The COP 26 UN Climate Change Conference, hosted in Glasgow starts today. The conference will see nearly 200 countries discussing urgent actions needed to cut CO2 emissions in alignment with Paris Agreement. According to the latest scientific guidance, emissions will need to be reduced by 45% by 2030, compared with 2010 levels, and from there to net zero emissions by 2050, if the world is to have a likely chance of avoiding dangerous climate change consequences.
Our take on the key five themes to watch out for during the next two weeks:
- Key regulatory points around Paris Agreement Article 6 and the future of carbon markets: To meet the Paris Agreement goals set during COP21, countries will have to cooperate across borders and private investments. Article 6 stands for the implementation of reliable international carbon markets and its operationalization is one of the main gaps in the Paris Agreement rulebook. While Parties have made progress in the various negotiation rounds, several issues remain to be finalized. Primarily, the notion of ‘corresponding adjustments’ that are to be made to prevent double-counting in carbon markets accounting systems, and how the Clean Development Mechanism (CDM) will be treated within Article 6. Finalizing this could stimulate the transfer of emissions reductions amongst countries and will facilitate nations to achieve their Nationally Determined Contributions (NDCs) by driving down the costs for climate action.
- Private sector's guidance on voluntary carbon markets and pricing: The growth of the voluntary carbon market is a consequence of the need for the private sector to find solutions to meet their emissions targets in the short term. We expect more guidance coming out for corporates on the principles of high integrity, transparent voluntary carbon credits, and some standardization around key trading products, which could drive future pricing signals in this market. Recent news include CBL's announcement to launch a new voluntary carbon market benchmark contract, CCP-GEO contract, aligned with the Core Carbon Principles outlined by the Taskforce for Scaling Voluntary Carbon Markets.
- More net zero pledges: We expect more corporates and governments to come out with more ambitious "net zero" pledges related to important emission reduction actions in line with the 1.5°C target. Based on the latest scientific guidance, we expect some announcements to be anticipated from 2050 to 2030, or announced with no specific timelines in mind as a result of the uncertainty of climate outcomes. We could expect more public or private sector announcements related to phasing out fossil fuels and coal, cutting methane emissions, moving towards zero deforestation and biodiversity targets.
- Regulation around climate-related disclosures: Governments could mandate new carbon footprint disclosures on products/services and set the standards in a globally coordinated fashion, empowering consumers to choose low carbon goods and manage their carbon budgets. Recent news include the UK government mandating the largest companies and financial institutions to disclose climate-related financial information on a mandatory basis from 2022 – in line with recommendations from the Task Force on Climate-Related Financial Disclosures (TFCFD).
- Large climate finance investment announcements: Developed countries promised at COP16 to scale climate support payments to the developing world to $100 billion by 2020, but actions have felt short. As part of the GFANZ (Glasgow Financial Alliance for net zero) global coalition of financial institutions, led by Mark Carney, we have seen roughly $90 trillion of assets committed to net zero within the last year. We expect more announcements from public and private parties in nature-based solutions, as well as we could see new targets being established on investments in green infrastructure and biodiversity.
Stay tuned for more COP26 relevant content over the next two weeks.
We will be in Glasgow around COP26, so feel free to reach out if you happen to be attending in person and would want to meet someone from our team.