What does the COP26 mean for businesses?

Key Takeaways from Glasgow

• Six years after its adoption, the Paris Climate Agreement has now been fully sounded out. Climate protection rules have been set.
• This COP sent clear signals that are crucial for international climate policy but also, most importantly, for all our future actions. For the first time in the history of international climate negotiations, all states acknowledged the cause of climate change: the burning of fossil fuels. The Glasgow Climate Pact calls for the use of coal to be ramped down.
• A drastic reduction in methane emissions by 2030 was also agreed, along with a broad declaration on the preservation and protection of forests.
• Climate neutrality at state level is now mainstream!
• The 1.5°C target is still the goal.
• The role and importance of the private sector (businesses and private individuals) was affirmed once again. These additional voluntary actions deliver crucial and, above all, cost-effective contributions to the achievement of goals.

by Franziska Heidenreich and Frank Helbig

The 26th Conference of the Parties (COP) of the UN Framework Convention on Climate Change (UNFCCC) was a very special event held under special conditions – not to say restrictions. We are talking about a two-week conference under Covid conditions that was nevertheless attended by a record of over 40,000 registered participants. The public interest in climate protection, manifested by the increasing pressure from civil society (particularly the world’s youth) and from business, which is demanding clear regulations and frameworks, was a notable factor at COP26. This could be felt in the corridors between the plenary halls and delegates’ meeting rooms. The will to work together was palpable, as was the will and the pressure not to let another year pass without at least reaching some agreement on the framework for climate protection and establishing the long overdue article on market-based climate protection.

And now? Even if all the targets announced at this COP are met – and past experience shows there are not really grounds for unbridled optimism here – then we will still be a long way from the 1.5°C target after Glasgow. Climate financing, our limited remaining CO2 budget in view of the time, and the still enormous task of transforming our economies: there are good reasons why the announcements and resolutions of Glasgow were viewed very critically and there was widespread disappointment in the aftermath. No great liberating blow was ever struck.

Anyone who expected this, however, had set the bar too high from the outset. This instrument of global climate policy is not made for liberating blows. COP26 was a working conference at which the secretariat (UNFCCC) and the participating states pursue clearly defined mandates and corresponding work plans. A conference of lots of small steps, measures and agreements. The most important of these steps, in myclimate’s view, are:

Rules for Market-Based Climate Protection (Article 6 of the Paris Climate Agreement)

The issue of market-based approaches, which is set out primarily in Article 6 of the Paris Climate Agreement, was negotiated over the last few years. At the last two climate conferences, these negotiations were very tough. Only this year were the member states able to agree on a text with furore and diplomatic skill in the finishing straight. By the standards of international climate negotiations, this can be considered something of a momentous moment! The rules on the implementation of this important building block of the Paris Climate Agreement have now been set, six years after the Agreement was passed. Now it is up to the states, businesses and society – in short, to all of us – to act based on these rules and in accordance with the ever-growing body of knowledge.

Enthusiastic people and businesses can make valuable contributions here. This is because the roles and rules within the framework of the Paris Climate Agreement were formalised at this COP for these groups in particular in the discussions about Article 6. What does that mean for voluntary climate protection and the approach of offsetting?

Role of the Private Sector in the Voluntary Carbon Market

Voluntary climate protection in the form of carbon offsetting and support for reduction or sink projects has achieved more than ever before (see the current report “State of the Voluntary Carbon Markets 2020”). The current Emissions Gap Report of the UN Environment Programme (UNEP) also clearly confirms this. This is not merely a “nice side-effect”, but is in fact extremely important, because even if all the pledges and intentions are met at state or international level, there still remains far too little time and money available for the climate than is needed to achieve the set goals.

What is needed are voluntary, additional and effective measures that support the efforts of the international community. There was no shortage of superlatives in this area as well this year. Mark Carney, UN Special Envoy on Climate Action and Finance, announced that, within the framework of the Glasgow Financial Alliance for Net Zero, more than 450 companies from the financial world with an investment value of around 130 trillion US dollars have currently committed themselves to the goals of the Paris Climate Agreement. This means net zero by the middle of the century. The private sector is becoming ever more aware of its role and its leverage.

