COP26 Diaries: Day 1

Granted that Rome wasn’t built in one day, it was still a bit disappointing to see the aftermath of the G20 summit that occurred over the weekend.

Yes, there was the overwhelming consensus on a global front against the climate crisis. Politicians repeated willingness to deal with rising emissions, but little was offered in terms of concrete steps. G20 economies—making up 60% of the global population and 80% of all global emissions—remained largely abstract in their climate ambitions and made a point of ignoring the mounting worries on the heavy role of coal and the funds required for underdeveloped countries to tackle the climate challenge.

The lack of clarity is clear itself: G20 leaders in Rome failed to agree on the Global Methane Pledge that can reduce emissions by 30% by 2030. There was some consensus to bring climate action to this decade, but the proposed target of 45% cut in emissions was not agreed upon.

Following the event, UN Secretary-General Antonio Guterres said that his hopes may not have been fulfilled, but “at least they aren’t buried.”

Glasgow needs to pick up from where Rome left off.

I believe we are running down the clock, and some key issues must be prioritized at COP26:

1.????Put a price tag on carbon/A carbon tax: The fact that carbon pricing mechanisms are yet to take momentum is a wasted opportunity. Currently, the price of carbon falls around $2 a ton; and according to the IMF, the price of carbon must hit $75 a ton by 2030 to curb emissions. We can start now by adjusting it to around $50--which places it between the $30-70 bracket where coal would become more expensive than renewables.

2.???Sort out the finance: Back in 2015, developing countries were promised 100 billion dollars annually up to 2020 to catch up with the Paris goals. As of now, only about 80 billion in total was provided to them.

There are multiple issues here that need to be sorted out: first and foremost, developing countries must not be forced down rabbit holes of debt that will spiral out of control and suffocate economies. Secondly, exhaustive, never-ending bureaucratic processes need to be eliminated. Most of these countries are already vetted by UN and similar institutions in receiving various funds, these accreditation processes must be integrated to save time and labor.

And it isn’t like the funds are not out there: during the pandemic, around 11 trillion dollars were injected into economies by developed countries to fight against COVID. 11 trillion dollars—within the span of two years. Developing countries however had to make up for that by limiting their climate spending. Indonesia, for instance, reduced its climate budget by 20%.

3.????Step away from the coal: One of the key failures of G20 must be amended at Glasgow. Over recent years, coal production in Europe and U.S. dropped, but emerging countries continue to rely on coal for energy.

By Bloomberg numbers, India is now burning more coal than U.S. and Europe combined. China, India, Indonesia, Japan and Vietnam plan to add more than 600 coal power units as we speak.

But the issue of fossil fuels is not limited to China or to emerging markets. 3 key financial institutions of the West—JP Morgan, Deutsche Bank and Citigroup—have all made most of their fees from fossil fuel companies. Bloomberg numbers show that global banks have organized $459 billion of bonds and loans for the oil, gas and coal sectors just this year. Since the Paris Agreement, the finance industry made more than $17 billion in fees from facilitating $4 trillion of fossil-fuel financing. I am not suggesting that banks stop financing fossil fuels immediately, but there must be a period of transition where this type of activity is reduced dramatically and can be seen to reach zero in the near future. ?

We have to leave fossil fuels behind. This requires transformative action in both energy and financial sectors—both of which should be at the heart of the discussion in Glasgow.

4.????Finish what Paris started: Two key issues of the Paris Agreement must be reevaluated: NDCs (Nationally Determined Contributions) and the Article 6.

Even if we succeed in achieving all global commitments made today, the world is set for a 2.7C rise in global temperatures. This is far beyond what we hope to achieve and most likely would mean the end of life as we know it. According to the NDC Synthesis Report, countries must double their efforts if we hope to stay well below 2C.

A second uncertainty of the Paris aftermath is the unfinished nature of Article 6. Article 6 oversees various mechanisms that help trade reduction outcomes: for instance, if country A is overachieving on its NDCs, it can help trade some of that reduction to countries that are falling behind. What constitutes as these mechanisms, called Internationally Traded Mitigation Outcomes (ITMOs), are not yet identified. There are also issues of discounting—at the end of the day, which country will these reductions belong to? If one country is financing them and the projects are taking place in another—that confusion needs to be resolved. As a market, voluntary offsetting is thriving and capable of great potential. It needs to be encouraged and mechanisms must be in place so that carbon can be traded freely across borders and companies can securely vouch for the quality of that carbon credit. ?????

World leaders in Glasgow must find ways to clarify what Article 6 entails and create a roadmap with clear road signs that will allow for a successful implementation of ITMOs.

If substantial progress can be made on all these issues, then COP26 will be remembered as a turning point in our fight against global warming.

We must not only aim for our best; we have to do whatever’s necessary.