US special climate envoy John Kerry speaks on a joint China-US statement aimed at increasing climate action at Cop26 in Glasgow. AFP
US special climate envoy John Kerry speaks on a joint China-US statement aimed at increasing climate action at Cop26 in Glasgow. AFP
US special climate envoy John Kerry speaks on a joint China-US statement aimed at increasing climate action at Cop26 in Glasgow. AFP
US special climate envoy John Kerry speaks on a joint China-US statement aimed at increasing climate action at Cop26 in Glasgow. AFP

US-China agreement on emissions a boost in securing wide-ranging climate deal


Soraya Ebrahimi
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An agreement struck between the US and China is a welcome boost as negotiators make their final efforts to secure a long-term deal to limit global warming to 1.5C at the UN's Cop26 climate change summit in Scotland, the UK's Prime Minister Boris Johnson said on Thursday.

The world's two largest emitters of carbon dioxide unveiled a deal on Wednesday to increase their cooperation on tackling climate change, including cutting methane emissions, phasing out coal consumption and protecting forests.

The surprise announcement came despite tensions between the two superpowers and signalled that the countries' leaders were prepared to put aside their difference to work together on the common threat to the planet, said analysts.

Mr Johnson said on Twitter that that deal was a sign that countries could keep alive the prospect of limiting global warming to 1.5C above pre-industrial levels.

"This is a boost to negotiations as we go into the final days of Cop26 and continue working to deliver an ambitious outcome for the planet," he said.

Alok Sharma, head of the UN climate conference, has warned that climate commitments so far in the talks would do too little to tame global warming and demanded an ambitious deal to be struck over the next few days.

"I want to be clear, we are not there yet, there's still a lot more work to be done," he said. "I know how hard you are all working, but today must represent another gearshift where negotiators finalise outstanding technical work and ministers dial up their engagement," he said.

The framework agreement was announced by US climate envoy John Kerry and his Chinese counterpart Xie Zhenhua at the summit in Scotland, billed by both as way to tip the summit towards success.

“Together we set out our support for a successful Cop26, including certain elements which will promote ambition,” Mr Kerry told a news conference about the deal between Washington and Beijing.

“Every step matters right now and we have a long journey ahead of us.”

Mr Xie told reporters that the deal would lead to China strengthening its emissions-cutting targets.

“Both sides will work jointly and with other parties to ensure a successful Cop26 and to facilitate an outcome that is both ambitious and balanced,” Mr Xie said.

A first draft of the Cop26 deal released earlier in the day received a mixed response from climate activists and experts.

Representatives from almost 200 countries in Glasgow have until the close of the two-week meeting on Friday to agree on a final text.

In an implicit acknowledgement that current pledges were insufficient to avert climate catastrophe, the draft asks countries to “revisit and strengthen” by the end of next year their targets to reduce greenhouse gas emissions up to 2030.

China's special climate envoy Xie Zhenhua speaks on a joint China-US statement at Cop26. AFP
China's special climate envoy Xie Zhenhua speaks on a joint China-US statement at Cop26. AFP

EU climate policy chief Frans Timmermans told Reuters the US-China agreement inspired hope.

“It's really encouraging to see that those countries that were at odds in so many areas have found common ground on what is the biggest challenge humanity faces today,” he said.

“It shows also that the US and China know this subject transcends other issues. And it certainly helps us here at Cop to come to an agreement.”

But E3G, a European climate change think tank, said that the deal did not include any new commitments on the crucial issue of coal.

China has pledged to peak coal consumption before 2030 and go carbon neutral by 2060 but has yet to spell out how it will achieve the goals. Environmentalists have warned that China could keep increasing emissions until 2030 under its current commitments.

"This declaration is a reassuring sign that the world’s two biggest emitters can work together on the biggest crisis humanity is facing," said senior E3G policy advisor Byford Tsang.

"But to walk the talk they’d now need to support a strong political commitment at the COP26 on mitigation and climate finance, and rally other countries to do the same."

The statement from the two global powers was not enough to "close the deal", said Bernice Lee, research director at the Chatham House think tank. "The real test of Washington and Beijing is how hard they push for a 1.5C aligned deal here in Glasgow."

Scientific evidence has grown suggesting that crossing the 1.5C threshold will significantly worsen extreme weather effects, including droughts, flooding and wildfires, and could wipe out some species.

