The work from international meetings such as COP26 is wide ranging, affecting businesses and governments all round the world.
There are policies on energy, agriculture, land use, transport, heavy industry, heating systems and much else. No-one can be in any doubt about the clear intent of the US the EU – and most other leading developed countries - to try to keep the world to the aims set out in the Paris Agreement of 2015.
The Paris Agreement is now signed by most countries in the world. It commits the signatories to file national plans to abate their own carbon dioxide output, with a view to reducing global emissions as quickly as possible. The objective is to keep the growth in world temperature to 1.5 degrees or “to well below 2 degrees”, using scientific forecasts of how much carbon dioxide output must be cut to control the temperature. The Glasgow conference is one of the staging posts and reviews on the way to 2050 – and the goal of net-zero carbon output worldwide.
It is likely that when all the national plan pledges are added up, the world will still see rising carbon dioxide output this decade. Whilst the US and Europe will be doing their bit, the other large producers including China, Russia, and India will still be expanding their output. At the heart of the Paris Agreement was an attempt to reconcile the interests of the developed world with those of the emerging economies. Many accepted the practical proposition that the richer world needed to offer cash to help the poorer world adjust more quickly – and needed to develop and share new technology that could assist the transition.
The conference has suffered a setback in its wish to achieve an early closure of the global coal industry. China has decided instead to open more mines and burn more coal as an immediate response to its energy shortage this autumn. As the world’s largest coal miner and user this makes achieving a breakthrough difficult. Germany and Poland are also reluctant to close their mines any time soon given the importance of coal in their energy supply. India intends to carry on burning coal as a necessary part of its current energy mix.
At Glasgow, effort is being put in to try to hit the promised target of $100bn a year of transfers from the richer countries to the poorer to help pay for their transition schemes and to adapt to the consequences of climate change. It appears that there may be a further delay in reaching the full $100bn until 2023 and beyond. There is also a wish to enter a series of country agreements, as with South Africa, so the advanced countries can see what they are backing and where they can assist with money and technical support. There are also a series of sector and themed agreements.
There is a global forest pledge. Various countries have agreed to halt and reverse forest loss and land degradation by 2030. The richer countries have pledged $12bn to assist, with Brazil and other countries with histories of cutting down forests signing up to the idea. There are statements about redesigning agricultural policies and programmes to switch to sustainable farming.
There has been an exploration of how much the private sector can finance. The development banks have promised to do more, and the investment industry has been primed to emphasise helpful investment that will assist the move to a low carbon world.
The green and technological revolution combined
There has been substantial work on technology. About 40 leaders including the US, China, EU, Japan, UK and Korea have signed a Breakthrough Agreement to create more green jobs and to change technologies in power generation, road transport, steel, and agriculture. There are also individual Breakthrough Agreements in the main areas of the general framework. The aim is to exchange information on these technologies and to co-ordinate global action. In the case of hydrogen there is a pledge to ensure “affordable, renewable and low carbon hydrogen is globally available by 2030.”
The overall results of the work are likely to be some toughening of some national targets, with a particular change of direction in the US following the election of President Biden. There will also be a bit more cash and technology transferred to the emerging world.
A mixture of government and private-sector money will be deployed on a substantial scale to promote and develop the preferred technologies. There is likely to be more emphasis on hydrogen going forward as a complement to the more advanced roll out of wind and solar power. Investors should expect more green investments to achieve high market ratings, as so much money chases those who can claim to be powering the decarbonisation policy.
Carbon counting will become a prominent feature of business life this decade, as targets get tougher and as more is expected sooner rather than in remote years closer to 2050. Quoted companies with reliance on fossil fuel will use investment in replacements and disposal of interests to reshape their exposures.
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