The world might turn a corner on climate change with the next UN Climate Change Conference, to be held in Glasgow in November.
In Paris, in 2015, 195 countries agreed together to limit global warming well below 2°C in order to mitigate the negative effects of climate change. Since then, the goal is to drastically decrease greenhouse gas (GHG) emissions, globally, to reach “net zero” by the second half of the century.
The Paris Agreement set an iterative process for global climate action. Basically, governments ratified the agreement and later submitted a first commitment for GHG reduction, called Nationally Determined Contribution (NDC). Every five years, NDCs are reviewed and governments need to revise them and submit new, more ambitious NDCs. As a result, the fight against climate change should move forward with the refinement of countries’ pledges.
However, as suggested by a study made by FTSE Russell, there is a gap between countries’ commitment and climate goals due to a general lack of ambition, even after NDCs’ revision. In February 2021, 75 countries (accounting for about 30% of global GHG emissions) already revised their NDCs. Even if the committed efforts increased, the projected level of emissions in 2030 is around 3% lower compared to the previous NDCs. The implied global temperature of these updated NDCs is slightly below 3°C. This is definitely not enough according to the last IPCC report: global emissions should decrease by 45% in 2030 compared to 2010 levels to be able to achieve the 1.5°C goal. As of now, with the updated NDCs, the level of GHG emissions would only be 0.5% lower than their 2010 level.
Five years after COP21, it appears that emissions evolution is far from being aligned with countries’ pledges: to strengthen both long-term goals and short-term policy action. As countries are facing strong pressure from their population to address climate change, meeting the goals will require stronger and more ambitious political actions.
The COP26 is paramount for global climate action as the first revision is due in November 2021. Therefore, it is a decisive test for the Paris Agreement and its ability to make countries work together and converge towards a common and long-term goal.
In conclusion, it is critical that the collective efforts to reduce emissions improve drastically after (and even before) COP26.
What are we expecting from COP26:
- A strong reinforcement of policy interventions to limit GHG emissions;
- Major economic transformations in sectors consuming fossil fuels (e.g. power generation, transport, manufacturing activities, buildings, etc.). Indeed, low carbon technologies and more sustainable production processes can compete with business as usual solutions;
- Massive asset reallocation, with key implications for investors globally in relation to risk management, asset prices and investment strategies.
More specifically, at Cozero, we expect discussions at COP26 to lead towards decisions on clearer standards and guidelines for carbon management for businesses as well as incentives framework for decarbonization measures.
The full presidency programme for COP26 is available here.