COP26: 7 key takeaways for business
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Like many of my colleagues at ClimatePartner, I’ve experienced mixed emotions in the wake of COP26.
The 2021 United Nations Climate Change Conference ended with some seemingly impressive headlines on financing, coal and deforestation but failed to provide the tangible ambition necessary to avoid the worst impacts of climate change.
Below, I summarise some of the most important outcomes, what they mean for companies and what corporate climate leadership could (or perhaps should) look like post-COP26.
1. We need to plug the ambition gap
Tallying up all the updated nationally determined contributions that were submitted in the run-up to the COP and during COP (notably from India), we are still on track for catastrophic global warming with projections: 2.4 degrees of warming by 2100.
This means we have roughly 23 GtCO2 more to tackle if we are to limit global warming to 1.5 degrees. To put this in context: all the world’s forests currently remove 7.6 GtCO2 a year. We effectively need the equivalent of 3x all the world’s forests to cover this ambition gap.
It’s a staggering challenge.
Bottom line: Companies need to commit to reducing emissions in line with limiting 1.5 degrees at a minimum. Beyond reductions, investing in carbon reduction projects outside of the value chain — such as with certified carbon offsets — will be key to plug the ambition gap left by our governments.
2. We need to stop deforestation today
Speaking of forests, The Glasgow Forest Declaration to “Halt and reverse forest loss and land degradation by 2030” convinced 141 signatories, which in turn accounts for an impressive 91% of global forest cover. This has the potential to avoid over 3.5 Gt CO2e by 2030.
Notable signatories include Indonesia and Brazil who have seen some of the worst tropical deforestation in recent years. It remains to be seen if government rhetoric on the international stage will follow with tangible national policies, but I am hopeful. $19.2bn in public and private investment has been committed over the period of 2021–2025.
Bottom line: Companies need to achieve zero deforestation much sooner. 2030 is simply too little too late. Eliminating or limiting deforestation-linked commodities such as beef, soy and palm oil, achieving better supply chain traceability, using innovative technology (e.g. satellite imagery) and collaborating with local governments and communities will be key. Investing in REDD+ (aka Forest Protection) carbon offset projects can also be a great way to show your climate leadership.
3. We need to (truly) say goodbye to coal
Coal power generation is the single biggest cause of global temperature increases. 40 signatories, including Poland, Indonesia and Vietnam have recognised the imperative to urgently scale-up the deployment of clean power to accelerate the energy transition.
The Coal to Clean Power Statement commits signatories to phase down coal power by 2030 for major economies and 2040 for the rest of the world. Despite the watered-down language (from “phase out”), this will send the right message to industry and markets that the renewable energy revolution is inevitable.
Bottom line: As soon as possible, companies need to eliminate coal from their value chain and exclude suppliers that emit coal-linked emissions in Scope 1. Mandating renewable electricity procurement (Scope 2) in markets where renewable energy credits and green tariffs exist will be critical. Sending the right market signals will encourage a faster transition. Providing financial incentives to enable this transition is one way to demonstrate your climate leadership too.
4. We need to eliminate the most dangerous greenhouse gases
The Global Methane Pledge commits signatories to cut methane emissions by 30% by 2030 from 2020 levels. It was signed by over 100 countries, representing 70% of the global economy and over 50% of anthropogenic (human-generated) methane emissions. This has the potential to reduce warming by at least 0.2 degrees Celsius by 2050. Despite the optimism this generates, the pledge lacks detail, and it will be interesting to scrutinise the national policies that follow.
Methane’s global warming potential is 28x higher than carbon dioxide. Anthropogenic emission sources include landfills, oil and natural gas systems, agricultural activities (including the infamous cow burps), coal mining, stationary and mobile combustion, wastewater treatment, and certain industrial processes.
Bottom line: Companies need to prioritise eliminating more potent greenhouse gases such as methane and nitrous oxide in their value chain. Focusing on agricultural raw materials is key. If elimination is not possible, it is time to invest aggressively in reduction initiatives. As an example, this livestock carbon offset project reduces methane by around 30% by adding garlic and citrus fruit to the feed for dairy cows.
5. We need to make the future of transport strictly green
The declaration on accelerating the transition to 100% zero emission cars and vans will help tackle approximately 10% of global GHG emissions.
Countries that have made official commitments are still few and far in-between, mainly based in Europe and North America, with the largest car making countries all absent still including China, Japan, Germany, and the USA.
Various initiatives were launched to spur further momentum such as Zero Emission Vehicle Transition Council which brings together governments representing over half the global car market.
Bottom line: Companies who can afford it and where solutions exist need to transition to electric vehicles today. Vehicle manufacturers are encouraged to show leadership in moving to supply only zero emission vehicles and partnering with businesses in the EV100 initiative to increase demand.
6. We need to mobilise more climate finance
The $100bn (£72bn) a year pledge agreed in Paris was not met. Commitments have been changed to deliver in 2023 with the 200 signatory Glasgow Climate Pact urging developed countries to at least double funding for climate adaptation by 2025 to c. $40bn. Beyond the ambition gap, we have a crucial financing gap too.
Bottom line: Companies need to start mobilising some serious cash to tackle this problem. Investing in carbon offsetting projects outside of your own value chain is one option but investment in climate think tanks, universities, NGOs and innovative carbon removal start-ups is equally as important. If you are in financial services, I would urge you to have a serious think about how you can encourage investment in climate solutions and start acting now.
7. We need to keep calm and carry-on (compensating)
COP25 marked the adoption of international rules for the operation of Article 6 of the Paris Agreement. In simple terms, this allows reduction efforts in one country to count towards the reduction targets of another, through the transfer of carbon market units.
This is referred to as “corresponding adjustments“ to their reported emissions: the country selling carbon market units can make an addition to its emission level, and the country acquiring such units can then make a subtraction. This approach ensures that only the buyer country can use transferred emission reductions, and thus avoids “double counting“.
It is important to stress that this only affects the compliance market, and has little to no impact on the voluntary carbon market that ClimatePartner and companies operate in. As Verra, a leading carbon offsetting standard puts it: “In addressing market activities and accounting among countries, the new rules also confirm that Article 6 does not regulate the voluntary market. […] Verra always took a firm stand that such [corresponding] adjustments should not be mandated across the voluntary market by the Article 6 rules and we are grateful that countries have now confirmed this view.”
Unlike states, companies do not use carbon credits from the voluntary market to count savings towards achieving reduction targets. The mitigation hierarchy dictates that investments in reductions should always be prioritised and that compensation, in the form of investment in voluntary carbon credits, should only be used for truly unavoidable emissions.
Any offsetting with certificates from the voluntary market is therefore additional and complementary to reductions within the company and its value chain. Activities in a project country only pay towards the reduction targets of the respective country. In the voluntary market, savings are not transferred to another country, but remain in the project country. This means that there is no double counting.
Bottom line: Companies should make sure they are reporting reductions and offsets transparently according to recognised standards such as the GHG Protocol or the relevant ISO Standards. If you are looking to demonstrate climate leadership: beyond simply reducing your emissions in line with 1.5 degrees, make sure you invest in certified offset projects that provide additional co-benefits such as biodiversity and social impact. Let us not be myopic on carbon. We must make the UN’s Sustainable Developments Goals a reality.
As I reflect on the successes and failures of COP26, the words of Mahatma Gandhi come to mind: ‘be the change you want to see in the world’.
We need to take full responsibility for the greatest crisis of our time. A crisis we have collectively created — even if the governments of the world simply have or will not.
We know where we need to go, so let us lead by example.
This is the decade of climate action.
