The deal’s been done and, as the dust settles on the Glasgow Climate Pact, EV Europe editor Allister Thomas and James Close, head of climate change at NatWest Group, dig into the detail.
Together they discuss the implications on the future of fossil fuels, whether developing nations can trust the COP process as climate finance pledges fall short and whether COP26 lived up to its central promise.
For Mr Close, the end result was “better than it could have been, but not as good as it needs to be.” But nevertheless, he said its completion offers an opportunity for everyone to look to the future and how the pact can be carried forward, both at governmental and corporate levels.
The inclusion of language on coal and fossil fuels – while not as challenging as many campaigners sought – is in itself “a big shift” he added, given previous agreements have rarely mentioned fuels explicitly.
This is likely to affect investor sentiment; while there were no significant market shifts immediately after the Paris Agreement, he noted the coal sector has since underperformed the market, suggesting the signals sent by events like COP26 help to set the market agenda, even if there remains political scepticism.
In that context, the difference between “phase down” versus “phase out” is less pronounced – both send the right signals to investors.
Mr Close added: “I think maybe if there’s one thing that was missed around Glasgow it was the fact that in Paris we talked about the pain everybody would have to endure in shifting away from lower-cost fossil fuels to higher-cost renewables. The narrative is somewhat different now; you can swap…fossil fuel energy for lower cost, cleaner and more productive energy,” and can do so while both providing high-quality jobs and benefitting the economy.
However, the finance to fully enable this kind of transformation in developing economies hasn’t fully materialised, though there is now hope to close the gap by 2023 at the latest. Accordingly, there is some ongoing distrust from developing nations around the promises that have been made – particularly for those who feel that the helped offered by Western nations in response to COVID-19 and vaccination programmes has not been extended to them.
Another sticking point in the final agreement was the establishment of a “loss and damage” fund to help support those countries inevitably affected by climate change – discussions on which extend back to the 2013 COP19 meeting in Warsaw.
Despite current resistance from some developed countries, Mr Close noted at some point it will become in developed countries’ interests to make sure that money is flowing, because the alternative would be large-scale migration, deep uncertainty in capital markets and market volatility which will not support global sustainable growth.
However, Mr Close agreed that small countries like Scotland – which did contribute a modest sum of £1 million to the Climate Justice Resilience Fund – can still make a difference to the process. He noted that the signal of that offering was “a powerful one” and that ambitious progress could be made at the city or regional level – something First Minister Nicola Sturgeon alluded to prior to the event.
The scale of the challenge is monumental. $70 trillion in cumulative capital expenditure may be needed to build out zero-carbon energy capacity while keeping the lights on, by some estimates.
However, Mr Close says that this will be “the 21st Century growth story” – and for that reason he is cautiously optimistic. “There’s no point being naïve that we have a silver bullet…we have to manage the transition in a really thoughtful and engaging way,” he said, but in the wake of summits such as Paris and Glasgow, he believes “the conversation is changing.”
And so, despite a two-week long negotiation and perhaps some eleventh-hour disappointments, his feeling of “cautious optimism” around the long-lasting impact COP26 remains.
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