Mr Johnson has made a goal of the conference to "keep 1.5 alive" but environmental groups said that pledges so far did not amount to a significant change. The Climate Action Tracker research group earlier this week said all national pledges submitted so far to cut greenhouse gases by 2030 would, if fulfilled, allow the Earth's temperature to rise 2.4C.

Negotiations are still likely to be fierce over the next two days.

While some developed countries point the finger at major polluters such as China, India and Russia, poorer nations accuse the rich world of failing to keep promises of financial help to deal with the ravages of climate change.

As delegations locked horns over the wording of the final statement, a group of countries, companies and cities composed a pledge committed to phasing out fossil fuel-powered vehicles by 2040.

The overarching goal of the conference is to keep alive hopes of capping global temperatures at 1.5°C above pre-industrial levels, which is unachievable based on most countries' current emissions-cutting pledges.

That aspirational target was set out in the 2015 Paris Agreement. Since then, scientific evidence has shown that crossing the 1.5°C threshold will unleash worse rises in sea levels, floods, droughts, fires and storms than those already occurring, with irreversible consequences.

Cop26 day 11 - in pictures

  • Delegates view the UK pavilion at Cop26 in Glasgow. Day 11 of the 2021 climate summit will focus on the global transition to zero-emission transport. Getty Images
    Delegates view the UK pavilion at Cop26 in Glasgow. Day 11 of the 2021 climate summit will focus on the global transition to zero-emission transport. Getty Images
  • Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and UAE Special Envoy for Climate Change, addresses delegates at the summit. AP Photo
    Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and UAE Special Envoy for Climate Change, addresses delegates at the summit. AP Photo
  • British Prime Minister Boris Johnson arrives to attend the summit. EPA
    British Prime Minister Boris Johnson arrives to attend the summit. EPA
  • Little Amal, a giant puppet depicting a Syrian refugee girl who has walked across Europe, crosses Tradeston Bridge over the River Clyde in Glasgow. AFP
    Little Amal, a giant puppet depicting a Syrian refugee girl who has walked across Europe, crosses Tradeston Bridge over the River Clyde in Glasgow. AFP
  • A visitor is silhouetted against a screen depicting shipping at the Cop26 summit. Reuters
    A visitor is silhouetted against a screen depicting shipping at the Cop26 summit. Reuters
  • Nancy Pelosi, Speaker of the US House of Representatives, exchanges her views at the summit. Getty Images
    Nancy Pelosi, Speaker of the US House of Representatives, exchanges her views at the summit. Getty Images
  • People take part in a pro-cycling rally outside the SEC (Scottish Event Campus), venue of Cop26, in Glasgow. AP Photo
    People take part in a pro-cycling rally outside the SEC (Scottish Event Campus), venue of Cop26, in Glasgow. AP Photo
  • Youth Climate Activists protest outside the plenary rooms at Cop26 as high-level negotiations continue in Glasgow. Getty Images
    Youth Climate Activists protest outside the plenary rooms at Cop26 as high-level negotiations continue in Glasgow. Getty Images
  • Alexandria Ocasio-Cortez, US Representative for New York's 14th congressional district, attends a press conference held by Nancy Pelosi. Getty Images
    Alexandria Ocasio-Cortez, US Representative for New York's 14th congressional district, attends a press conference held by Nancy Pelosi. Getty Images
  • Campaigners from Friends of the Earth Scotland, Get Glasgow Moving and the International Transport Workers Federation gather in George Square, Glasgow, demanding better public transport as an essential part of addressing climate change during the Cop26 summit in the city. PA
    Campaigners from Friends of the Earth Scotland, Get Glasgow Moving and the International Transport Workers Federation gather in George Square, Glasgow, demanding better public transport as an essential part of addressing climate change during the Cop26 summit in the city. PA
  • A hydrogen-powered, zero-emission ambulance is displayed in Glasgow. Getty Images
    A hydrogen-powered, zero-emission ambulance is displayed in Glasgow. Getty Images
  • Scotland's First Minister Nicola Sturgeon speaks to the media during the Cop26 summit. PA
    Scotland's First Minister Nicola Sturgeon speaks to the media during the Cop26 summit. PA
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Analysis

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In numbers: China in Dubai

The number of Chinese people living in Dubai: An estimated 200,000

Number of Chinese people in International City: Almost 50,000

Daily visitors to Dragon Mart in 2018/19: 120,000

Daily visitors to Dragon Mart in 2010: 20,000

Percentage increase in visitors in eight years: 500 per cent

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: November 11, 2021, 2:05 PM