degrees Celsius target of the Paris Climate Agreement, and significantly increase financial support for developing countries to mitigate today’s harmful climate impacts and transition to a clean energy future.
Neither goal was achieved. The two-week conference highlighted the differing goals and ambitions of countries on climate, with funding and the pace of developing world adaptation as two areas where countries could not align their commitments.
Three takeaways from the final agreement
· The role of “fossil fuels” is mentioned for the first time in any climate agreement, with a call to end “inefficient subsidies” and phase down the “unabated” use of coal. The final text was watered down to get India, China and Iran to sign on. As with previous climate agreements, there remains no binding enforcement mechanism.
· Parties are requested to attend COP27 next year in Egypt with updated plans to reduce their carbon emissions by 2030. Under the Paris Climate Agreement, the next deadline would have been 2025. The idea of updating plans more frequently is that if countries increase their ambition more regularly, it should result in an acceleration to net zero.
· The final agreement leaves the crucial question of how much and how quickly each nation should reduce its emissions over the next decade unresolved. U.S. and European leaders are urging developing markets to accelerate their shift from coal and other fossil fuels, but those markets say they do not have the financial resources to transition to clean energy and wealthy countries are not providing the funding for them to do so.
10 outcomes to watch
In addition to the final agreement, negotiators also announced several commitments to address climate impacts and initiatives in different markets and industry sectors. Watch these 10 outcomes for their future impact on climate action.
· Country commitments: In the runup to COP26, 149 countries representing 80% of global emissions updated their National Determined Commitments (NDCs). Eighty-seven of these markets presented new NDCs, while 20 countries restated previous targets. The United States offered a detailed plan for how it will meet its 2050 net zero target. India announced a 2070 target year for its net zero commitment.
· Climate public sector finance: Rich countries failed to meet a target of providing $100 billion a year by 2020 and now say that will happen in 2023. However, 12 donor governments pledged $413 million in new funding for the Least Developed Countries Fund, the only dedicated source of climate resilience funds for the 46 Least Developed Countries. At Glasgow, finance also focused on what happens next. Some developing countries want payments of at least $1.3 trillion per year by 2030, split evenly between cutting greenhouse gas emissions and adapting to climate impacts. Moreover, they want grants — not loans that will accumulate more debt. Another issue is how much is put into adaptation versus mitigation efforts. One major point of contention between rich and poor countries was the need for a separate pool of money to address “loss and damage” — such as the disappearance of national territory, culture and ecosystems. While the final agreement recognized the importance of loss and damage and agreed to provide technical assistance to impacted countries, no fund was established.
· Climate private sector finance: The Glasgow Financial Alliance for Net Zero, a coalition of international banks, investment firms and asset managers created by former Bank of England governor Mark Carney and co-led by Michael Bloomberg, announced it has secured up to $130 trillion in private capital to help countries reach their net zero targets. The goal is to finance $100 trillion worth of projects over the next 30 years. However, some experts doubt the significance of the commitment, saying banks are still free to invest in fossil fuels over the next decade. Major insurance companies presented plans to target decarbonization through the Net Zero Insurance Alliance.
· Deforestation: One hundred and thirty-seven (137) countries, including the U.S., China and Brazil, agreed on a deal aimed at ending and then reversing deforestation by 2030, committing $20 billion in public and private funds ($2 billion from Jeff Bezos) to protect and restore forests. A coalition of global companies are part of the initiative. More than 30 financial institutions also vowed to stop investing in companies responsible for deforestation and new guidelines offered a path toward eliminating deforestation from corporate supply chains.
· Coal: One hundred and ninety (190) countries, regions and companies signed a pledge to phase out coal in developed countries by 2030 and developing countries by 2040. All G7 countries will phase out coal financing this year. The commitments of the Powering Past Coal Alliance (PPCA) are not binding and some signatories said they will not be able to phase out coal without sufficient financial help from other countries. The largest coal producers and users — China, India, Australia and the United States — did not sign the agreement. Prior to COP26, the G20 member countries said they would no longer finance international coal utilities.
· Oil and gas: The Beyond Oil and Gas Alliance, an initiative founded by Denmark and Costa Rica, is aimed at phasing out oil and gas production. France, Greenland, Ireland, Sweden, Quebec and Wales joined as full members and Portugal, New Zealand, Italy and California as lower tier members. Members will commit to end new licensing for oil and gas exploration and production. The world’s oil producers — United States, Saudi Arabia, Russia, Canada and China — did not join, nor did COP26 host United Kingdom. However, it was noted that Scotland, where much of the UK’s oil and gas operations are located, was “in close dialogue” with the initiative.
· Methane emissions: One hundred (100) countries signed a pledge to reduce global methane emissions by 30% by 2030. Fulfilling this goal could shave 0.2°C off global warming by mid-century. President Biden announced new EPA regulations on methane emissions from U.S. oil and gas production. China, Russia and India did not sign the agreement.
· Autos and aviation: A group of countries, companies and cities committed to phasing out fossil fuel vehicles by 2040. However, major car markets in China, the United States and Germany did not sign up — highlighting the challenge in transitioning the global auto sector to net zero emissions. General Motors, Ford, Mercedes, Jaguar Land Rover and China’s BYD signed on, while Toyota, Volkswagen, Honda, Nissan, BMW and Hyundai did not. In the aviation sector, 20 countries launched the International Aviation Climate Ambition Coalition (IACAC) to work together and through the International Civil Aviation Organization (ICAO) to reduce aviation carbon emissions, including talks to develop an industry-wide net zero plan next year. The countries signing the pact include four of the six largest passenger aviation markets (United States, United Kingdom, Ireland and Japan) while the other two (China and India) did not join the coalition.
· Carbon markets: Negotiators agreed to standardize Article 6 rules on carbon credits or offsets. Countries will be allowed to trade carbon credits with each other. The rules could give momentum to creating a global carbon marketplace. But there are concerns the agreement contains loopholes that could allow some to overestimate or double count their carbon credits, particularly wealthy nations and large businesses that can afford a lot of offsets.
· U.S.-China agreement: China and the United States announced a surprise deal that may end as a significant achievement of COP26. The two largest carbon emitters will cooperate on decarbonization and transitioning to clean energy over the next decade, upgrade their 2030 pledges and offer new 2035 commitments. Detailed plans and timelines were not announced. However, China will not bring forward its peak emissions target from 2030.
On Purpose Decoded, we have published a set of post-COP26 implications and guidelines for business. Read here: https://impact.webershandwick.com/cop26-outcomes-and-communications-implications-for-global-business-d21402e97e29
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