COP 26: the implications

COP 26: the implications

As the dust settles post COP 26, portfolio managers Velislava Dimitrova and Cornelia Furse discuss the main outcomes of the Glasgow event.

While the outcome from COP26 is not a 1.5 or even 2 degrees Celsius scenario, it should lead to incremental improvements to reduce global CO2 emissions in the coming decades. We witnessed several global goals, such as the Global Methane Pledge, commitment to end deforestation by 2030, the agreement to phase down unabated coal, along with green technology initiatives such as the Breakthrough Agenda and the First Movers Coalition. However, the quality of and commitments to these outcomes can only be evaluated over time, with many lacking short term, concrete actions and key regions missing from the list of supporters. The breadth is also insufficient as many sources of GHG emissions have not been addressed.

Whilst the range and scope of agreements is insufficient to prevent the catastrophic events of climate change, it is moving us one step closer. As of 2 November 2021, over 140 countries had proposed Net Zero targets, covering 90% of global emissions, vs 80% pre COP-26 (BNEF, 2021).  In an optimistic scenario, if these discussed targets are fully implemented, we are on track for a warming of 1.8 degrees Celsius (International Energy Energy) by 2050. Whilst this is a significant improvement, it is still above the 1.5 degrees Celsius warming limit defined by the Paris Agreement.  Furthermore, by aggregating all COP-26 official pledges, the United Nations reported emissions in 2030 would be 13.7% higher than 2010 levels. This is a modest improvement from the 16% increase before these new pledges, but there is a long way to go to reducing emissions by 50% in 2030 (United Nations, 2021).

We believe the outcomes of COP 26 will provide an ever-increasing recognition of the urgency to respond to the climate crisis. Furthermore, the credibility of targets discussed at COP 26 must be proven and short-term policies to achieve these targets will need to be implemented, which should provide significant tailwinds to decarbonisation technologies and solutions. Events such as COP 27 (held in Egypt next year) and the accelerated awareness of climate change, should help drive commitments to achieve 2030 and 2050 decarbonisation goals.

 

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