Where to get $ 100 billion?
The topic of the third day of International Climate Negotiations COP26 in Glasgow, November 3, is climate finance.
Finance ministers discussed raising funds for rapid and large-scale climate action.
On November 2, leaders of developed countries pledged significant government climate funding for the Adaptation Fund, in particular to support developing countries in tackling the effects of climate change. Canada has pledged 40% of its climate finance for adaptation. Norway has tripled adaptation funding, Japan and Australia have doubled adaptation funding. Spain, Ireland and Luxembourg have made new commitments on climate finance.
Finance ministers also discussed that billions of dollars of public finances should be used to raise the trillions of dollars of private finance needed for a sustainable future.
A $ 130 trillion in private funding has been agreed to achieve zero emissions from the Glasgow Financial Alliance (GFANZ).
A new financing mechanism, the Climate Investment Funds Capital Markets Mechanism (CCMM), has also been launched to promote investment in clean energy, such as solar and wind energy, in developing countries.
Live from Glasgow ?
Watch the #COP26 Presidency Press Conference with COP President @AlokSharma_RDG and @UNFCCC Executive Secretary @PEspinosaC.#TogetherForOurPlanethttps://t.co/I3kVgtpgUP
— COP26 (@COP26) November 3, 2021
Further commitments are expected in the coming days.
“Ministers of European countries discussed the tools of careful economic and financial planning of climate finance, calculating the price of real threats and transparency of costs,” said lawyer Maryana Vynyarska.
More events of the day
Research on the issue of stopping the extraction of fossil fuels “a fair shares phase out of fossil fuel extraction” was presented.
The World Wildlife Fund (WWF) at a press conference stressed the importance of monitoring, accountability and criteria for voluntary compliance by countries with their carbon emissions commitments, and spoke about the need to transform the food system to reduce methane emissions.
The CAN network demanded climate justice and real commitment from states and pointed out that the Paris Agreement does not contain goals to stop the production of fossil fuels and gas: “We cannot declare a transition to clean energy and export coal at the same time,” activists said.
COP26 TV | Live from Glasgow ?
On Finance Day at the summit, we spoke to #COP26 Finance and Resilience Deputy Director, Dharshan Wignarajah.
Watch the full interview ?@UNFCCC | @hlcchampions https://t.co/my6qEmuldW
— COP26 (@COP26) November 3, 2021
More than 20 countries and financial institutions will halt all financing for fossil fuel development overseas and divert the spending to green energy instead from next year. These countries at Cop26 vowed to divert funds to low-carbon energy from 2022.
The move marks a significant boost for the transition to clean fuels. The Guardian states the countries involved include the US, UK, Denmark and some developing countries that would receive such finance, including Costa Rica. The European Investment Bank is one of the financial institutions involved.
Diverting their funding from fossil fuels to low-carbon efforts will generate an estimated $8bn a year around the world for clean energy. The agreement will prevent the funding of any fossil fuel development, including gas, though there are provisions for loopholes.
However, China and Japan, two big funders of fossil fuel development around the world, have shunned the initiative.
The countries involved will also be able to continue developing their own fossil fuel resources at home, including oil and gas fields.
? NEWS: New finance commitments made at #COP26 have led to significant progress by developed countries towards the $100bn goal.
95% of the top 20 developed countries have now made pledges beyond 2020.
See our updated climate finance tracker ?#COP26 pic.twitter.com/iXKZKYUp5T
— COP26 (@COP26) November 3, 2021
The US has at least 24 pending fossil fuel projects representing more than 1.6 gigatons of potential greenhouse gas emissions. The UK is licensing new oil and gas fields in the North Sea, despite hosting the Cop26 climate summit in Glasgow.
The UK will also be able to press ahead with funding a controversial gasfield in Mozambique, because that project is already in the pipeline and the initiative covers only new investments. Funding for fossil fuels from private sources will also not be affected by the agreement.
The move also builds on the UK’s efforts to end the overseas financing of coal, as president of the G7 this year as well as host of Cop26.
The G7 agreed in May to stop funding coal development overseas, despite resistance from Japan, and China – one of the biggest funders of coal development around the world.
Collin Rees, the program manager at the Oil Change International campaign group, said the initiative, which will be made public on Thursday when the Cop26 summit is focusing on energy issues, would mark a major change in outlook for fossil fuel investment around the world.
