In the “business-as-usual” version of 2020, global leaders should have been gathering this week in Glasgow for the most important meeting on climate since the Paris Agreement five years ago.
As we all know, business in 2020 has turned out to be anything but usual. The disruption wrought by the coronavirus pandemic has led to COP26 being postponed until this time next year.
But the pandemic has had more positive effects on the climate. Whilst 2019 marked a record high for both global travel and carbon emissions, in 2020 the world has found out how many journeys can be eliminated or replaced by virtual meetings. Indeed, this year is now set to see the largest drop in global emissions on record. Energy related CO2 emissions are estimated to be seven percent lower than last year. It is even possible that peak global emissions are now behind us.
However, these reductions in emissions have come at a huge cost to the global economy and to the welfare of people across the world. Turning off the economy is not a sustainable – or equitable – way to address the long-term challenge of achieving carbon neutrality.
If we are going to achieve net zero emissions whilst allowing a growing global population to raise its living standards, we need a new compact between business and government, one that is focussed on a common goal and pursued with shared commitment and urgency. We already know the endpoint for this collective effort: net zero emissions by 2050.
Governments in many of the world’s leading economies have already set out their plans for net zero by mid-century. Last week, Equinor was proud to join the small but growing number of businesses putting the same goal at the heart of their long-term strategies. More and more companies stand ready to invest the capital, competence and capabilities necessary to realise an unprecedented industrial transformation.
But companies will not achieve their net zero goals without the support of society. If we are to succeed, we need to recognise that governments and business all share a single, common goal. Governments will need to use the twelve months before COP26 to unlock the potential of the private sector.
Here are four actions they can take:
Firstly, governments will need to come to COP26 with ambitious, long-term strategies and clear policy frameworks. Not only will countries need to deliver what they promised in Paris, but they will also need to step up their levels of ambition. This will enable business to invest with confidence and scale.
Secondly, we need a meaningful price on carbon. This will be the most efficient and transparent policy mechanism for realising at-scale emissions reductions. The price can be set in a number of ways including carbon taxes, as in Norway, and cap-and-trade programmes, like the EU Emissions Trading System. Effective carbon pricing enables countries to realise the highest volume of emissions abatement at the lowest cost.
Thirdly, for carbon pricing to be as effective as possible, there needs to be a mechanism for national emissions reduction efforts to be linked together. Article 6 of the Paris Agreement sets the frame for this and we urge parties at COP26 to establish a well-functioning international emissions trading mechanism. As well as reducing their own emissions, companies should be encouraged to invest in natural sinks, such as tropical forests, to offset emissions at the lowest cost possible.
Finally, governments need to back the widespread deployment of zero and negative emissions technology. Three technologies stand apart: onshore solar, offshore wind and carbon capture and storage (CCS). Solar and wind provide domestic, secure and carbon-free sources of energy and the opportunity for countries to develop local industrial capacity. To realise the full potential, governments should set ambitious capacity targets, clear schedules for the award of acreage and streamlined regulatory approval processes.
CCS allows near-term, large-scale emissions abatement whilst enabling countries to retain reliable energy, high-value industries and highly skilled jobs. When partnered with clean hydrogen production, whole new business sectors can be created. To realise the potential of CCS and clean hydrogen, governments should explicitly target measures that incentivize their deployment.
The response to the coronavirus pandemic has rightly occupied the attention of governments this year. But whilst the postponement of COP26 is an unavoidable setback, it is also an opportunity. Governments and industry have more time to prepare for the meeting to ensure that it represents a level of ambition in line with the Paris goals. The United States, which formally withdrew from the Paris Agreement just last week, now plans to re-join in January, providing a real boost to the fight against climate change. And across the globe, countries are pledging to build back better after the coronavirus downturn.
In the meantime, ever-increasing investment by companies in low and zero carbon projects is providing a platform for faster decarbonisation than anyone thought possible even a few months ago.
When it comes to the climate challenge, business as usual is no longer an option.
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