The task now is to translate this role into quality-assured measures characterised by integrity. It is quite clear in this regard that these funds are not to go towards simply sprucing up local climate balances, but rather to ensuring that each market participant spares no efforts, including within their own supply chains, in avoiding what can be avoided and in taking responsibility by putting a price on emissions that cannot (yet) be avoided and supporting effective projects.

What does that mean specifically for Offsetting and Voluntary Climate Protection?

The indispensable contributions from business are misunderstood or completely misinterpreted by parts of civil society and the “climate youth” in particular. Greta Thunberg described market-based approaches as “greenwashing” during COP26. There is a strong and shared need for communication here. Both companies and those supporting them like myclimate need to address society more effectively with integrity, transparency and clear messages. It is clear that only through market mechanisms will it be possible to achieve the urgently required, time-critical emissions reduction targets at a lower cost. Carbon markets deliver climate protection and can provide for ambitious climate goals – IF there are clear rules and transparency!

Ten years ago, the “climate-neutral” label identified particularly dedicated companies. It has now become mainstream. There are thus also critical questions increasingly being raised, some of which are absolutely justified. The next few years will demand more efforts from us all in relation to this. Rules that the voluntary market can refer to will simplify this task.

Further Results and Impressions from COP26

This conference was awash with big announcements. These included, for example, the declaration on the preservation and protection of forests, the Global Methane Pledge, which promises to cut emissions of methane (a greenhouse gas with a climate impact 80 times greater than that of CO2) by 30 per cent by 2030, and the declaration to halt new registrations of internal combustion engines from 2035. There was a multitude of such alliances, announcements and plans.

Countries such as India and the United Arab Emirates announced their net-zero goals. Climate neutrality at state level is now mainstream! The USA and China agreed on greater cooperation for the gradual phase-out of coal.

These are important initiatives, although they best serve as a mood indicator for the spirit of the event. The participants wanted to deliver. In a setting like this, such an endeavour is best achieved through alliances and target announcements. It is worth mentioning in passing that, for the first time since industrialisation, the global community is now at a point where we are heading for global warming of below two degrees compared to the pre-industrial age by the year 2100. If – and this is crucial – all the announcements are actually implemented. Of course words and deeds can be worlds apart, but simply having the words written down in the first place is more than a start. Yes, this step has come late, needlessly late, but it’s still not too late for climate protection.

What Else Happened?

For observing organisations like myclimate, it is in many ways exciting to see what goes on at the many so-called side events alongside the delegates’ negotiations. Here, countries and national and international organisations present their approaches to climate protection. The pavilions hosted a great many panel discussions, presentations and workshops to bring visitors up to date with the current state of knowledge in the area of mitigation and adaptation strategies.

In Glasgow, the focus was primarily on the role of nature, youth and the indigenous population. The role of natural carbon sinks such as forests and vegetable carbon was discussed, as were the possibilities of technical “carbon capture and storage”. How can avoided emissions from peatland projects be integrated into future efforts for greater climate protection? There was heated debate about what counts as “net zero” (based on the Science Based Targets initiative), climate neutral, carbon neutral or climate positive. myclimate was involved in a number of these events and discussions. This meant we were able to take on board a wealth of new ideas and suggestions so that in the future we can continue to work with you to implement targeted measures where they have the greatest impact.

Summary: A COP of Signals

What did this year’s COP really achieve? It sent out clear signals. It maintained achievable goals and strengthened ambitions. The climate conference showed, and clearly expressed, that the private sector is needed more than ever before.

Now is the time to deliver and to turn the signals into action. Certainly, even if we take away plenty of positive impressions and choose not to join in with the general “cacophony”, we cannot be blind to reality. The great transformation to “net zero” is still ahead of us. Is the Glasgow Climate Pact sufficient for tackling this enormous task? No, it is not. “Greenwishing”, meaning a focus among politicians and NGOs on vague, perhaps desirable but not realisable goals and ideas about society, will not get us any further in our efforts towards climate protection.

It is therefore all the more important that, alongside the UN climate conferences, the private sector continues to forge ahead with climate protection – with ambition, personal responsibility, appropriate incentivisation and, most importantly, speed. Some say we are already past the peak of global emissions. Now we need to keep going – heading in the direction of net zero together!