During the World Leaders Summit, non-Party stakeholders spoke on stage to highlight the importance of business, finance and civil society in accelerating the transition to a zero-carbon world.#TogetherForOurPlanet | #COP26 pic.twitter.com/pRGlFBDwdK
— COP26 (@COP26) November 3, 2021
He said: “This is a massive step forward. This represents a serious chunk of the current international public finance for fossil fuels. It’s a really big thing, though there may be some devil in the detail.”
Rees pointed to the advice of the International Energy Agency, published in May, that found all new development of fossil fuel resources globally must end after this year if the world was to limit global heating to 1.5C above pre-industrial levels.
“This move is significant in light of the IEA report,” he said.
Cop26 protesters’ anger and frustration tinged with optimism
While demonstrations have so far been small, there is a feeling among activists that momentum is building, The Guardian reports.
On November 2 morning, activists dressed in the red jumpsuits familiar to viewers of the dystopian Netflix series Squid Game strike posed for the assembled media on the south bank of the Clyde, directly opposite the Cop26 conference centre. Across the river and further into the city centre later on November 2, Anne Thoday was squatting on the pavement on St Vincent Street next to her surdo drum as a thick line of police prevented Extinction Rebellion protesters from moving towards the conference centre.
“I think there are a lot of grandparents involved,” said the 59-year-old social worker, who arrived from Derbyshire on Sunday. “This Cop really does feel like the last chance to turn things around. I’m not feeling very hopeful but I still felt compelled to come here.”
This modest gathering – about 100 protesters – was typical of a smaller-than-expected protest presence so far at Cop26. No one is quite sure why, although anxiety about coronavirus is certainly playing a part. Activists argue, however, that it is also the result of exclusionary structures that go well beyond concerns about COVID-19 transmission.
Joe Karp-Saway, of Global Justice Now, said people had been put off by COVID-19, “but also the huge cost of travel and accommodation to Glasgow and miscommunication from the UK government and UNFCCC [the United Nations framework convention on climate change], which means there are fewer civil society groups from the global south.”
2 days of powerful testimony, climate pledges and new partnerships.
The World Leaders Summit kick-started #ClimateAction at #COP26
Watch part 2 of our highlights ?#TogetherForOurPlanet pic.twitter.com/KjtR0Q6xbU
— COP26 (@COP26) November 3, 2021
He noted that these early days were just the start of actions that would be spread across the fortnight, as well as the larger mobilizations planned for this weekend when up to 100,000 people are expected to march in Glasgow, and similar demonstrations will take place across the UK and around the world.
The XR activists moved off again carrying a pink lettered banner reading: “How many Cops to arrest climate chaos?” When they arrived outside the venue later in the afternoon, the police closed the Clyde Arc, preventing protesters from continuing their march but also stopping other visitors who needed to get to events around the green zone across the river. The walk to the nearest open footbridge and back would take at least an hour.
Inside the conference centre, Fatima Ibrahim, of Green New Deal Rising, was finding it hard to share Boris Johnson’s cautious optimism about the summit. There was frustration and weariness among activists, she said. “People are tired of rhetoric and false promises.” The policing seemed heavy-handed to her. “I’ve not seen protesters greeted by police in the same way at previous Cops, while civil society is locked out of spaces within the blue zone.”
Activists urge negotiators to ‘End Climate Betrayal’ with concrete action over the next two weeks.
For those who made it across the river, youth and indigenous activists had gathering for speeches and another photocall, holding up illuminated letters spelling out “End Climate Betrayal”.
In her speech, Mitzi Tan, a convener of Fridays For Future for the Philippines, sounded angry – the leaders aren’t in there, she gestured across the river, they are in front of her, she told the small crowd, to hearty cheers.
The mood among activists was angry, the 24-year-old from Manila agreed afterwards. “It’s only been the second day but I’ve already heard so many excuses.”
Having arrived in Glasgow on Sunday, she had been attending back-to-back events and meetings. “I have no sense of time,” she laughed, admitting she’d started taking vitamin D supplements “because I miss the sunlight so much”.
It was as important to be in Glasgow to build networks as to protest, she said. “One of the best feelings is meeting people from across the globe and hugging each other, because we’ve been organising together online for a year and some of us have never met in person.”On Wednesday morning Ibrahim and her team challenged the UK chancellor, Rishi Sunak, about why there was no mention of the climate in his recent budget, as he walked through the conference blue zone. His team demanded that they be removed before he addressed the plenary.
