COP26 has now concluded a week ago, many are divided on its accomplishments. Let’s focus on the positive outcomes:
1) 1.5 deg C is still achievable, just... 6 years ago the Paris Agreement was signed by 195 countries. Therefore agreeing to reduce global warming to ‘well below 2 deg C’ by the end of this century, 2100. Currently, the planet is on track to hit 2.4 deg C warming over pre-industrial times; importantly this is down from a 3.5 deg C projection at the time of the Paris Agreement. But admittedly there’s room for real improvement.
2) COP26 wording requests tougher emissions caps (via a binding country ‘NDC’) at COP27 in Nov 2022, it’s critical that all countries continue to ratchet their ambitions.
3) COP26 momentum is clear, they spelled-out that a 45% reduction in global emissions is needed by 2030, verses 2010 levels.
4) A doubling in financial support for low-income countries to implement climate-change plans.
5) Coal and fossil-fuel subsidies will be ‘phased down', India requested ‘phased-out’ to be replaced. These new references are still a climate-summit first in its 26 year lifespan. Irrespective of whether this is a divisive change in the original wording, this is still a clear statement which will divert investment flows.
6) UN climate summits are excellent, but the real change occurs as individuals cast green-votes at the ballot box to further influence local climate policy, make the vote count - its all about local leaders driving a strong NDC.
7) Article 6 and other elements of Paris Agreement rules are now at last agreed upon. Including the much-maligned, but in fact critical, carbon markets. Which had remained unresolved for the last 6 years.
8) Stopping deforestation by 2030 covering 85% of the world’s forests.
9) Methane emissions to reduce by 30% by 2030, the US published its blueprint to meet the goal.
10) India, 4th largest emitter, will meet net-zero by 2070
In direct response to COP26 the carbon price for compliance and voluntary markets has substantially increased, impacting airlines, refineries, and other carbon regulated industries, but also non-regulated corporations that wish to better plan their 2050 net-zero pathway. Ultimately all corporates will have exposure to carbon commodity price in some way shape of form.
Pricing of both voluntary carbon (13.75 USD/mt for CME’s CBL Nature-based NGEO) and compliance carbon (Dec21 at 70 USD/mt) increased in response to COP26, see below the graph of offset carbon from October to date.