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Cop26: Climate finance progress made, but doubt lingers over big promises

After almost two weeks of frantic activity in Glasgow, the 2021 UN Climate Change Conference (Cop26) is reaching its climax.

The gathering of world leaders, bureaucrats, international organisations and the world’s biggest banks and corporations was supposed to find a way to keep global warming under 1.5 degrees Celsius above pre-industrial levels, as envisaged under the 2015 Paris Agreement.

As yet Cop26 looks to be falling well short of that, despite a slew of new net zero commitments made ahead of and during the summit. An updated UN estimate, taking into account the pledges, says the planet is on track to warm by around 2.7 degrees Celsius by 2100 even if the fresh commitments are fully implemented.

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But the conference has also seen new pledges that aim to reroute the flow of financing from emissions-heavy fossil fuels and towards renewable energy sources. Some have been praised by climate campaigners – who have spent a large part of 2021 trying to corral financial institutions and governments into tougher commitments – while others were met with disappointment.

Public financiers vow to kick fossil fuels

One development that was unusual in receiving widespread praise from environmentalists is the (at press time, still growing) list of countries promising to end all public finance for fossil fuels by the end of 2022, including export credit agencies and export finance.

The original 25 signatories included the UK, US, Canada and Switzerland as well as France’s development bank, the European Investment Bank and East African Development Bank.

The participants say they “will end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement”.

As Cop26 continued, the Netherlands and Germany joined the pact, bringing the average annual public finance from the signatories that will be shifted from fossil fuels to green energy to US$21.7bn, according to campaign group Oil Change International. Other governments may sign up in the final stretch of the summit.

The agreement goes much further than most previous announcements by governments or export credit agencies, which typically focused only on unabated coal power and were softer on oil and gas. In the export credit sector, only the UK had given a comprehensive commitment to end fossil fuel support before Cop26.

Adam McGibbon, UK campaign lead at shareholder activist group Market Forces, identified the pledge as the conference’s “most promising development” when asked by GTR to nominate one.

“This is a huge step and builds on last year’s successful campaign to get the UK to become the first country to phase out its overseas public finance for fossil fuels. It shows that ‘first mover’ countries can use their diplomatic power.”

Deforestation pledge

A promise by 134 countries to “commit to working collectively to halt and reverse forest loss and land degradation by 2030” was met with a lukewarm response.

Deforestation, usually to make way for cattle pasture or rubber, palm oil or soya plantations, fuels global warming by reducing the size of carbon sinks and by the greenhouse gases released when the forests are cleared through burning.

For years campaign groups have been demanding that banks stop financing companies involved in deforestation or providing trade finance facilities for supply chains where products contribute to it.

The signatory countries vowed to “facilitate the alignment of financial flows with international goals to reverse forest loss and degradation, while ensuring robust policies and systems are in place to accelerate the transition to an economy that is resilient and advances forest, sustainable land use, biodiversity and climate goals”.

It was backed up by US$19.2bn in public and private funding and a separate promise by major fund managers and insurers “to use best efforts to tackle commodity-driven deforestation impacts in their investment and lending portfolios by 2025”.

While the participation of major countries of concern such as Brazil, the Democratic Republic of Congo and Indonesia was deemed a significant step, a lack of enforcement and follow-through could render the pledge similar to previous unmet commitments, campaigners warned.

Jo Blackman, head of forests policy and advocacy at Global Witness, says: “If global leaders are serious about stopping forest destruction then they must back up [the] announcements with a commitment to bring in strong and binding national legislation that makes it illegal for companies and financial institutions to fuel deforestation.”

Those fears were underlined when shortly after signing up to the statement, Indonesia’s environment minister Siti Nurbaya Bakar reportedly cast doubt on whether the country, a major palm oil producer, would abide by it, saying the country’s development agenda “must not stop in the name of carbon emissions or in the name of deforestation”.  

Key countries missing from coal exit plan

Early in the conference a long list of attending countries said they would no longer construct unabated coal-fired power projects and end “new direct government support for unabated international coal-fired power generation”, capping a steady trickle of coal exit announcements by governments and private sector institutions ahead of Cop26.

The statement calls on developing countries to phase out coal “in the 2030s” and developing countries in the following decade, but was immediately criticised over the absence of top coal exporters and users such as the US, China, Russia, India, Japan and Australia.

Greenpeace’s Juan Pablo Osornio says the statement lacks urgency, effectively allowing countries to choose when they will phase out coal. “Overall this statement still falls well short of the ambition needed on fossil fuels in this critical decade.”

A draft of the final Cop26 statement, published early on November 10, “calls upon parties to accelerate the phasing-out of coal and subsidies for fossil fuels”, but the text is likely to be significantly altered during negotiations that may drag past the summit’s official end date of November 12.

 

 

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