Glossary

Experiencing COP26

Experiencing COP26

Experiencing COP26


by: Zach Harmer | Strategic Policy & Markets Manager | November 30, 2021

 
Experiencing COP26

I had the honor of attending the Conference of Parties 26th (COP26) meeting in Glasgow, UK, on behalf of ClimeCo. Upon arrival, I was pleasantly surprised to see how Glasgow had wholly transformed to facilitate the arrival of over 30,000 participants. From airport and train station signage to rapid antigen test procurement sites spread throughout the city, it’s safe to say that there was much preparation to ensure the welcome for the global community was as smooth as possible. The effort put forth allowed attendees to focus on the power of coming together to discuss and make climate commitments.

About COP26

If you are unfamiliar with COP26, it is a United Nationals Climate Change conference that brings parties together to accelerate action towards the goals of the Paris Agreement. It is organized into three core areas: the Blue Zone, the Green Zone, and then side events, such as the New York Times Climate Hub (NYT Hub). The Blue Zone is dedicated for delegates and select leaders of the business world to provide space for the negotiations that led to the agreement on the Glasgow Pact. The Green Zone is open to the public, focusing on education and a plethora of side events that offered the opportunity to listen to world-renowned speakers and network with other attendees.


My Favorite Speaker


I was excited to be able to attend the Green Zone as well as several side events. Of the various presentations I attended, the one speaker that resonated with me the most, Vanessa Nakate, spoke on a panel at the NYT Hub. If you have never heard of Vanessa, she is well known as a climate activist from Uganda. She is the founder of the Rise up Climate Movement, which aims to amplify the voices of activists from Africa. During her presentation, Vanessa provided the following powerful statement on global temperature rise: 

“It’s important for people to know that even at 1.2 degrees, it has been hell for so many communities in my country… the climate crisis has been ravaging vast parts of the African continent, many people have lost their farms, many people are losing their businesses, many people have lost their lives… this is what is happening at 1.2. The weather patterns are changing, they’re being disrupted… this is one of the disconnections that I have been talking about. We think that 1.5 is our salvation, and yet, still at 1.5, it won’t be safe for very many communities.” NYT, Full Recording of Session 

To me, her comment brings light to a common misconception that I see frequently in the media – that limiting global temperature increase to 1.5 degrees Celsius above preindustrial levels is not a universal solution to climate change. The 1.5 degrees is a threshold defined by the Intergovernmental Panel on Climate Change (IPCC) that, if crossed, will bring “catastrophic and irreversible effects of climate change.” (Check out ClimeCo’s recent blog on the Key Takeaways from the most recent IPCC report).

Many of the world’s most vulnerable populations are already experiencing significant effects from the global temperature rise, which further emphasizes the urgency of the worldwide community to work together to reduce emissions and support those in need.

My Key Takeaways From The Pact

The Glasgow Climate Pact (Pact) was underscored by a commitment by all parties to the 1.5-degree target. With that, there is an urgent need to drastically scale up funding for developing countries to assist with the costs associated with mitigation and adaptation for climate change. Additionally, for the first time, there was an explicit reference for the need to phase out fossil fuel usage, though the requirement for coal was downgraded from a “phase-out” to a “phase-down” at the last minute due to pressures from China and India. 

Another notable outcome from the Pact was the announcement of the intention to form a stand-alone organization to provide financial support and technical advice to developing countries seeking to mitigate loss and damages from climate change. Despite some of the successes of COP26, participant countries were unable to deliver on the $100 billion climate finance target set in the year leading up to COP26. In response, members of the Pact committed to reaching the $100 billion target and to match the amount annually up until 2025.1 Alongside the commitments was the agreement on the rules of Article 6 of the Paris Agreement.


