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The COP that was not – Will postponing COP26 affect global climate action?

While global emissions are expected to be considerably lower in 2020 as a result of COVID-19, postponing the COP26 meeting has sparked concerns about a wasted year for political action on climate change. How will these tumultuous 12 months affect the global climate landscape?

The 26th UN Conference of Parties – or COP26 – originally scheduled to be held this year in Glasgow, was due to be one of the most important climate summits in recent years, where nations were expected to formally announce greater ambitions to tackle climate change.

As the scale of the pandemic became apparent, the UN decided in May to postpone the conference for a full year to November 2021.

What will this delay mean for the COP process, and the climate itself?

What was due to be achieved?

This year’s climate conference was being billed as the most significant COP since the Paris Agreement was struck at COP21 back in 2015. COPs over the last few years have been laying the foundation for this summit, at which nations were due to update their Nationally Determined Contributions (NDCs) – or individual climate pledges – for the first time. This is part of a five-year ratcheting process designed to periodically push countries to increase their emissions-reduction goals.

The ratchet mechanism is necessary as NDC pledges to date are collectively not enough to keep the increase in global temperatures below the Paris Agreement’s target of a maximum 2C temperature rise on pre-industrial levels, let alone its preferred target of 1.5C. The UN’s Emissions Gap Report 2019 (see exhibit 1) indicates current NDCs, should they be achieved, will together result in around 3.2C warming by the end of the century.

Exhibit 1: The ‘emissions gap’ between non-revised NDCs and what’s needed to reach the Paris Agreement targets

Source: UNEP Emissions Gap Report 2019 (p.19)

COP26 was also due to tie up loose ends from COP25; particularly the issue of ‘Article 6’ on setting rules for global carbon markets and carbon credits.

Separately, 2020 was also supposed to mark the year the target of USD 100 billion in annual climate finance flows from developed to developing countries was to be reached. The latest figures from the OECD indicate there is some way to go to achieve the goal, with USD 78.9 billion provided and mobilised in 2018.

What happens now?

Preparatory meetings ahead of the main summit were also delayed, meaning there is a lot of diplomatic catching up to do in 2021. COP27, which was due to take place in Africa in 2021, will also be delayed and the COP cycle will be permanently set back a year.

Countries now have a little more breathing space to set out their plans but COP or no COP, they are still expected to publish their updated NDCs this year as per the timeline agreed at COP21. At the time of writing, 12 countries covering 2.8% of global emissions have done so. Of these, Chile’s plans are the most Paris-friendly, with its new target ranked as 1.5C compatible.

Seven countries, including Australia, Japan and Russia, may not be updating their NDCs this year, according to Climate Action Tracker. The UN and the UK are planning an online climate summit in December to encourage countries to set new, more ambitious NDCs.

Do we have a year to spare?

There is one silver lining: while the pandemic delayed climate negotiations, it also resulted in a lowering of greenhouse gas emissions in 2020. Over the year, emissions are expected to fall by 4% to 7% compared to the 2019 level. While this is a small benefit, this drop will not mean a huge amount in terms of the cumulative CO2 stock in the atmosphere unless it is followed with continued action. To reach the Paris Agreement’s 1.5C target, we need to see roughly the same level of emissions reductions – 7.6% – every year.

While climate diplomacy may be on ice, 2020 has still seen positive news from governments. The shock of the pandemic has resulted in many countries looking to recover from this period in a resilient, green manner.

Regions including Europe are setting aside significant funds for climate-friendly economic stimulus, while also looking to set more stringent emissions-reduction goals. If implemented effectively, green recovery packages worldwide have the potential to avoid 0.3C of future warming.

It’s not just Europe focusing on upping its climate goals. China surprised the world in September by setting a target to reach net-zero emissions by 2060. This was followed by Japan and South Korea. Both countries set net-zero targets for 2050.

A boost from a US recommitment?

Currently, the 126 countries with some form of net-zero announcement cover over 50% of the world’s emissions. President-Elect Joe Biden’s commitment to net-zero emissions by 2050 would take the total to 63%. It could cut warming by an additional 0.1C by 2100.

Perhaps more importantly for COP26, the Biden-Harris transition website says Biden is working to “lead an effort to get every major country to ramp up the ambition of their domestic climate targets.” Next year’s COP could now be boosted by a new US administration seemingly hungry to re-engage with climate action.

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

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