Rod Oram: COP26's difficult second week

The encouraging signs from the first week of the global climate summit must now be brought closer to reality in critical negotiations in the final week, writes Rod Oram in Glasgow

More sustainable land use practices, particularly by agriculture, was the main theme of a weekend programme at the COP26 climate negotiations in Glasgow. In typical COP fashion, a slew of new promises were made and programmes launched by 45 governments, international agencies such as the World Bank, and 95 multinational food producers and retailers.

“If we are to limit global warming and keep the goal of 1.5C alive, then the world needs to use land sustainably and put protection and restoration of nature at the heart of all we do,” said Alok Sharma, the UK politician who is President of COP26.

“The commitments being made today show that nature and land use is being recognised as essential to meeting the Paris Agreement goals, and will contribute to addressing the twin crises of climate change and biodiversity loss.”

New Zealand, for example, signed up to the Policy Action Agenda for the Transition to Sustainable Agriculture. The goal is to help countries better focus their farming policies to respond to climate imperatives.

Changes in diets and other aspects of consumer demand are also identified as a driver of change. For example, the big five UK supermarkets have agreed to halve the environmental impact of the average UK shopping basket by 2030.

They said they will work with the WWF on measures “to turn the food and agriculture system from a driver of climate change into a nature hero by cutting negative impacts and boosting regenerative agriculture to restore nature.”

The programme will focus on seven key themes: climate change, deforestation, sustainable agriculture, sustainable diets, marine, waste and packaging. These will also apply to imported food, which will lift the bar for New Zealand farmers.

To help 100 million farmers in developing countries, the World Economic Forum launched an alliance with farmers’ organisations, civil society, businesses and other partners. The programme will help the farmers achieve innovations by 2030 that will advance the ultimate goals of net zero and “nature positive” farming.

And the World Bank will commit to spending US$25 billion in climate finance annually to 2025 through its Climate Action Plan, including a focus on agriculture and food systems.

COP26 has a big and difficult agenda for this its second and final week. The top items include:

– Securing deeper emission cuts from more countries so, in theory, the global community can keep the rise in temperature to 1.5C. By the end of last week, new pledges had moved that key measure down to 1.8C from 2.1C at the start of the negotiations.

– Getting developed countries to finally meet their long-standing commitment to giving US$100bn a year in climate funding to developing countries.

– Reaching final agreement on the rule book which will operationalise the Paris Agreement of 2015. Very key sections include rules for carbon markets, both regulatory and voluntary; and giving indigenous peoples much stronger land rights protection against adverse pressures from those markets.

This week will also focus on decarbonising industrial sectors such as cement, steel and aviation which are major emitters because of their current dependence on fossil fuels.

For insights about the progress made during the first week of COP26, I’ve interviewed Kingsmill Bond, the energy strategist at Carbon Tracker. Previously, he was an equity analyst and strategist for 25 years with Deutsche Bank, Sberbank and Citibank in London, Hong Kong and Moscow. Over his years at Carbon Tracker he’s written many reports on the myths of the energy transition, looking at multiple arguments made by incumbents to deny the reality of change.

Back in 2011, Carbon Tracker, a leading UK NGO, published its first Unburnable Carbon report. It argued that up to two-thirds of the world’s known reserves and resources of oil, coal and gas could not be burned if we were to avoid dangerous levels of climate change. It triggered awareness of the fossil fuel sectors’ looming burden of stranded assets, which 10 years later are becoming an escalating crisis for the sector.

Carbon Tracker continues to offer great clarity on the political, economic and technological dynamics at play in the global transformation to climate compatible societies. In September, for example, Bond and his colleague Sam Butler-Sloss wrote that the dynamic of the UN climate negotiations has shifted from dividing the pain of tackling the climate crisis to sharing the gains.

When we met on Friday, he offered this perspective on the shift. “Coming out of COP 10 years ago the question was ‘why’; and out of Paris [in 2015], the question was ‘what now’. Increasingly the question now is ‘how’. We can see around us now that the debate has moved on to this framing of gain, not pain. Not a question of sharing the costs of something which is very difficult. But exploiting the opportunity that has been made possible by these new energy technologies. There is very much now a sense of hope and opportunity.”

This first week of COP26 brought “many more announcements than we had hoped for the entire two weeks. For example, we’ve had an agreement on methane, and an agreement on forestry. We’ve had the Gfanz [the Global Financial Alliance on Net Zero] saying the money is available. And we’ve had a series of countries now committing to net zero by mid-century, most notably of course, India.”

On the other hand, the week included disappointments such as only modest progress on pledges to end the burning of coal to generate electricity.

However, “there’s also a very obvious and rising financial risk for anyone building these [and other fossil fuel] assets. At Carbon Tracker, we’re getting the financial community to recognise the risk is far higher than it has been in the past. The fact is any coal-fired power station built today will certainly not achieve the necessary returns over its lifetime to justify building it. And therefore it’s financially dumb to be building these assets today.”

But the pledges last week to reduce methane, coal use and deforestation weren’t signed by some of the countries which are main sources of those problems. Moreover, there’s a lot of work to do to make the agreements operational and to give them teeth.

Bond believes, though, “that these political decisions set the direction and the tone, and then financial markets realise which way change is moving; and they bring that future forward, which is precisely what Larry Fink [chairman of BlackRock, the world largest fund manager] said. Which is why they then stop funding the growth of the assets for very good financial reasons.”

He has a blunt message: “It’s axiomatic at times of transition, that incumbents will struggle.”

So, to help fossil fuel producers make more rational investment decisions during their sector’s decline, Carbon Tracker is setting up a registry of global of fossil fuel assets. The goal is to steer the declining volume of investment into low cost assets rather than high cost ones, thus minimising wasted investment. The early backers include Denmark which has long pursued such a national strategy. This drove the transformation of the state oil and gas production company into one of the world’s major investors in wind power, Ørsted.

Clean technologies offer abundant opportunities for new companies, and old ones that can pivot. Hydrogen is one example in our conversation. Bond says it has considerable merits for meeting certain energy needs in transport and industry. But much of that demand will be met by local production using local renewable electricity sources. That will undermine the argument made by countries with abundant renewable electricity that they will export large volumes of hydrogen very long distances.

The audio of our full conversation is below. Please excuse the background noise. In typical COP26-style, we met in a busy place.