Article 6 Overview

A significant achievement of the Glasgow Pact was the approval of the rules for implementing Article 6 of the Paris Climate Agreement. Article 6 was ratified in 2016 along with the rest of the Paris Agreement; however, agreeing on the rules for implementation proved to be a challenging exercise. The main components of the Article are briefly highlighted below: 

  • Article 6.2: establishes an accounting framework for country-level cooperation. The purpose of this article is for linking the emissions-trading schemes of two or more countries (but not for business-level transactions). This “treaty” framework will also allow the international transfer of Internationally Traded Mitigation Outcomes (ITMOs). 
  • Article 6.4: establishes a United Nations-centralized mechanism to trade emission reduction credits (referred to as “A6.4ERs”) generated through projects that will contribute to reducing emissions in developing countries. This mechanism would issue A6.4ERs to developers of clean energy projects, where the developers can either be foreign countries or private entities. 
  • Article 6.8: is meant to guide the implementation of the framework for non-market approaches in implementing parties’ Nationally Determined Contributions (NDC). Article 6.8 is not instrumental in the implementation of an emission trading system. Examples include, but are not limited to, the application of taxes or other relevant initiatives to discourage emissions.  

Conclusions

It is no easy feat to bring over 200 delegates together from around the world in a time where COVID-19 is ever-present, let alone to get all delegates to agree on a plan to limit temperature rise to 1.5 degrees. Though there may be criticisms from both sides on the intricacies of the Pact, progress has been made on one of the biggest challenges we have ever faced as a global community. As I reflect on my visit to COP26, I am left with these two thoughts: 

  1. No action is too small; everything starts with the individual. Every action you can take to reduce your emissions and waste footprint helps. I encourage you to look into actions you can take to reduce your daily footprint, such as reviewing your city’s waste, organics and recycling rules. 
  2. Climate change is here and is already affecting the world’s most vulnerable populations. We must continue to encourage our leaders to drive emissions reductions from both inside and outside their borders. 

It will be interesting to see what the delegates of our world will do to meet the commitments they made at COP26. At ClimeCo, we strive to continually work with our partners to reduce emissions and go beyond business-as-usual. I am looking forward to helping our partners navigate the multiple paths available to them to reach their goals/commitments.  

 
Watch #TeamClimeCo at COP26 on our Instagram.


About the Author

Zach Harmer is the Strategic Policy and Markets Manager at ClimeCo Canada, based in the Calgary office. At ClimeCo, Zach leads the tracking and analyses of regulatory and market updates in California and Canada’s carbon programs. Zach earned his Master of Public Policy from the University of Calgary’s School of Public Policy and his Bachelor of Arts from the University of Alberta in Political Science and French Language and Literature.

The Role of Net-Zero in Corporate Strategy

The Role of Net-Zero in Corporate Strategy

The Role of Net-Zero in Corporate Strategy


by: David Prieto | Director, Climate Finance & Strategy | August 25, 2021

The Paris Agreement signed in 2015 ushered in a new era in corporate strategy. This new era is one where companies and investors play a fundamental role in addressing the key issue of our time – climate change. In our lifetime, the corporate sector has increasingly experienced the impact of climate risk – both physical and transitional. High-profile examples include the bankruptcy of PG&E after the 2018 wildfire season in California and the Volkswagen diesel emissions scandal from 2015. Nonetheless, corporate leaders realize that climate change is also the biggest wealth-creating opportunity in human history. It is, therefore, no surprise that investors are rewarding low-carbon business models with record valuations, such as Tesla and Beyond Meat.

In the absence of broad climate policy and regulation, corporate leaders have to navigate a growing landscape of voluntary initiatives designed to address many environmental, social, and governance (ESG) issues, including climate change. The rapid pace of change in ESG can be daunting to navigate for corporate leaders. Therefore, it is important to understand which voluntary initiatives best align with a company´s strategy and business model, from campaigns and commitments to methodologies, registries, and standards. This blog will discuss the latest development in ESG – Net-Zero – and why it plays a fundamental role in any corporate strategy.

The Science Behind Net-Zero

The goal of the Paris Agreement is to limit the rise in mean global temperature by 1.5°C above pre-industrial levels to avoid the most severe impacts of climate change. To succeed, global emissions of greenhouse gases (GHG) need to halve by 2030 and reach net-zero by 2050, according to a landmark study published in 2018 by the Intergovernmental Panel on Climate Change (IPCC). Achieving net-zero emissions will be a monumental challenge – human activities generate 55 GT of carbon dioxide (CO2) per year, resulting in a total carbon budget of 580 GT of CO2 before exceeding the 1.5°C threshold.

