By Thomas Hohne-Sparborth, Head of Sustainability Research at Lombard Odier
Going into COP26, Boris Johnson’s slogan was “coal, cash, cars and trees”. As the first week of COP draws to a close (still to be followed by a second week), where do we stand on this four-way priority?
The phaseout of coal is perhaps regarded as the most vital, most urgent policy step needed to keep the objective of limiting warming to no more than 1.5C in sight. This week, more than 40 countries have pledged to phaseout coal by the 2030s and 2040s. Yet the absentees are perhaps as striking as the signatories, with the US, China, India and Australia not yet having signed onto the pledge. But, with cost of renewables falling, simple economics may outweigh the impact of policy, with a rapid succession of bankruptcies of coal plants even during the last US administration.
As regards cash, COP26 has often been billed as the “finance COP”. The new Glasgow Financial Alliance to Net Zero brings together asset owners and managers with a reported USD 130 trillion in assets (albeit this would include some double counting). While only a small portion of this would be dedicated to green solutions, specifically, the transition to a net zero economy requires not only investment in low carbon technologies, but also the large-scale realignment of the wider economy and, by extension, of investment portfolios – and it is here where the GFANZ alliance may become hugely impactful.
As for trees, climate change is driven not only by energy-related emissions, but also those generated by changes in land use – including those linked to deforestation. Ceasing deforestation, and investment in reforestation, has garnered growing momentum owing to the recognition of not only the comparatively low cost of this intervention, but also its associated benefits to the wider environment, biodiversity and the communities that depend on it. World leaders and 30 financial institutions – including Lombard Odier – have signed pledges to ensure a halt to deforestation, as well as financial support for specific focus areas, such as the Congo basin.
As for cars? Most striking perhaps has been the predominance of electric vehicles used in and around Glasgow by participants motivated to set the right tone. The relative cost of electric vehicles has already rapidly increased, but a new Breakthrough Agenda is seeking to further bring forward the tipping point at which electric vehicles and other green technologies displace incumbent alternatives. The first five breakthroughs targeted include clean electricity, electric vehicles, green steel, hydrogen and sustainable farming – providing a glimpse of the technologies that will characterise the Net Zero economy.