There is a flurry of announcements of climate-related policy and investment initiatives in the run-up to COP26. What is this conference all about? What’s at stake? We answer the basic questions.
The United Nations’ Climate Change Conference (COP26), which takes place in Glasgow, Scotland, in November, is intended to be a pivotal meeting of global leaders and climate experts that cements in place the rules to tackle global warming contained in the 2015 Paris Agreement.
The meeting was postponed from 2020 due to the effects of the Covid pandemic, and since then there has been plenty to concentrate minds still further.
Intense heat waves and torrential floods, widely attributed to climate change, now regularly hit the headlines. The global average temperature in 2020 was about 1.2°C above pre-industrial levels, according to research of the World Meteorological Organization – anything over a 1.5°C rise is likely to be dangerous for the planet, according to climate scientists.
Meanwhile, the International Energy Agency reported on July 15 that nearly half of a forecast 5% rise in global electricity demand in 2021 would come from fossil fuels, especially coal, despite the renewable energy revolution.
High-level delegations from 197 nations and territories, and other interested parties will try to seek consensus on key topics, from boosting renewable energy use and speeding up carbon emissions reductions to mitigating the impacts of climate change in the most vulnerable developing countries – and how to finance it all.
Can the interests of competing superpowers and of rich and poor countries be reconciled? We summarise the key themes, progress made so far and what to expect.
What’s on the agenda?
Four main goals have been outlined for COP26. Countries are being asked to:
- Set ambitious 2030 greenhouse gas emissions reductions targets, consistent with efforts to reach net-zero emissions by 2050. Eliminating nearly all atmospheric carbon emissions by mid-century is regarded as necessary if global warming is to be restricted to 1.5°C.
To do this, countries are being asked to accelerate the phase-out of coal, restrict deforestation, increase uptake of electric vehicles, and encourage investment in renewable energy.
- Adopt measures to protect communities and natural habitats against the impacts of climate change by protecting and restoring ecosystems, building defences, improving warning systems and making infrastructure and agriculture.
- Mobilise finance to cover the cost of meeting the first two goals. Developed countries pledged to mobilise at least $100 billion/year in climate finance for developing countries by 2020, but have yet to meet this target. International financial institutions are also being asked to play their role in facilitating private and public sector flows into climate finance.
- Step up cooperation by finalising the Paris Rulebook that would activate the Paris Agreement, and by accelerating action to tackle the climate crisis through greater collaboration between governments, businesses and civil society. This will enable more accurate assessments and comparisons of how countries are progressing towards their climate change targets.
What progress has been made towards realising the goals for COP26?
Most of the heavy lifting needed for a successful conference outcome needs to be done before ministers and other high-ranking officials arrive in Glasgow. But the Covid pandemic continues to hamper preparations, by slowing the collection and collation of data needed for workable frameworks to tackle climate change, especially in the developing world.
Following three weeks of online COP meetings in June, the UN’s climate chief Patricia Espinosa said that while “good progress” had been made on many issues, a “significant amount of work remains.” The talks were the first involving all the climate change conference parties since COP25 in December 2019.
At the UN May-June Climate Change Session views still diverged on how to make the Paris Agreement’s carbon market and non-market mechanisms work, as well as on how countries communicate their climate actions transparently under the Paris Agreement.
“Other crunch issues that need to be resolved at COP26 include delivering the pledge to mobilise $100bn annually to support developing countries, raising ambition on emission reductions, adaptation and finance while ensuring that no voice remains unheard and no proposal unattended.”
UN Climate Change
A spate of climate change policy announcements has been issued by the world’s largest economies in the run-up to COP26, covering tougher carbon emissions targets, stimuli for faster electric vehicle rollouts, improved energy efficiency and a range of other measures.
The EU’s plan, announced in mid-July, for the world’s first carbon border tax – applicable to imports of carbon-intensive steel, aluminium, cement, fertilisers and electricity – aims to remove financial incentives for companies with high emissions to relocate production from EU countries under a tight carbon regime to countries outside the bloc where emissions are not taxed as heavily.
The US, China and India were among countries quick to question whether the EU proposal would be fair on their manufacturers – an indication of the difficulties that lie ahead for COP26 negotiators attempting to produce global harmonisation on carbon taxes and other climate change measures that affect trade.
Can COP26 provide more certainty on climate change funding for poorer countries?
Developing countries, especially those in the tropics, are already being hit disproportionately hard by the effects of climate change. Few doubt the need for more spending by rich nations to help poor countries pay for the construction of costly projects to mitigate climate change impacts such as drought, floods, deforestation and biodiversity loss, as well as measures such as boosting renewable energy at the expense of fossil fuels, and building more energy-efficient transport infrastructure.