Establishing a Net-Zero Target

Net-zero is a state in time where corporates meet two conditions, according to the Science Based Targets initiative (SBTi). First, GHG emissions from a corporate value chain are abated at a rate consistent with a 1.5°C pathway. Second, residual emissions that cannot be eliminated for technical and economic reasons are compensated by an equivalent amount of carbon dioxide removals. During the transition to net-zero, a science-based target (SBT) informs whether the current rate of emissions abatement is aligned to a 1.5°C pathway. Establishing a net-zero target (NZT) is a commitment to the deep decarbonization of a business model and the resulting future emissions rate.

Deep decarbonization is complex work that requires a diverse set of policy, legal, technology, and market solutions that remain in development as outlined by various net-zero roadmaps, such as the IEA Net-Zero by 2050 and BNEF New Energy Outlook. Optional compensation measures play a key role during the transition to net-zero by neutralizing unabated emissions as the global economy aligns with climate science.

Graphical representation of a net-zero target, an interim science-based target, and optional
compensation alongside the taxonomy of climate mitigation tactics, Science Based Targets Initiative


Different Pathways to Net-Zero

The journey to net-zero is critical to corporate strategy because it entails a fundamental transformation across all sectors of the global economy for business models to operate in balance with the planet. Unfortunately, not all net-zero transformations are created equal, as the emissions profile of value chains vary significantly by sector. In particular, so-called hard-to-abate sectors, such as plastics and aviation, will take longer to decarbonize in the absence of low-carbon alternatives. Nonetheless, the complexity of business model decarbonization has not deterred the private sector that now has approved science-based targets encompassing 20% of total global market capitalization.

Sustainability Solutions for Net-Zero

Since our founding, ClimeCo has been a leading transformation partner to companies, investors, and governments pursuing a low-carbon future.  As a vertically integrated sustainability solutions provider, we have enabled our clients to go beyond business as usual. By developing frontier technology-based and nature-based carbon reduction projects, transacting voluntary and compulsory environmental credits, and advising on climate risk and disclosure, our team is dedicated to implementing decarbonization pathways tailored to our clients’ sector, business model, and balance sheet.

Cypress trees planted at a Climate Forward reforestation project in Louisiana, Restore the Earth Foundation


Commencing the Net-Zero Journey

From carbon neutral to net-zero and climate positive, any corporate climate strategy must follow a mitigation hierarchy. A mitigation hierarchy will inform whether a mitigation strategy effectively neutralizes a company’s impact on the climate, mitigating climate risk on the company, and incentivizing low-carbon capital allocation. At ClimeCo, our team aligns to the Blueprint for Corporate Action on Climate and Nature and recommends four priority interventions:

1. Account for and disclose emissions using internationally recognized frameworks, such as the GHG Protocol, CDP, and Task Force on Climate-related Financial Disclosure (TCFD),
2. Reduce value-chain emissions in line with a science-based target pathway, as defined by the Science Based Targets initiative (SBTi),
3. Quantify a financial commitment by pricing remaining emissions through an internal carbon price, and
4. Invest the financial commitment for impact to climate and nature to further emission reductions, unlock climate solutions, and source high-quality carbon credits.


Net-Zero in a COVID World

The IPCC released the first part of the Sixth Assessment Report (AR6) this month and the science is clear – it is in our hands to limit the rise in global temperatures to 1.5°C. Global emissions must fall 7.6% per year between 2020 and 2030, roughly the same drop in emissions from the COVID-19 lockdowns. As a result, extreme weather and the failure of climate action have continued to dominate the long-term risks by likelihood among members of the World Economic Forum. However, COVID-19 has accelerated stakeholder pressure to transition to a low-carbon growth path that could deliver a direct economic gain of US $26 trillion through 2030, compared to business-as-usual. In his annual letter, BlackRock’s Larry Fink, succinctly points this out: “given how central the energy transition will be to every company’s growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net-zero economy – that is, […] how this plan is incorporated into your long-term strategy and reviewed by your board of directors.” For leaders integrating net-zero into their corporate strategy, ClimeCo is ready to help.


About the Author

David Prieto serves as Director for Climate Finance & Strategy at ClimeCo, where he advises clients navigating the risks and opportunities associated with an increasingly changing climate. David holds a Master of Science from Columbia University and Bachelor of Arts from the University of London.