The State of Climate Change - COP26 in Review
by Caroline Mara, Lily Cassidy, and Sven Burluraux
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COP26 has concluded in Glasgow with nearly 200 countries agreeing on the Glasgow Climate Pact to keep 1.5°C alive and finalise the outstanding elements of the Paris Agreement.
This event saw 25,000 delegates from 191 countries galvanise under the banner of ‘together for our planet’ where they committed to accelerate action towards the goals of the Paris Agreement and UN Framework Convention on Climate Change.
The four main goals of COP26 were to:
- secure global Net Zero by 2050 and keep 1.5°C within reach;
- adapt to protect communities and natural habitats;
- mobilise finance in support of the climate; and
- work together to deliver climate action as a global community.
COP26 represents the biggest diplomatic event on British soil since the second world war and comes just months after the UN’s IPCC Report signalled a ‘code red for humanity’.
The IPCC report concluded that humans are unequivocally warming the planet and the 1.5°C temperature limit is on life-support, placing whole countries and communities at grave risk.
The aim of each COP iteration is to assess the progress made by countries around the world in their efforts in helping to tackle climate change. Every five years there are landmark COP gatherings, the last one resulting in the establishment of the 2015 Paris agreement. But with the need to address climate change greater than ever, the world will need to continue to make important progress in the meantime.
This year’s meeting is particularly significant as countries delivered their Nationally Determined Contributions (NDC) to the Paris Agreement. That means they are outlining their contribution towards the agreement made at COP21 - to limit global warming to well below 2°C, and pursuing efforts to reach 1.5°C against pre-industrial levels.
The event signalled one of the most crucial and decisive climate meetings of the century.
More than 125 of the world’s most influential figures were in attendance, including Australian Prime Minister, Scott Morrison, United States President, Joe Biden, UK Prime Minister, Boris Johnson, UN secretary General, António Guterres, and youth climate activist Greta Thunberg.
There were also some notable absentees.
Brazil’s president was missing - his nation is the biggest deforesting nation in the world - as was Saudi Arabia’s Crown Prince of the world’s second biggest oil producer, and Russia’s Vladimir Putin, president of the world’s second biggest gas producer. China’s Xi Jinping, President of the biggest coal consumer and carbon emitter, was also missing due to COVID-19.
Other voices missing included indigenous and First Nations peoples in ‘big ticket’ negotiations.
In the weeks leading up to COP26, governments and corporations around the world were ramping up their climate policies with more ambitious emissions reductions targets, decarbonisation obligations for industries, and mandated disclosures of climate related risks.
- World leaders were faced with increased pressure to act to tackle global warming. This pressure was felt deeply in Australia as Prime Minister Scott Morrison was urged by key leaders across Europe, Asia and the United States to set a Net Zero emissions target ahead of the meeting. Notably, Australia has since committed to Net Zero by 2050 with plans to achieve it recently outlined.
- Prime Minister of India, Narenda Modi,pledged India will be net zero by 2070, and will use non-fossil fuel sources for half the country’s energy needs by 2030.
- More than 130 countries have now set or are considering a target of reducing emissions to net zero by the middle of the century, while the EU has made ambitious policy announcements through the European Green Deal.
- G7 finance ministers reaffirmed their commitment to move towards mandatory disclosure for corporates on climate impacts and investment decisions.
- In the corporate space, more than 2000 companies, including a number of global heavyweights, have set net-zero targets to reduce their emissions in line with the Paris Agreement. Additionally, more than 3000 businesses have signed up to the UN’s Race to Zero campaign, which has a focus on commitments that support net zero by 2050.
- The creation of the International Sustainability Standards Board (ISSB) was announced, which seeks to build on and replace a patchwork of voluntary disclosure practices that have had mixed success.
The first week of COP26 saw a range of commitments come to life, with the most prominent negotiations centring around reducing methane emissions, phasing out coal-fired power, and reversing the decline of nature.
