Cop26 brought money to the cause of climate change

Glasgow summit included substantial mobilisation of private sector to provide climate momentum

The SEC Armadillo, one of the venues for the Cop26 summit2, is illuminated on the first day of the Cop26 summit in Glasgow. PA
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In the run-up to Cop26 in Glasgow in November, Alok Sharma, UK president of the event, described himself as shepherd-in-chief for a worldwide deal on global warming.

The role of the president was to guide the disparate coalition to make progress together – and it worked, as 190 nations signed on to pledges to extend and complete the 2015 Paris Agreement that committed the world to limiting the global temperature rise to 1.5°C above the pre-industrial norm.

Speaking six weeks after the meetings, Mr Sharma said the mission was accomplished because all countries embraced the conclusions made in Glasgow.

“Ultimately, if we are going to succeed in what the science tells us we need to do, which is to effectually cut global emissions in half by 2030, it will require all countries to act in concert,” he said.

Describing his continuing Cop26 role – the position runs up until the next conference opens in Sharm El Sheikh in 2022 – Mr Sharma said he was shifting to the task of auditor-in-chief, examining the progress towards meeting the commitments made at the meeting.

But the big miss of the meeting was the failure, yet again, to meet financial commitments, with wealthy countries failing to meet the $110 billion annual funding target set in Paris to subsidise developing nations' efforts to move towards carbon neutrality and help them face the effects of climate change.

Mr Sharma pointed to substantial mobilisation of the private sector to provide momentum where governments had held back.

“I would just say is that the $100bn, of course, is a totemic figure, and we absolutely have to deliver on that,” he said. “But if we are going to make real progress in terms of energy transition around the world, getting countries off fossil fuels on to renewables, it will need the private sector involved, it will need trillions mobilised.”

It is a point in keeping with the organisers' pledge that the priorities in Glasgow would be coal, cash, cars and trees – and the moves around cash as well as coal ended up being the dominant outcomes of the meeting.

'An institutional investor coalition'

Abyd Karmali, a client adviser on Cop26 who spoke at a Bank of America panel, pointed to how asset management firms with $130 trillion under management had attended the conference, with many joining the Glasgow Financial Alliance for Net Zero, led by UN climate finance envoy Mark Carney and Mike Bloomberg, former mayor of New York.

“You have the beginnings of an institutional investor coalition,” said Mr Kamali. “The critical point is that $130tn that is sending an unbelievably strong signal to all the different stakeholders out there that this is unmistakably the direction of travel.”

There was much talk of some types of investments becoming “stranded assets” with no recourse to market financing as climate deadlines come closer.

Julian Mylchreest, executive vice chairman of Bank of America, sees the weight of finance driving much faster progress to net zero.

“My hope is, post-Cop, the conversation gets more sophisticated now and a bit more nuanced,” he said. “Because I think that once you got to a position where climate change is an accepted truth and net zero the undebatable target now, it's all about the what and the how and the pace of the how and who pays for it and I think we'll make a lot more progress now.

“It's not a case of them and us, and I'll give you some examples. I think one of the things which my colleagues have heard me talk a lot about is hydrogen. I don't see a path to getting to net zero and dealing with the hard-to-abate sectors without seeing hydrogen playing a very big role.”

But countries remain the building blocks of the Cop process.

“We now have 90 per cent of the world covered by a net-zero target. But crucially, those together do not yet take us on a path to 1.5°C, so more needs to be done,” Archie Young, the UK's chief negotiator, said.

“One of Glasgow’s key achievements was, I think, putting in place the expectation that countries will revisit and strengthen their [Nationally Determined Contributions], their 2030 numbers next year.

“So, if we hadn't got that the global stock take in 2023 and then the ratchet in 2025, we would have only looked at the numbers beyond 2030.”

Jake Werskmen, an EU Commission international adviser on climate, told a panel that Glasgow had raised the bar by driving detailed commitments from all the participants.

“Much more specific in terms of the science requires of us 1.5°C, net zero by the middle of the century,” he said. “Much more specific in terms of the kinds of types of policies that we have to put in place. More specific in terms of where we have to make those cuts, particularly with regard to methane and near term CO2 by 45 per cent from 2010 levels by 2030.”

However policymakers and businesses are in many senses catching up with consumers.

A survey by consulting firm Simon-Kucher & Partners last month found that 85 per cent of global consumers polled had actively chosen more sustainable purchase choices over the past five years.

Sustainability was identified as a key factor in purchases by six out of 10 buyers and a little more than one third said they were happy to spend extra on these goods and services.

The findings showed the strongest support of sustainable options among millennial shoppers. Respondents were keen to see green commitments from utilities and energy companies.

Coal's future the key clash

The most intense moment of Cop26 came on the final afternoon, when China and India joined forces to replace “phase out” with the more ambiguous “phase down” in the final communique on coal.

Mr Young said that by dint of population size, China and India, with about three billion people between them, could not be excluded from the final deal.

“They were not prepared to accept the pact as it was – that needed to be taken seriously” he said. “There is still the phase down of coal — that's not phase out but it's still phase down. It sets a bar for future cuts and you still have a phase out of inefficient fossil fuel subsidies.”

Bernice Lee, director of sustainability research at Chatham House, said Glasgow showed the balancing act that China was performing as it managed its economy while participating in the climate change process. She sees a difference between the organisers' priorities for targets and achieving reductions in the carbon economy.

“Throughout the whole Cop, China has time and again reminded everybody the important thing is delivery,” she said. “There are good and bad things about that. The good thing is that delivery is clearly important. The bad thing is that I think ambition and target-setting is also important.”

For the private sector, the importance of Glasgow was the signal sent on the future direction of innovation and the shift to renewables. India set a net-zero target date of 2070 while many other states, including Mena nations, are looking at 2020.

The backdrop to Cop26 was a cold spell across Europe that triggered an energy crisis. After shifting so much capacity to renewables in recent decades, many European countries scrambled to find alternatives as the wind stopped blowing and the mercury dropped.

In Germany, where the government has moved away from nuclear power, coal was the most important energy source in the third quarter. The fuel generated 32 per cent of the amount of electricity fed into the grid, an increase of 22.5 per cent.

Yet the shift away from coal has become a stampede. S&P Global Platts Analytics estimates that the global pipeline for new coal plants has been collapsing since the Paris Agreement, from 1,175 gigawatts in 2015 down to 313GW of future capacity in the pipeline.

“What I thought was most interesting about Glasgow was a perceptual shift, exemplified by South Africa's announcement that it had struck a deal to basically get a bunch of countries to collectively to pony up $8.5bn to support a just transition away from coal,” said Navroz Dubash of the Centre for Policy Research.

“And in India, there was some reports of India talking to the World Bank directly about an even larger sum aimed at supporting a soft landing on coal.

“I think we are going to see much more of these kind of financing packages that go beyond public money.”

Updated: December 28th 2021, 3:29 PM