COP26 Climate Summit: What should business leaders expect?
On the eve of the Glasgow Summit, green business, economy and diplomacy experts gave BusinessGreen an exclusive overview of their hopes, fears, and expectations for the two weeks of talks
The COP26 Climate Summit is finally upon us, but what issues should business be following closely? What are the economic signals that should come out of the conference? And what would a ‘good’ outcome look like?
These were some of the topics discussed this morning in a COP26 briefing hosted by BusinessGreen in association with Schneider Electric, in which some of the UK’s leading green experts – E3G CEO Nick Mabey, Adlersgate Group head of policy Ana Musat, Frontier Economics director Matthew Bell, and Schneider Electric’s Greg Conary – shared their expectations for the summit.
While there are important issues to be negotiated by political leaders and diplomats at COP26, panellists stressed the aim of the summit is not to hammer out a fresh global deal. This ground work was already laid at COP21 six years ago, when the Paris Agreement was brokered. COP26, in contrast, is about building on what was achieved in Paris. As such, the flurry of enhanced national climate action plans and new sectoral agreements that have been announced in the run up to the conference or are expected in the coming days, mean the Glasgow Summit is guaranteed a certain level of success before it starts, even if it is highly unlikely that these various commitments will get the world onto a decarbonisation trajectory that is compatible with keeping temperatures below 1.5C.
“[While] there are important things which are going to be negotiated in terms of detail, COP26 is really about ambition and delivery,” explained E3G’s Nick Mabey. “It’s about showing the Paris Agreement we agreed five years ago is working. Countries are turning up and increasing their ambition to get near the goals they collectively agreed before. It’s first of kind… Previously it’s always been about text; now it’s about action in the world. And the key goal is keeping 1.5 degrees within reach.”
Set against that 1.5C goal, the outlook currently is less than promising. While a number of countries have come forward with much improved climate plans in the months leading up to the Climate Summit, progress is not yet where it should be. Earlier this week, the UN warned national climate plans are currently on track to deliver 2.7C of temperature rise and warned collective ambition needed to increase seven-fold to stand a chance of moving on to a 1.5C warming pathway.
As such, high level discussions at COP26 are set to revolve around getting countries to raise their ambiton, and about whether partries should be mandated to bring forward the next round of updated climate targets to 2023 – rather than 2025 as dictated under the Paris rules – in a bid to increase pressure on countries to align their climate plans with a 1.5C trajectory. At the same time, negotiating teams will be wrangling with outstanding technical issues in the Paris Agreement rule book around carbon markets, transparency, common timeframes, loss and damage, and climate finance.
Among the voluntary commitments that hope to gain traction at the conference are a ‘No New Coal’ agreement, launched last month by a handful of countries, to bring together countries that have pledged to stop building new power plants. This effort will combine with the Powering Past Coal Alliance – which brings together countries that have pledged to phase out their existing coal power plants – to move the UK government closer to meet one of its stated aims of the summit, to “consign coal to history”.
Meanwhile, the US and EU will be hoping to get more countries to sign up to their Global Methane Pledge, a deal which has already been endorsed by several nations around the world, including the UK. Its stated aim is to collectively slash methane emissions across all sectors by 30 per cent between 2020 and 2030.
Elsewhere, the UK will be rallying countries behind a new international aviation pact that aims to pile pressure on global industry regulator ICAO to take a tougher stance on emisisons reduction, as well as a renewed agreement from countries to halt and reverse deforestation by 2030, with a boosted focus on mobilising funding for Indigenous Peoples. In addition, there is a growing expectation the Summit could see some world leaders agree to an accelerated phase out date for petrol and diesel cars.
If this all sounds like something of a patchwork approach, that is because mobilising action across the various strands of the economy towards climate goals is not a neatly comparmentalised exercise. Panellists explained that credible progress at COP26 will ultimately be reflected by a portfolio of initiatives cemented before or during the two week summit – from the ironing out the global rules on carbon markets and agreement on how to crank up national climate goals, to the advent of new industry, investor, and country coalitions that can solve critical climate challenges.
Participants also discussed how a successful COP26 Summit could beam market signals around the world that will help catalyse the pace of decarbonisation. Just as the Paris Agreement has driven the acceleration of a number of new markets, from clean energy and electric vehicles to clean heating, the hope is the various deals to come out of Glasgow will unleash yet more corporate investment in the low carbon economy. Key technical discussions set to take place around carbon pricing and carbon markets could also help accelerate the low carbon transition, as will a package of announcements – dubbed the Glasgow Breakthroughs – designed to mobilise funding that can bring down the cost of technologies crucial to the decarbonisation of notoriously ‘hard-to-abate’ sectors, such as steel or shipping.