But mobilising the funding is proving difficult. UN Climate Change has criticised developed countries for falling short on their 2019 pledge to mobilise $100bn a year of climate finance for developing nations – a key pillar of the Paris Agreement.
Given that this is a largely symbolic figure, unlikely to be anywhere near enough to finance the action needed to tackle climate change, the failure to hit it by 2020 as planned is a serious concern for negotiators. Only around three-quarters of the $100bn/year is estimated to have been pledged by wealthy countries so far.
Alok Sharma, the UK government official presiding over COP26, said in a 15 July letter [pdf] to the conference parties that delivering the $100bn annual goal up to 2025 was of “utmost importance” and that a COP ministerial meeting taking place in late July also needed to decide how the need for greater funding flows after 2025 should be addressed in Glasgow.
International financial institutions have been asked to come up with mechanisms to help facilitate the flow of funding from rich to poor countries. The IMF says it will announce measures to enable ‘debt-for-climate’ swaps before COP26. These enable international creditors to offer debt relief to developing countries in exchange for green measures, such as renewable energy or climate mitigation measures.
What should private investors look out for?
Increasing private sector participation in the climate change process is integral to the COP26 discussions. Efforts to ensure climate change measures are included in corporate planning, and to tackle corporate greenwashing and encourage investment in climate-positive projects are hot topics.
A plethora of measures designed to mobilise private funding flows to fight climate change have been rolled out in the run-up to COP26. Large private sector players are playing a role through membership of UN-backed bodies such as the Net-Zero Asset Owner Alliance – a group of over 40 institutional investors committed to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050 – and the Task Force on Climate-Related Financial Disclosures.
The COP26 parties will be pushing for greater alignment in the approach to tackling climate change from large private sector companies and institutional investors.
Does the US decision to rejoin the UN climate change process mean COP26 is more likely to be a success?
On becoming president, Joe Biden returned the US to the Paris Agreement, after his predecessor Donald Trump pulled out of the accord, preferring to support fossil fuel industries and constrain the power of environmental regulators instead. Biden appointed former Secretary of State John Kerry as his climate envoy, sending a signal that the US was serious again about tackling global warming.
So, hopes are high that the return of a global economic powerhouse – and the world’s second-largest carbon emitter – to COP will provide impetus to the process. Biden hosted a live-streamed online Leaders’ Summit on Climate with 40 world leaders in April to underscore US commitment. But Washington’s clout at COP26 may depend more on the administration’s actions than its words.
Clean energy measures were an integral part of Biden’s $2trn American Jobs Plan, a template for post-Covid regeneration announced in March. Among other measures, the plan calls for the removal of fossil fuels from the US power sector by 2035, heavy investment in the US electricity transmission system, and a $35bn investment in research and development for clean energy technologies, including battery storage, carbon capture and sequestration and hydrogen. Parts of the plan will face opposition in the US Congress, but it indicates a willingness by the US government to implement far-reaching climate change policies.
Also crucial to the success of COP26 is the relationship between the US and China, the world’s largest carbon emitter by far. Kerry met his Chinese counterpart Xie Zhenhua in April when they agreed the countries should cooperate on tackling the climate crisis. However, there was little detail on what this means in practice. Meanwhile, the political relationship between the two countries remains strained, and a deterioration could yet hamper progress in Glasgow.
What are the prospects for a positive outcome from COP26?
Climate change meetings since the Paris COP21 in 2015 have struggled to reconcile the diverse interests of participants, regularly ending up with fudged final communiques reflecting limited progress.
Some of the toughest battles in Glasgow are likely to be those over the scale of funding from rich countries for climate change-related measures in developing countries. The need is clear, but developed countries whose finances are under strain following the Covid pandemic may be reluctant to provide significantly more funding in the short term.
That the UK government, which is hosting COP26, has just cut its annual foreign aid budget to 5% of its gross national income from 7% in response to the Covid crisis does not augur well in this regard. Getting a unified approach to carbon pricing is also likely to be a thorny issue.
Progress may come more easily in arcane but important areas of Paris Agreement rulebook implementation, such as improving harmonisation of carbon emissions measurements and reporting.
The world’s largest economies (and carbon emitters) say they are keen for COP26 to be a success and their stated ambitions have been converging. Many have toughened up their short-term carbon emissions reductions targets since COP25 in Madrid in December 2019, including China and the US, without whose commitment the process would falter.
Perhaps the biggest driver for closer alignment between parties in Glasgow is greater public awareness of the need for urgent climate action. Those seeking high office in many countries cannot afford to face the electorate without firm climate change commitments and are acutely aware that fulfilling ambitions to reach ‘Net Zero’ carbon emissions by mid-century requires sweeping actions now.