- An alliance of more than 100 nations, covering two-thirds of the global economy, committed to reduce methane emissions by at least 30% from 2020 levels by the end of the decade. Australia was not part of this alliance.
- More than 40 countries, including Canada, Poland, South Korea, Ukraine, Indonesia and Vietnam agreed to phase out coal-fired power. However, some of the world’s biggest coal-dependent economies, including Australia, China, India and the United States were missing from the deal.
- A number of major international banks also committed to ending the funding of unabated coal. In addition, a group of 25 countries, together with public finance institutions signed a UK-led joint statement committing to ending international public support for the unabated fossil fuel energy sector by the end of 2022 and prioritise support for the clean energy transition instead. This means all significant public international financing for coal power has effectively ended. Australia was not part of this commitment.
- Some 45 governments pledged urgent action and investment to protect nature and shift to more sustainable ways of farming. Australia was among a host of countries that joined the Taskforce on Nature-related Financial Disclosures (TNFD), committing to recognise the economic value of natural capital, such as water, oceans, and biodiversity.
- Equally impressive, 95 high-profile companies from a range of sectors have committed to being ‘Nature Positive’, and agreed to work towards halting and reversing the decline of nature by 2030.
- A record 110 leaders signed a pledge to end deforestation by 2030 and restore damaged land in developing countries. Though previous declarations of this nature have failed, this time, there is significant funding to support the plan. Governments and the private sector have committed US$19.2 billion to this and most of the major forest nations have signed up. There is also an extra package of more than US$1 billion for indigenous communities.
- There is considerable activity across the financial sector. The Glasgow Financial Alliance for Net Zero, which represents more than 450 banks, insurers and other asset managers across 45 countries - and is responsible for more than US$130 trillion in financial assets - committed to limiting global warming to 1.5 degrees above pre-industrial levels.
The role of activism and ensuring a ‘just transition’ was front and centre of the event, as thousands of young protesters marched through Glasgow to demand urgent climate action while the views of more than 40,000 young climate leaders were presented to ministers, negotiators and officials.
About two-thirds of civil society organisations who usually attend COP26 could not attend Glasgow due to visa issues, lack of access to COVID-19 vaccines and changing travel rules.
While climate change disproportionately impacts women across the world, women remain under-represented in key decision-making forums across COP26.
Mostly absent are those from poorer, less industrialised countries who have contributed least to greenhouse gas emissions but are disproportionately harmed by increasingly intense extreme weather events linked to global heating. Emphasising this disparity, Tuvalu's foreign minister gave an iconic speech to COP26, standing knee-deep in seawater to show how his low-lying Pacific island nation is on the front line of climate change impacts.
Meanwhile, Australian eco-entrepreneur Sophia Hamblin Wang’s carbon capture, use and storage (CCUS) start-up took first prize in a business pitch at COP26 in Glasgow.
Amazon’s Executive Chair, Jeff Bezos announced a US$2 billion pledge toward restoring nature and improving food systems.
The second week of COP26 delved into the detail and technical aspects of negotiations.
The intersection of gender and climate change was in focus, as well as the responsibility of wealthy nations to support community resilience and inclusive, community-led adaptation. The final hours of COP26 produced some breakthrough pledges as well as a long-awaited set of rules on carbon markets, low emissions transport and green shipping corridors.
- All 197 participating countries adopted the Glasgow Climate Pact, however, an 11th hour intervention by India - with support from China - meant that the final agreement saw a last-minute change of text, from “phasing out” coal to “phasing down”. This prompted an emotional closing speech from COP26 President, Alok Sharma, who apologised for the way the process had unfolded.
- Nations also agreed to “revisit and strengthen” their 2030 emissions-cut targets before the November 2022 climate summit in Egypt. Australia signed this international request, however, within hours of agreeing to the Glasgow climate pact, the Australian Government announced that it had no intention of changing its “fixed” target.
