Opinion – Martin Wolf: Dancing on the Edge of Climate Disaster

How can we assess the results of COP26 in Glasgow? It would be reasonable to conclude that it was both a victory and a disaster—victory because some notable steps forward were taken, and disaster because they fell far short of what is needed. It remains highly doubtful whether our divided world can muster the will to face this challenge in the time that remains before the damage becomes unmanageable.

O Climate Action Tracker [rastreador da ação climática] provided a useful summary of where we stand: with current policies and actions, the world is expected to experience an average temperature rise of 2.7 degrees centigrade above pre-industrial levels; with the 2030 targets alone, this would drop to 2.4 degrees; full implementation of all stated and mandatory targets would deliver 2.1 grades; and finally, the implementation of all announced targets would yield 1.8 degree. So if the world were to deliver everything it indicates today, we would be close to the recommended maximum increase of 1.5 degrees C.

Skepticism is fully justified. According to the Climate Action Tracker, only the European Union, the United Kingdom, Chile and Costa Rica have properly projected net zero targets. Announced improvements in Nationally Determined Contributions (NDCs) since September 2020 will reduce the shortfall in GHG emission reductions needed by 2030 by just 15% to 17%. More than half of this reduction in CNDs comes from the US, whose future policies are, at best, uncertain. New sectoral initiatives will reduce the scarcity of greenhouse gas emission reductions by 2030 by 24% to 25%. The announced reductions in methane emissions and deforestation would be especially significant if realized. But reducing deforestation is doubtful. In any case, the deficit is big.

However, the image is not entirely bleak. Net zero commitments today cover 80% of total emissions. The 1.5 degree ceiling is also a clear consensus. Another good sign is a joint declaration between the United States and China, as nothing can be achieved without these two countries. The final declaration also includes a commitment to “accelerate initiatives towards the gradual reduction of coal power and inefficient fossil fuel subsidies”. This is too little. But it’s a start on climate deals.

If the world is to make the recommended reductions in emissions by 2030, however, much more needs to happen. One possibility is new commitments at the next COP, which will be in Egypt in 2022. This will be the first in a series of high-level annual meetings where countries will be asked to improve their pledges.

Another possibility is a more active private sector. On this, the main news is the Glasgow Financial Alliance for Net Zero (GFANZ). According to Mark Carney, former chairman of the Bank of England, his goal is “to build a financial system where every decision taken takes climate change into account.”

GFANZ consists of the leading fund managers and banks, with total managed assets of $130 trillion. In principle, the allocation of these resources towards the net zero goals would make a huge difference. But, notes Carney, $100 trillion is “the minimum amount of external finance needed for the sustainable energy initiative over the next three decades.” This is disheartening.

Needless to say, while it is possible to prevent companies from doing profitable things, it is impossible to force them to do things they consider insufficiently profitable, once adjusted for risk. If they are to invest on the scale needed, there needs to be carbon pricing, elimination of fossil fuel subsidies, bans on internal combustion engines, and mandatory climate-related financial statements. But there must also be a way to get vast amounts of private investment in the climate transition in emerging and developing countries outside China.

GFANZ calls for the creation of “national platforms” that could bring together and align “stakeholders — including governments, businesses, NGOs, civil society organizations, donors and other development actors, national and international — to agree on and coordinate priorities “. A big and controversial issue will be risk sharing. The public sector should not assume all the risks and the private sector all the rewards of the energy transition.

Great attention is devoted to the failure of developed countries to deliver the promised $100 billion a year in finance to emerging and developing countries. This is symbolically important. But as Amar Bhattacharya and Nicholas Stern of the London School of Economics comment, it’s small change: “In all, emerging markets and developing countries other than China will need to invest approximately another $800 billion a year by 2025 and about US$ $2 trillion per year to 2030” in climate mitigation and adaptation and restoration of natural capital. About half of this must come from abroad, mostly from private sources.

But the official sector must also do more. In this context, it is a real shame that the recent issuance of special drawing rights is not being taken advantage of. Of the total allocation of $650 billion, about 60% will go to high-income countries that don’t need them, and only 3% to low-income countries. Of these, it is planned to lend $100 billion from high-income countries to developing ones. This should be much more, to help tackle Covid’s legacy and climate change.

In short, if we compare the global discussion today with that of a decade ago, we’ve come a long way. But compared to where we needed to be, there is still a frighteningly long way to go. It’s too soon to give up hope. But being complacent would be absurd. We need to act with strength, credibility and speed and, finally, we must agree to do it together. The task is big and the time is late. We can no longer wait seated.

Translated by Luiz Roberto M. Gonçalves