Coal: Coal is the dirtiest fossil fuel and the International Energy Agency has made clear that if it is not rapidly phased out, the world has no hope of staying within 1.5C of global heating. While there was some disappointment that The Glasgow Pact only agreed to “phase down” coal rather than “phase out”, this is still the first COP statement ever to include a direct reference to fossil fuels. Therefore, even the watered-down commitment was seen as a major step forward. In terms of more ambitious related initiatives, 23 countries made new commitments to phase out coal power under the Global Coal to Clear Power Transition Statement, including five of the world’s top 20 coal power-using countries. Major international banks also committed to effectively end all international public financing of new unabated coal power (coal power without carbon capture) by the end of 2021. Furthermore, at least 25 countries and public finance institutions committed to ending international public support for the unabated fossil fuel energy sector by the end of 2022.
Methane: More than 100 countries, including the US, Japan and Canada, have pledged to significantly cut emissions of methane (which as a reminder is one of the most potent greenhouse gases in terms of its warming effect). The Global Methane Pledge announced at COP26 commits signatories to reducing their overall emissions by 30 per cent by 2030, compared with 2020 levels. The US government also published a detailed blueprint of how it intends to meet the goal. The new initiative emphasises making cuts by tackling methane leaking from oil and gas wells, pipelines and other fossil fuel infrastructure. Australia, China, Russia, India and Iran did not sign the deal, but it is hoped more countries will join later. Russia in particular will be important as it is reportedly known for its leaky infrastructure.
Climate finance: Developed nations in 2009 agreed to provide $100B p.a. of private and public climate finance to developing countries by 2020 to fund emissions cuts. However, in 2019, the latest year for which data is available, only $80B was provided. The Glasgow Pact includes an agreement to provide the same amount going forward, or $500B of climate finance to developing countries for 2021-2025. Another important consideration is what this finance is being spent on; to date, climate finance has tended to fund emissions cuts (e.g., new renewable energy infrastructure) because it is generally profitable. However, developing countries want more money to be spent on adaptation to help fight the unavoidable impact of extreme weather. The Glasgow Pact agreed developed countries would double the collective share of adaptation finance within the $100B annual target for 2021-2025. For context, of the $80B of climate finance mobilised in 2019 25% went to adaptation (up from 21% in 2018), 64% went to climate change mitigation activities (down from 70% in 2019), and the remainder to crosscutting activities.
Deforestation: More than 100 world leaders have promised to end and reverse deforestation by 2030. Approximately 90% of global forests are covered by the endorsers. The signatories list includes highly forested countries such as Brazil and the Democratic Republic of the Congo.
Green technologies: This year’s COP had an increased focus on particular green technologies that can help accelerate decarbonisation goals. A group of 40 signatories including the US, UK, India, European Union and China (representing more than 70% of the world’s economy) launched the Breakthrough Agenda – an agreement to accelerate and stimulate investments into clean technologies to make them the most affordable and attractive choice for every country by 2030. The Agenda focuses on five areas; clean power, zero emission road transport, low-emissions steel, clean hydrogen, and sustainable and resilient agriculture.
Countries to revisit 2030 target next year: a string of additional net-zero commitments at COP26, notably from emerging economics like Brazil (2050), Russia (2060) and India (2070) mean that more than 80% of global GDP is now covered by net-zero pledges. However, scientists are arguing that the updated pledges are not enough,as shown by research from Climate Action Tracker. According to this research, implemented policies and action has been slow and would lead to disastrous end-of-century warming of 2.7°C. At the other end of the spectrum, if all announced net-zero commitments are implemented (and this is a big if), this would lead to end-of-century warming of 1.8°C. Turning to interim targets, current 2030 targets announced by countries are expected to lead to 2.4°C of warming by 2100. This is clearly well short of the required goal. Therefore, the final agreement at Glasgow requests countries to revisit and strengthen their 2030 targets by the end of 2022, to put us on track with the 1.5°C goal. The investment implications are that there could be more dislocation coming than just what is implied by recent commitments.
US-China co-operation on climate change: China and the US produce about 40% of the world’s CO2 emissions annually making their surprise agreement a potentially significant contributor to reaching global net-zero goals, provided it leads to tangible actions. While the agreement is short on detail and concrete actions, it broadly agreed to: cooperate on regulatory frameworks and environmental standards related to reducing emissions of greenhouse gases in the 2020s; maximising the societal benefits of the clean energy transition; policies to encourage decarbonisation and electrification of end-use sectors; the circular economy, such as green design and renewable resource utilisation; and deployment and application of technology such as Carbon Capture Usage and Storage (CCUS). Before COP27, they also intend to develop additional measures to enhance methane emission control, at both the national and sub-national levels. Independently, China intends to develop a comprehensive and ambitious National Action Plan on methane, aiming to make significant advances in controlling methane emissions and reducing them in the 2020s.
Beyond Oil and Gas: One of the most ambitious policies to come out of COP26 has been the Beyond Oil and Gas (“BOGA”) initiative, a coalition of 8 members committed to ending oil and gas extraction. The core members of this alliance are Costa Rica, Denmark, France, Greenland, Ireland, Sweden, Wales and Quebec (the Canadian province). Core members of BOGA commit to end new concessions, licensing or leasing rounds for oil and gas production and exploration and to set a date for ending oil and gas production and exploration on the territory over which they have jurisdiction.
Download paper: Summary of Key Outcomes from COP26