- New momentum from around the world put gender at the forefront of climate action on Gender Day of the COP26 agenda, as countries and non state actors set out gender and climate commitments. Canada, the US, Germany, the UK, Nigeria, Sweden and Bolivia have all committed to climate investments that target gender equality outcomes.
- Community resilience and inclusive adaptation were a hot topic, with countries making new commitments to increase finance to support developing countries to deal with the impacts of climate change, including a commitment from Australia to double its adaptation finance to meet the annual US$100 billion target.
- Global leaders committed to shifting towards locally-led adaptation through over 70 endorsements and over US$450 million was mobilised for initiatives and programs enhancing locally-led approaches
- COP26 also finalised rules for global carbon trading, known as Article 6 under the Paris Agreement. This has long been a point of contention for COP summits, and the new rules will bring clarity to companies and standardization that should help reduce emissions. However under the rules, the fossil fuel industry will be allowed to offset its carbon emissions. Critics argue this will give polluters the option to pay for their emissions, and say this isn't the answer to climate change.
- The United States and China agreed to work together to achieve the 1.5°C temperature goal set out in the 2015 Paris Agreement, in an “unexpected and welcome” joint declaration of the world’s biggest emitters.
- A total of 30 countries agreed to work together to make zero emission vehicles the new normal by making them accessible, affordable, and sustainable in all regions by 2030 or sooner. Some of the largest car manufacturers agreed to work together to make all new car sales zero emission by 2040 and by 2035 in leading markets. Countries and cities are following suit with ambitious petrol and diesel car phaseout dates.
- Nineteen governments have also stated their intent to support the establishment of ‘green shipping corridors’ – zero-emission shipping routes between two ports. This will involve deploying zero-emission vessel technologies and putting alternative fuel and charging infrastructure in place in ports to allow for zero-emission shipping on key routes across the globe.
A critical question remains on the minds of many. Was COP26 a success? And will we achieve our targets?
Just two years ago, only 30% of the world was covered by net zero targets. Today, this figure sits at around 90%. Over the same period, 154 Parties have submitted new national targets, representing 80% of global emissions.
The International Energy Agency projected the commitments made so far could take warming down to 1.8°C. However, as they currently sit, policies are projected to result in about 2.4°C - 2.7°C warming above pre-industrial level by the end of the century.
Either way it will not currently meet the 1.5°C target. The IEA rightly observes that the gap between rhetoric and action needs to close if we are to meet the 1.5°C target: "Doing so requires nothing short of a total transformation of the energy systems that underpin our economies.”
COP26 President Alok Sharma proclaimed the event as ‘a fragile win’ and that ‘the pulse of 1.5°C is weak’. Though it is simply too early to tell whether COP26 has done what we need it to or failed. The final agreement fell short of achieving its original stated goals, however, the world has taken an unambiguous turn away from fossil fuel as a source of energy.
Most crucially, the event has brought together a group of global changemakers and decision makers and emphasised the importance of global collaboration for the benefit of our planet.
All of these leaders will return to their home countries and need to meet the continued and growing expectations of their stakeholders in respect of climate action, with a momentous opportunity to spur further change.
So, where does Australia stand?
With the shift in global political pressure towards Net Zero economies by 2050 coupled with increasing regulatory change, the spotlight continues to shine on Australia and its current climate trajectory.
Australia has seen growing international pressure to step up its efforts to cut emissions and tackle global warming. Australia has warmed on average by 1.4°C since national records began in 1910.
To date, Australia’s energy needs have been largely met by fossil fuels. Australia's heavy reliance on coal-fired power makes it one of the world's largest carbon emitters per capita.
In the 2021 UN Sustainable Development Report, Australia ranked last on action in response to climate change, among more than 170 members analysed.
Days before COP26, and after significant global pressure, Prime Minister Scott Morrison set a 2050 Net Zero target. The government’s plan was unveiled shortly before COP26, which favours a “gas-fired recovery” as well as a “low emissions technology” plan.
