Wed. Dec 1st, 2021

How should we assess the outcome of COP26 in Glasgow? It would be reasonable to conclude that it was both triumph and disaster – triumph, by taking a few notable steps forward, and disaster, by falling far short of what is necessary. It remains very doubtful whether our divided world can muster the will to tackle this challenge in the time left before the damage becomes unmanageable.

Climate action tracker provided a useful summary of where we are: on current policies and actions, the world is ready for a median increase in temperature of 2.7C above pre-industrial levels; with the targets for 2030 alone, it would drop to 2.4C; Full implementation of all submitted and binding targets will yield 2.1C; and, ultimately, implementation of all announced targets will yield 1.8C. So, if the world had delivered everything it now indicates, we would be close to the recommended ceiling of a rise of 1.5C. (See maps.)

Graph showing that even on optimistic assumptions, warming has been set to exceed 1.5C

Skepticism is fully justified. According to Climate Action Tracker, only the EU, UK, Chile and Costa Rica now have adequately designed net zero targets. Announced improvements in nationally determined contributions (NDCs) since September 2020 will reduce the greenhouse gas emission reduction required by 2030 by only 15-17 percent. More than half of this reduction in NDCs comes from the US, whose future policy, to put it mildly, is uncertain. New sectoral initiatives will reduce 2020’s deficit in greenhouse gas emissions by 20-25 percent by 2030. Announced reduction in methane emissions and deforestation would be particularly significant, if delivered. But the reduction in deforestation is questionable. The shortfall remains large anyway.

The picture, however, is not entirely dark. Net zero liabilities now cover 80 percent of total emissions. The 1.5C ceiling is also a clear consensus. Another good signal is a joint statement between the US and China, as nothing can be achieved without these two countries. The final statement also includes a commitment to “accelerate efforts to accelerate untapped coal power and inefficient fossil fuel subsidies”. This is far too little. But this is a first in climate agreements.

Graph showing that despite new promises, the gap between planned and required reductions in emissions remains large

Yet, if the world reduction in emissions recommended by 2030, much more needs to happen. One possibility is new commitments in the follow-up COP, which will be in Egypt next year. This will be the first of a series of annual high-level meetings in which countries will be asked to improve on their promises.

Another possibility is a more active private sector. The most important news about this is the Glasgow Financial Alliance for Net Zero (GFANZ). According to Mark Carney, former Governor of the Bank of England, his aim is to “build a financial system in which every decision taken takes into account climate change”.

GFANZ is made up of the world’s leading asset managers and banks, with total assets under management of $ 130tn. In principle, the allocation of such resources for the net zero targets will make a big difference. But, Carney notes, $ 100tn is the “minimum amount of external funding needed for the sustainable energy drive over the next three decades”. This is scary.

Graph showing that sectoral initiatives should make a useful contribution to emission reductions

Needless to say, while it is possible to prevent businesses from doing lucrative things, it is impossible to get them to do things that they consider to be insufficiently profitable, after adjusting for risk. If they want to invest on the necessary scale, there must be carbon prices, elimination of subsidies for fossil fuels, bans on internal combustion engines and mandatory climate-related financial disclosures. But there must also be a way to get large amounts of private investment into the climate transition in emerging and developing countries, apart from China.

GFANZ calls for the creation of “land platforms”, which will “bring together and align stakeholders – including national and international governments, businesses, NGOs, civil society organizations, donors and other development actors … to align and coordinate priorities”. A major and controversial issue will be risk sharing: the public sector must not take all the risks and the private sector all the rewards of the energy transition.

Much attention is paid to the failure of developed countries to deliver the promised $ 100 billion a year in funding to emerging and developing countries. This is symbolically important. But if Amar Bhattacharya and Nicholas Stern of the London School of Economics take note, these are small changes: “In total, emerging markets and developing countries other than China will have to invest about an additional $ 0.8tn per year by 2025 and almost $ 2tn per year by 2030” in climate mitigation and adaptation and the restoration of natural capital. About half of this should come from abroad, mainly from private sources.

Graph showing US policy shift explaining more than half of planned emissions reduction since September 2020

Yet the official sector also needs to do more. In this context, it is a real pity that there has not been a greater benefit from the recent issuance of special drawing rights. Of the total allocation of $ 650 billion, about 60 percent will go to high-income countries that do not need it and only 3 percent to low-income countries. It is planned to lend $ 100 billion of this from high-income countries to developing countries. It should be much more to help deal with Covid’s legacy and the climate challenge.

In short, if we compare the global discussion today with that of a decade ago, we have come a long way. But if we compare it to where we need to be, there is still a frighteningly long road ahead. It’s too soon to give up hope. But to be complacent would be absurd. We must act forcefully, credibly and swiftly and, not least, we must agree to do it together. The task is big and the hour is late. We can no longer sit and wait.

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