Ana Musat, head of policy at the Aldersgate Group, expressed hope that COP26 can rally players from around the world to work to transform sectors that had long resisted decarbonisation due to technological or cost barriers. “There’s always a hope that some tricky global issues are going to be tackled,” she said, adding that the aviation sector is a clear example where a more co-ordinated and ambitious approach is needed. “The UK has got some domestic objectives, but we need joint action to tackle emissions from this sector. And likewise in heavy industry, we need to see action right across the board to make sure about action in one country doesn’t lead to emissions being offshored and there’s a level playing field for businesses in the UK.”
Musat added that there was a major imperative for the stakeholders attending the conference to set out how they planned to ramp up public engagement around the net zero transition, given the growing impact decarbonisation will have on people’s lives over the coming years as the transformation of the economy gathers pace. “At COP and the year after, its going to be a really good opportunity to really dial up this level of public engagement and make sure that people understand what is at stake,” she said. “Some people do, but because of lack of engagement, we’re seeing narratives around the cost of net zero, it’s becoming really powerful… That really comes from a place where the whole just transition piece isn’t being treated the way it should be.”
Mabey agreed that bigger and better thinking on how to deliver a transition that is fair to communities and workers was crucial post-Glasgow, and that businesses had a crucial role in guiding government on this issue. “I think the issue of a just transition and how you actually do this are only starting to penetrate into the consciousness of politicians,” he said. “That’s where we need business to be really actively talking to government about how to do things, because they definitely don’t know how to do it.”
He added that there was a danger of the talks being undermined if issues of climate justice and the just transition on an international level were not handled carefully by negotiators in the wake of the announcement that developed countries have delayed meeting their $100bn climate finance commitment to poorer nations until 2023. “If the focus of the whole week is about compensation for loss and damage notifications from the poor countries countries [subsequent to the failure to meet the $100bn commitment] that could result in the whole failure of the talks,” he warned. “It will be coupled with a huge climate justice march in around the world and also in Glasgow, so there will be heightened emotion.”
As such, Matthew Bell from Frontier Economics stressed that the way the summit was covered and presented was really important, because it would send important signals to investors, companies, and governments of the direction of travel of global markets. “The optics matter because they frame the expectations and the expectation on the back of investors, companies, governments that will go away from Glasgow and make and make decisions,” he said.
That said, ironing out many of technical details around carbon markets, carbon pricing and climate finance is absolutely crucial, he added. “It does have to go beyond the optics, because at the end of the day that decisions are made on the basis of a real calculus of profitability and a potential office… so its important that concrete things come out of the Summit,” Bell warned
As such, COP26 in many ways presents political leaders with a more difficult challenge than COP21 at Paris, given that it is comes in the midst of a global pandemic and is not expected to culminate in a headline treaty, Bell argued. “The French government in Paris, deservedly got a lot of credit for the diplomacy that they undertook leading up to leading up to the COP and how the negotiators then brought things together,” he argued. “But the worry here is that a combination of Covid and international geopolitics – politics that has little to do with climate change – will make that diplomacy much more difficult, and ultimately result in difficulties in coming together with something that sets the expectations over coming years.”
However, almost regardless of the outcome it is increasingly clear that many businesses, countries, and regions are not going to compromise on their net zero transition plans, according to Schneider Electric’s Conary. He suggested that a successful Summit could serve to underline that there is now a critical mass of countries and industries committed to accelerating climate action that those that continue to lobby for a watered down agreement end up being sidelined by investors and other governments.
He also noted that regardless of the specific policies or legislation that results from COP26, the direction of travel has been well and truly set – and it is towards a low carbon economy. “[Decarbonisation] is good for business,” he said. “Businesses recognise that sustainability and being environmental, being efficient, is good for us. It is good for our customers. When Trump pulled out of the Paris Accord, business and local governments in the US still focused on being net zero.”
COP26 matters hugely and should help unleash a new wave of accelerated climate action, but regardless of the precise outcome in a fortnight’s time the net zero transition will continue.
BusinessGreen’s COP26 briefing was hosted in association with Schneider Electric.