COP26 | Daily update ?
Read the #COP26 Presidency and @hlcchampions press release from today at the summit.
?️ 3 November
— COP26 (@COP26) November 3, 2021
For Green New Deal Rising this fortnight is also geared towards training up new activists: it will welcome 100 young people from across the UK to its hub at a warehouse in the east end of Glasgow. While the immediate momentum is building up to the weekend’s marches, “really what we are working towards is how to keep [leaders] accountable after 12 November”.
At lunchtime on Wednesday, Extinction Rebellion convened again for a protest against corporate green-washing in the city centre. As the drums boomed out, activists remarked on the swelling crowd of 300 or more, suggesting protest numbers were increasing as the week progressed.
Meanwhile, outside the conference hall, indigenous activists were converging after a march from Glasgow Green.
Txai Surui, the daughter of a tribal chief from the Brazilian Amazon, had delivered an eloquent appeal to the conference on Monday, telling delegates: “The Earth is speaking. She tells us that we have no more time.” The 24-year-old has been wearing the bird feather headdress made for her by her father and uncle, fashioned “for going into battle” she said.
Looking ahead to the weekend’s marches, she urged people around the globe to participate. “Everybody should go to these marches, to show the power and strength of all the people in this fight. This is going to be a moment for us to send a message that they cannot do whatever they want, because the power is with the people.”
ℹ️ UPDATE: There is currently a high level of attendance at the #COP26 venue.
In order to comply with COVID-19 measures, we encourage you to only visit the Blue Zone for as long as necessary and consider making use of the COP Platform where possible.
— COP26 (@COP26) November 3, 2021
Biden plays up positives but frustrations apparent after Cop26 talks
Trip to Glasgow was heavy on dire warnings but light on deep emissions cuts – and ended with him blaming China and Russia, The Guardian states.
COP26 TV | Live from Glasgow ?
On Finance Day at the summit, we are speaking to #COP26 Finance and Resilience Deputy Director, Dharshan Wignarajah.@UNFCCC | @hlcchampions https://t.co/XGq11Nzse7
— COP26 (@COP26) November 3, 2021
Joe Biden returned to the US in the pre-dawn gloom on November 3 to a climate agenda still held in frustrating limbo by Congress, following his high-profile cameo at crunch UN climate talks in Scotland that was heavy on dire warnings but light on deep cuts to planet-heating emissions.
The US president had aimed to arrive in Glasgow for the Cop26 summit with historic climate legislation in hand, which he could use to brandish at world leaders who still harbor resentments over four turbulent years of Donald Trump, where the climate crisis was variously ignored and mocked.
Instead, the intransigence of Senator Joe Manchin, a centrist Democrat and leading beneficiary of fossil fuel industry largesse, has left the landmark climate bill pared back and not voted upon, its fate left uncertain throughout Biden’s trip.
In Glasgow, Biden vowed America will “lead by the power of our example”, but was the target of activist protests over oil and gas leases issued back home, while leaders of several major emitters either did not show up or failed to submit vastly improved emissions reduction plans.
Biden ended his time in Scotland by ladling blame upon China for not taking the climate emergency seriously.
Over the last 2 days world leaders, young activists and climate advocates from around the world have raised their voices and committed to action on climate change.
Watch part 1 of our highlights from the World Leaders Summit ?#COP26 | #TogetherForOurPlanet
— COP26 (@COP26) November 3, 2021
“The most important thing the president needed to do was reassure the rest of the world that the US is back in addressing this global crisis,” said Christy Goldfuss, an environment adviser to Barack Obama and now a policy expert at the Center for American Progress.
“But we have to have some humility, we have ground to make up. We can’t reclaim the mantle of leadership until the US can deliver on its commitments. Every Democrat, apart from one senator, supports climate action. That is untenable and everyone understands that.”
Biden has sought to play up the positives of his time at Cop26, where he has left negotiators to thrash out a deal aimed at averting disastrous global heating of beyond 1.5° C. “I can’t think of any two days where more has been accomplished on climate,” he said.
The highlights include a global pledge, led by the US and European Union, to slash methane, a potent greenhouse gas, by 30% by 2030, based on last year’s levels. More than 100 countries, including six of the 10 largest emitters of methane, have signed on to the agreement to cut methane, which is spewed out by oil and gas drilling operations and agriculture and is about 80 times more powerful in trapping heat than carbon dioxide.
