For the EU, COP26 is crucial for motivating other countries to match its bold climate ambitions, as well as ensuring a level playing field. With Cicero/amo being on the ground in Glasgow for the duration of COP26, our EU team will be providing tailored updates on the progress being made, and the potential impacts for businesses in the EU and beyond.
Highlights from ‘Energy Day’ and earlier in the week
Central to the COP26 Presidency’s objective of promoting the energy transition, the British government announced that a coalition of countries and organisations had agreed to phase out coal power. With over 190 signatories, the ‘Global Coal to Clean Power Transition Statement’ sets out a commitment to end investment in new coal plants, to phase out coal use and scale up renewable energy. This Statement holds great significance, especially for countries committing to ending the use of coal for the first time, such as Vietnam. Despite these new commitments, NGOs have been critical of the fact that some of the world’s largest coal users, notably China, have not signed up. Alongside the Statement, the ‘Powering Past Coal Alliance’, a coalition of governments and organisations working to move away from coal, announced 28 new members, including Chile and Singapore.
Thursday’s ‘Energy Day’ saw major international banks commit to effectively cease financing new unabated coal plants as of 2021, with a further group of 25 countries and public finance institutions agreeing to end international public support for unabated fossil fuel use in the energy sector by the end of 2022. Thursday also had a strong emphasis on ensuring a socially just energy transition, with an appreciation that climate change has the biggest impact on socially vulnerable groups. Several EU and non-EU countries, along with the European Commission, signed the ‘International Just Transition Declaration’, calling for the energy transition to create new jobs and opportunities for all groups of society.
Wednesday saw the US and the EU succeed in forging a coalition on cutting global methane emissions by 30% in 2030, compared to 2020. Over 100 countries have joined the pledge, which includes significant emitters Nigeria and Pakistan. Major emitters China and Russia have not signed on however, and the lack of individual signatory targets and commitments have raised concerns over implementation.
Earlier this week, the controversial subject of carbon border taxes emerged. During a speech on Tuesday, European Commission President Ursula von der Leyen stressed to the international community that the EU would move ahead with its plans for its own ‘Carbon Border Adjustment Mechanism’ (‘CBAM’). However, she underlined to world leaders that the EU would “prefer you keep the money in your economy by putting a price on carbon in your economy”.
The EU’s take
The various commitments made in relation to the phase out of coal and scale up of renewables should be seen as a positive development for the EU, with signatory countries committing themselves to a path that would put them on more equal footing on the EU. Domestically, the EU has introduced various tools to make coal a more costly energy source (e.g. EU’s Emissions Trading System), while seeking to redirect private sector investments to other sources (e.g. Sustainable Finance Taxonomy). In relation to the social dimension of the energy transition, international commitments will also be welcomed by the EU given the emphasis on ensuring a ‘Just Transition’ under the EU’s guiding ‘European Green Deal’ agenda.
In relation to the CBAM, von der Leyen’s speech this week on the topic reaffirms the EU’s commitment to moving forward despite vocal international opposition. The topic of carbon border taxes may strain some existing trading relationships and could even jeopardise progress in some COP26 negotiations. Nevertheless, similar plans from countries like Canada highlight that the EU is not alone in its position. While there are some doubts that the CBAM proposal will survive the EU’s legislative process intact, it nevertheless represents a signal of upcoming change for the development and interaction of international carbon markets.
On methane, the formation of the coalition looking to slash global emissions by 30% is a very timely development for the EU. In December, the European Commission is due to publish a proposal for a Regulation on reducing methane emissions in the energy sector, as announced in its 2020 Methane Strategy. The COP26 commitment helps strengthen the Commission’s hand to move forward on this issue and cement its leadership position.
Photo: The Canadian Press/Sean Kilpatrick. All rights reserved
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