However, Australia will not join more than 40 countries in pledging to end coal power by 2030, which has sparked considerable debate. All states and territories across Australia have Net Zero emissions and renewable energy targets in place and a de facto commitment to Net Zero.
Increased focus has been given to 2030 targets. The Climate Change Authority recommends that in order to achieve our 2050 targets, and stay below a two-degree temperature rise, a 45–65% reduction in emissions by 2030 is required.
Australia’s 2030 target has remained unchanged, with a commitment to reduce greenhouse gas emissions by 26-28% below 2005 levels by 2030. Other nations such as the United States doubled their original 2030 targets.
Almost half of the ASX200 has set emissions reduction targets. This is largely supported by the public who favour increased climate change action. According to the Australian Conservation Foundation, across Australia, one in four voters say climate change is the most important issue to determine their vote at the next federal election. Eight in ten Australians support ‘setting a net-zero emissions target for 2050’. Climate of the Nation reports that 75% of Australian voters are worried about climate and 69% want the Federal Government to push for net zero.
The past five years has seen a meteoric rise in global climate action, both in regulation and shifting consumer, stakeholder and investor demand. The events at COP26 have amplified this momentum, and the outcomes may impact Australia in a number of ways:
- One of Australia’s most important export partners, South Korea, has joined more than 40 countries in a UN climate summit pledge to phase out coal over the next decade in a major blow to the industry’s future as a national champion and income earner.
While several of the world’s biggest coal consumers – including big Australian customers China and India – have not signed the pledge, South Korea’s decision could prompt others such as Japan to follow suit. This presents great opportunities for the renewable sector and minerals sector, and paves the way for new markets to emerge.
- Australia could be one of a small number of countries called upon to improve their 2030 emission reduction targets next year according to a summary of negotiating points released by the presidency of the United Nations climate talks in Glasgow.
- New research suggests about half the world’s fossil fuel assets could become worthless by 2036 under a net zero transition. A drop in demand for oil and gas will reshape the geopolitical landscape, with countries that are slow to decarbonise likely to suffer but early movers will profit.
The world has watched COP26 closely, as powerful policy and market signals drove an ambitious new wave of global climate action. At PwC Australia, we believe that to thrive in the economy of the future, businesses will be expected to set ambitious environmental and Net Zero targets, and deliver on them rapidly.
COP26 has provided a unique opportunity for business leaders and policy makers to re-evaluate their current policies, practices and procedures and consider how they may raise their strategic ambition to address the most pressing issue of our era.
Broader societal issues will be disproportionately impacted through climate change and business has a critical role to play to ensure our transition to a holistically sustainable future is one that builds a society that places social inclusion and environmental stewardship at the centre.
In order to achieve this net zero goal, organisations need to identify their climate risks and opportunities.
COP26 has revealed the urgent need for the world to find a shared solution to achieving net zero greenhouse gas emissions by 2050. As PwC Chairman, Bob Moritz said, “We need 8 billion people to make this a personal cause."
Ultimately, Net Zero cannot be achieved by one person, organisation or country.
Instead, it requires a holistic approach that includes; government, businesses, customers and communities. At PwC, we are continuously adapting our involvement and learning how to play our part through our commitment to achieve net zero by 2030. We want to help others achieve the same goals.
As part of our new global strategy ‘the New Equation’, PwC is committed to helping lend our expertise and support organisations in reaching their own Net Zero goals and broader ESG (Environmental, Social, Governance issues) issues.
We strongly support the idea that like-minded, problem solving organisations and employees can help rapidly shift the corporate world towards one that takes responsibility and pioneers 2030 net zero targets.
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Partner, Advisory, Climate Lead & Global PwC Energy Transition Lead, PwC Australia
Caroline Mara
Partner, Assurance, Sustainability Reporting and Assurance Leader, PwC Australia