The COP26 – our best last hope to save our planet, came to an end last Saturday, 12 November 2021. Between positive highlights and myriad of criticism, the UN summit finally gave birth to the Glasgow Climate Pact – an “agreement of compromise.” However, is this enough to save humanity from doomsday like in a big James Bond movie? Well, surely not. To reflect on the most critical climate conference of 2021, read our actionable recap of key takeaways, alongside a simple guide for businesses and CEOs to take climate action into their own hands.
COP26 – Key takeaways and challenges
The Glasgow Climate Pact
On Saturday, at 8 p.m., the pact was adopted by the 197 signatories of the UNFCC. The rulebook of the Paris agreement is complete, 12 years after the initial COP15. The signature leads to disappointment from Alok Sharma, president of the COP, and other signatory countries. The main aim of the COP was to limit global warming to 1.5°C, and this agreement is not enough to hold it. Sharma addresses the disappointment of many but also points out how important it is that an agreement was reached at all: “I understand the deep disappointment. It’s also vital we protect this package.” Read the 10-page full proposal here.
Regulations are not enough: The New Climate Institute pointed out that “policy implementation on the ground is advancing at a snail’s pace“. Under the current policies, the climate action tracker estimates a temperature rise of 2.7°C (yes, not Fahrenheit) by the end of the century, and the current NDCS would lead to a 2.1°C increase. There has been insufficient momentum from leaders and governments to increase 2030 climate targets ahead of, and at Glasgow: NDC improvements submitted over the last year have reduced the emissions gap in 2030 by only 15-17%. Globally, around 90% of emissions are now covered by net-zero targets.
Keeping the 1,5°C target alive: All countries are committed to revising and increasing their current 2030 emissions targets in 2022. Before that, such a revision would not be scheduled until 2025. In addition, another World Leaders Summit was scheduled for 2023. “Today, we can say with credibility that we have kept 1.5 degrees within reach, but its pulse is weak,” COP26 President Alok Sharma said Saturday. “It will only survive if we keep our promises.”
Transparency: Transparency is about uniform rules on how countries have to calculate their greenhouse gas emissions.
Phasing down fossil fuels and coal
The sentence “phasing out of coal and fossil fuels” has been mentioned for the first time, a historical premiere for the United Nations. This term did not stay too long in the Glasgow Climate Pact draft, as India and China preferred the term “phasing down” of coal and fossil fuels to “phasing out”, signifying that coal and oil are meant to stay globally.
The “Beyond Oil and Gas Alliance” (BOGA) has been unveiled by Costa Rica and Danemark (joined by France, Ireland, Sweden, Wales, Greenland, and Québec). The goal is straightforward: countries must create a plan to end fossil fuel extraction, the ultimate solution to stop climate change.
Why does it matter: The International Energy Agency found new oil and gas exploration must end by 2022 (yes, next year) to have a shot at keeping global warming within 1.5°C (2.7 degrees Fahrenheit) of pre-industrial levels. A 2018 report by the world’s top climate scientists found the world will need to shorten coal use by 78%, oil use by 37%, and gas use by 25% by 2030 to have a shot at that target.
Leaders of more than 100 countries, including Brazil, China, Russia and the United States, vowed to end deforestation by 2030. The agreement covers about 85% of the world’s forests, which are crucial to absorbing carbon dioxide and slowing the pace of global warming
There are no “loss and damage” funds available
Wealthy nations, which have historically added the most greenhouse gases to the atmosphere, successfully fought off a proposed fund to help emerging countries deal with loss and damage. Instead, delegates agreed to start a “dialogue” about the idea, angering those who say such reparations are long overdue.
Implementation of global carbon markets
- Article 6 of the Paris Agreement requires states to develop carbon markets. Under the Kyoto Protocol, less ambitious states could buy emission certificates from states that have cut emissions.
- This market aims to reduce emissions where it is cheapest. The problem is that there were numerous legal loopholes, emission reductions often did not take place, and some projects even undermined human rights.
- So far, no agreement has been reached on the new emissions market. To accelerate climate protection, the regulatory framework must be clear, uniform and transparent. This is not the case with the individual NDCs that are currently used and the different methodologies for calculating them. In addition, some countries are demanding that they can continue to use certificates from the Kyoto Protocol. Many states heavily criticise this because the mechanism under Kyoto was not strict enough.
Four actions for companies and CEOs to go beyond COP26
Race to net-zero: Monitoring Scope 1,2 and 3 of carbon emissions and SBTis
The Science-Based Targets Initiative (SBTi) is overgrowing as a gold standard for setting ambitious decarbonisation targets— Bain and Company found that SBTis had an annual growth of 130% in the number of participating companies over the past five years. Thus, companies must actively monitor and reduce their scope 1, 2, 3 of carbon emissions.
One question to ask within your company: Are we able to track, report, and manage greenhouse gas emissions as we do cost? It is now possible with Plan A’s all-in-on carbon management and ESG performance platform. Get in touch with us.
Stay on the lookout for regulations: carbon markets and financial disclosure
- Carbon taxation and emissions-trading schemes that cover 21.5% of global greenhouse gas (GHG) emissions in 2021 will expand, and the price of carbon (already above €60 per ton of carbon dioxide equivalent in the European Union’s Emissions Trading System) will probably continue to rise.
- A new metrics framework for measuring resilience, for the first time, allows cities, regions, businesses and investors to measure the progress of their work in building strength to climate change for the 4 billion people most at risk by 2030.
- Regulatory frameworks adopt best practices from voluntary initiatives. The UK makes net-zero transition plans mandatory for UK financial institutions and listed companies by 2023, a month after GFANZ members called on G20 countries to do so.
Your COP26 read: Whitepaper on the EU Taxonomy Regulation
Board members: weigh in the strategy
Embedding uncertainty in the way you build your strategy as a C-level or a board member is of the essence. We cannot rely on any predictions for the future as they are merely a model of experienced reality. How can we assume what is ahead of us, given we have never gone through it? Those who develop an agile mindset and embed it in the way their company is managed will be the winners of tomorrow.
Climate risk means finance risk
Climate change will cost us a lot of money. But the costs can be significantly reduced if a business puts climate at the core of its strategy rather than having a patched up CSR initiative. The costs will mainly come from three areas:
- Direct Costs: unaccounted for CAPEX, depreciation, operating and maintenance cost
- Indirect Costs: waste management, training and support, compliance management
- Potential Future Costs: remediation cost, contingent liability cost
Businesses will play a crucial role in the transition to a low-carbon economy. Diplomacy showed us that governments are slow to take climate action – pleasing 200 nations with different agendas is a daunting task, indeed. It is time for companies to take the matter into their own hands. We do not need to wait for regulations which takes time to implement