Posted on January 18, 2022 by Daniel C. Esty
When the history of the global shift toward a clean energy economy and a sustainable future gets written decades from now, it may well be that the COP26 Climate Change Conference will be seen as a watershed moment. While the government-to-government negotiations produced only modest results, what was truly remarkable about the gathering in Glasgow was the array of other forces aligning behind the need for deep decarbonization. Most notably, thousands of corporations announced net-zero greenhouse gas (GHG) pledges and hundreds of banks and other financial institutions committed to conform their lending to the requirements for a 2050 net-zero GHG world.
The official Glasgow Climate Pact (to which 197 nations signed on) highlights the recent advances in climate science, including the Intergovernmental Panel on Climate Change’s recent 6th Assessment Report, and thus the need for greater ambition in emissions control. The Pact also reset the target for achieving net-zero GHG emissions from the 2015 Paris Agreement’s focus on the end of the century to a much more aggressive goal of net-zero emissions “by about mid-century,” interpreted by most as 2050.
More impressive and potentially transformative than the Glasgow Climate Pact, which inevitably represents a least-common denominator outcome on many issues, was the suite of Side Agreements that emerged from COP26, including accords on:
- Methane — with 100+ nations committing to 30% reductions of this potent GHG (30–80x more “radiative forcing” than carbon dioxide) by 2030;
- Forests — with 120 countries, including Brazil, agreeing to halt deforestation by 2030;
- Coal — with 40 national governments (not including China, India, or the United States) announcing that they would end coal burning by 2030 for the developed nations or 2040 for developing nations;
- Cars — with 24 countries (and a number of major automakers including Ford and GM) promising to halt the sale of gasoline and diesel vehicles by 2040;
- Breakthrough Agenda — and commitments to push innovation in a variety of hard to decarbonize sectors including steel, cement, aviation, and agriculture;
- Just Transition for South Africa — with the UK, United States, France, Germany, and the EU promising $8.5 billion to help South Africa shift from its current dependence on fossil fuels for power generation toward a clean and renewable electricity system.
The most high-impact announcement at COP26 may well turn out to be the launch of the Glasgow Financial Alliance for Net-Zero (GFANZ). Led by former Bank of England Governor Mark Carney, 435 banks and financial institutions, representing $130 trillion in assets, signed on to the GFANZ and committed to align their future lending with the clean energy transition required to meet the 2050 net-zero GHG target.
While some long-time climate change observers have cast doubt on whether the big bankers are really going to regear their loan strategies, I think that the rising interest in sustainable investing provides a significant point of leverage that could drive the business world from talk (just more “blah, blah, blah” as the Swedish climate activist Greta Thunberg complained) to action — tracked by more robust Environmental, Social, and Governance (ESG) corporate performance metrics. Indeed, the interest of an ever-growing number of mainstream investors in aligning their portfolios with their values – including their desire in many cases for action on climate change — could be transformative.
More broadly, a new consensus baseline for corporate behavior seemed to emerge in Glasgow with company leaders acknowledging that private gains at public expense are no longer seen as ethical. Thus, business models that depend on “externalizing” environmental costs — whether in the form of air pollution up a smokestack, effluent out a pipe into a nearby river, GHG emissions into the atmosphere, or taking advantage of below-market-cost access to natural resources (such as water, timber, or minerals) — will increasingly be judged to be unacceptable.
It may well be that the “Spirit of Glasgow” — marked by a commitment to the transformative change required to address the climate challenge with a seriousness of purpose not previously seen — will falter in the months or years ahead. But for the moment, the world seems to be taking up the “sustainability imperative” broadly and advancing the logic of deep decarbonization more specifically. In this regard, COP26 might well have set in motion changes that will resonate for decades.