It’s Finance Day at #COP26
Mobilising finance for #ClimateAction is vital to limiting global temperature rises to 1.5 degrees.#TogetherForOurPlanet
— COP26 (@COP26) November 3, 2021
Biden backed this move with new regulations rolled out by the US Environment Protection Agency to cut methane emissions by about 75% from hundreds of thousands of oil and gas wells. “The pledge to cut methane is the single biggest and fastest bite out of today’s warming,” said Durwood Zaelke, president of the Institute for Governance and Sustainable Development.
There was also a sweeping accord, which Biden vowed to support with billions of dollars, to end deforestation within a decade. The pact encompasses 85% of the world’s forests, vital for biodiversity and to soak up excess carbon from the atmosphere, and is backed by Brazil, Russia and China, countries often reluctant to make such promises.
But the US was clearly piqued at how little the relentless diplomacy of John Kerry, Biden’s climate envoy, had done to extract deeper emissions cuts from leading carbon polluters. Neither Russia’s Vladimir Putin nor China’s Xi Jinping, who both offered barely improved new targets at the talks, traveled to Glasgow. Biden’s frustration bubbled over as he prepared to depart on Tuesday.
“The fact that China is trying assert a new role in the world as a world leader, not showing up? Come on,” Biden said. “It’s just a gigantic issue and they’ve walked away. How do you do that and claim to have any leadership now? Same with Putin in Russia: his tundra is burning. Literally his tundra is burning. He has serious, serious climate problems and he’s mum on his willingness to do anything.”
#COP26: GREENWASH ALERT!
The fossil fuel industry & banks caused are among the biggest climate villains. Now @Shell @BP & @StanChart are here in Glasgow trying to scale up offsetting & give polluters a free pass to keep polluting. Their plan could trash the 1,5°C goal.
— Greta Thunberg (@GretaThunberg) November 3, 2021
The blame placed at Cop upon China, which is now the world’s largest emitter of greenhouse gases, comes amid frayed US-China relations on several fronts. The Global Times, a newspaper run by China’s Communist party, said in an editorial that Washington’s attitude had made it “impossible for China to see any potential to have fair negotiation amid the tensions”.
Goldfuss said: “The blame game is not something the US should be really playing right now given we have so much work to do ourselves.”
Back home, Biden has acknowledged his presidency will probably be defined by the proposed reconciliation bill that contains $555 bn in climate measures. The White House says the legislation would bring the country close to the president’s goal of cutting emissions in half this decade and help curb disastrous climate breakdown that is already unleashing severe heatwaves, floods and drought at home and around the world.
The far-reaching legislation needs every Democratic vote to pass the Senate but West Virginia’s Manchin has questioned its scope, said it is filled with “gimmicks” and has already ensured that a centerpiece plan to phase out fossil fuels from the American electricity grid was axed from the bill.
Democrats continue to fret over the fate of the bill, with a vote that could take place as early as this week, with Biden saying he is “confident we will get it done”. But climate campaigners say the president could do more without the help of Congress to stem the flow of fossil fuels that are causing the climate crisis.
The opening week of Cop26 saw Biden’s administration announce it will sell off oil and gas drilling leases across 730,000 acres of the US west, with a further auction of 80m offshore acres of the Gulf of Mexico, an area larger than the UK, set to commence later this month. The International Energy Agency has said that no new fossil fuel projects can commence if the world is to keep to the agreed 1.5° C warming limit.
“With all eyes on Glasgow this week, the Biden administration seems to be turning its back on reality and throwing climate leadership into the toilet,” said Jeremy Nichols, climate and energy program director for WildEarth Guardians.
India’s huge solar uptake has boosted climate goals, says minister
Indian foreign secretary says price and popularity of renewables behind Modi’s 2070 net zero target, The Guardian reports.
The staggering take-up of solar power in India has enabled the prime minister, Narendra Modi, to announce a more ambitious climate plan at the Cop26 conference in Glasgow, according to the country’s foreign secretary.
India’s commitment to get half of its energy from renewables and to reach net zero by 2070 was arguably the most positive news from the opening phase of the UN gathering.
Some tried to portray this as the successful result of international pressure, diplomatic arm-twisting by the UK host and still-unfulfilled promises of financial support, but senior Indian officials said the decision was based on practical domestic considerations, in particular the unexpectedly fast expansion of photovoltaic energy.
