What do the COP26 outcomes mean for UK business?

The final agreements struck in Glasgow did not meet the high ambitions of many campaigners or clearly put the world on track to keep global warming to 1.5°C. But they did make a number of important changes which will stimulate government and corporate action to cut emissions and help hold those that do not to account.

Britain's President for COP26 Alok Sharma (L) and Britain's Prime Minister Boris Johnson (R) smile at each other during a press conference Now the hard work begins. Photograph: WPA Pool/Getty Images

In the next year, all states are being asked to reevaluate their nationally determined contributions to ensure they are strong enough for 2030. After that they should deliver fresh and more ambitious plans to the UN every five years. For countries that abide by this, tougher plans are likely to eventually be embedded in national policy so companies should anticipate more top-down pressure and/or support in future.

Governments also agreed a new set of transparency rules on making and delivering their climate plans. This means that, by 2024, there will be clearer information on the state of national and international greenhouse gas emissions and progress towards cutting them. 

On energy, the final Glasgow Climate Pact text commits states to ‘phase down’ unabated coal power and inefficient fossil fuel subsidies, a weakening of the earlier ‘phase out’.

Nick Blyth, IEMA’s policy and engagement lead, notes that there is already a very clear corporate move away from both coal and fossil fuels. This is being accelerated by existing and upcoming regulations such as the Task Force on Climate-Related Financial Disclosures, ESOS revision and new procurement requirements

But Nick Molho, executive director of the Aldersgate Group, says that, although the language was watered down, it is still novel by UN standards and will send a strong market signal to catalyse private sector action on clean energy. “It is now clear to businesses and investors that coal - and fossil fuels as a whole - are an even less viable investment than they were before the start of the summit.”

In a statement, industry body Renewable UK was pleased that the agreement recognises the importance of supporting a just transition, which includes helping people working in oil and gas find new roles in the renewables industry.

Unlike the previous summit in Madrid, the Glasgow talks did manage to finalise a set of rules under which carbon markets will operate, an idea originally prescribed in the Paris Agreement.

Molho says the rules will help set up a regulated and transparent global market for carbon trading, which could significantly boost investment in domestic and international nature restoration and emission-reduction projects.

Gilles Dufrasne, policy officer at Carbon Market Watch, is less than impressed with the decision to allow millions of credits from the older Kyoto Protocol system (known as the clean development mechanism) to be rolled over into the new one. He says these are of poor quality, lack environmental integrity and most of the projects they financed would have happened anyway without the financial support.

He adds that, to ensure that the system contributes meaningfully to reducing overall emissions, a greater proportion of credits needs to be cancelled and exemptions removed.

But Jonathan Crook, policy officer at Carbon Market Watch, is pleased with the inclusion of credit ‘corresponding adjustments’, which should prevent double-counting of emissions reductions. 

He says the agreement will have implications for the voluntary carbon schemes that many companies are already engaging in because projects that want to be approved for the new interstate system will have to abide by the newly agreed rules and because they set the tone for all carbon markets. “People have been saying for a long time that provision on double-counting is not needed in voluntary markets and here it’s clearly set out that every single credit that’s approved needs to have corresponding adjustments. It should send a clear signal to the voluntary carbon market that this is required.”

Molho says due diligence now has to be carried out to close off any potential for double counting.

Blyth agrees that the rules strengthen existing requirements, although notes businesses were already having to show stakeholders that their approach to implementing net zero is credible. “The main focus for corporates is the rate at which they transition and are cutting their emissions.”

He says there is still concern about offsetting, as indicated by their low take-up. A recent survey of IEMA members showed the use of green electricity tariffs increased over the decade by around 23% but use of offsets only increased around 11%. “There’s so much scrutiny of offsetting,” says Blyth. “Although things such as voluntary standards have got better, professionals and companies are still wary of adopting those because of greenwash concerns, stakeholder and NGO concerns. That’s going to continue.”

While the official texts are important, a lot also happened on the COP26 sidelines. Molho is keen to point to the Glasgow Breakthroughs – a global initiative to speed up affordable low-carbon technologies - saying it could boost private investment, cut costs and drive up deployment of renewable power, clean transport, hydrogen, green steel and sustainable agriculture. 

“This should be bolstered by increased transparency, particularly through the UN Secretary General’s welcome call to establish a group of experts to propose clear standards to measure and analyse net zero commitments to prevent greenwash,” says Molho.

 

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