“We voluntarily and unilaterally enhanced our commitments,” the foreign secretary, Harsh Vardhan Shringla, said. “It was very, very carefully thought through and considered.”
He said the take-up of solar power had been so quick that India’s original target of adding 175 gigawatts of capacity by 2030 was on course to be achieved eight years early. In response, the government had first upped the target to 450 GW, and now, in Modi’s speech, to 500 GW.
This was encouraging news, because it suggested the price and popularity of the technology was driving the pace of change far faster than planned by the government, which continues to support coal power. Shringla said it had put the 2070 net zero target in sight. “We have consistently met our targets and surpassed them,” he said. “These are the stepping stones for us to reach that net zero figure.” He predicted the gap between India’s peak emissions and net zero would prove the smallest of any country.
As an example of the spread of solar, he said he had recently seen many remote homes along the Brahmaputra river with photovoltaic panels, which residents had chosen because that was the cheapest and best way to power their homes, which were not otherwise connected to the grid.
On a macro level, the government plans to upgrade its energy infrastructure further and joined the UK and other countries this week in unveiling plans for a global network of interconnected solar power plants that could ensure the world is powered by sunlight. The One Sun, One World, One Grid plan envisages more investment and regulations to encourage cross-border transmission lines and shared renewable energy.
Until now, Shringla said India had funded its own expansion of clean energy. “We have to do what we do for our own country, our own people and future generations,” he said. But he emphasised that greater finance was needed to hasten the process in India and other developing nations.
The question, he said, was the amount of support. “It is clear that it is not in the billions, but in the trillions of dollars.” This did not all have to be grants, he said; it could also be zero- or low-interest concessional loans that help developing countries invest in renewables.
Cop26 emission pledges may limit global heating to below 2C
University of Melbourne research suggests India’s plans could make sizeable difference to projections, The Guardian writes.
The pledges on greenhouse gas emissions on the table at the Cop26 climate summit in Glasgow would limit global temperature rises to below 2° C, the first time the world has been on such a trajectory, according to research.
Plans by India, the world’s third biggest emitter, have made a sizeable difference to the global temperature estimate, research by the University of Melbourne has found.
If its commitments and those of other nations at the talks are fulfilled, temperatures would probably rise by about 1.9° C above pre-industrial levels. That would be lower than the 2C upper limit but higher than the 1.5° C lower limit set out in the 2015 Paris climate agreement.
Ed Miliband, Labour’s shadow business secretary and a veteran of the dramatic 2009 Copenhagen Cop, warned that much more needed to be done.
He told the Guardian: “Any progress is welcome but we need extreme caution about declaring success on the basis of vague and often vacuous net zero targets three or more decades hence. For example Australia has a 2050 net zero target but its 2030 plans are in line with 4 degrees of warming. There is a reason for the focus on halving emissions this decisive decade. It reflects the urgency, clarity and specificity we need to keep 1.5C alive. We cannot allow political leaders to shift the goalposts.”
Alok Sharma, the president of Cop26, said the new commitments represented important progress but that more would have to be done at this Cop to bring the 1.5° C goal within reach.
With India’s and other recent national pledges, he said, 90% of global GDP was now covered by net zero pledges, up from only about 30% over a year ago. But the near-term target of halving global emissions by 2030 was still lacking, he said. How to address this gap in ambition was now the key question for the Cop.
Patricia Espinosa, the UN climate chief, added: “We have to work on how to address this gap, that’s the biggest challenge of this conference. But I have not heard anyone saying they do not want to go for 1.5° C.”
The report’s author, Malte Meinshausen, an associate professor in climate science at Melbourne and a lead author for the Intergovernmental Panel on Climate Change, said the “momentous” shift in the projected global warming was largely triggered by recent improvements in India and China’s emission targets for 2030, as well as India’s commitment to net zero by 2070.
He said it was the first time the combined pledges and probable emissions paths of more than 190 countries had given a better than 50% chance of limiting warming to below 2° C. But achieving the below-2° C rise remained highly conditional and depended on countries mapping credible pathways to net zero as promised and developing nations receiving the climate finance they have called for to reach carbon neutrality.
Scientists have said improved research since Paris shows the 1.5° C target was the limit of safety, beyond which some of the impacts of climate breakdown were likely to become irreversible, such as small islands being inundated and extreme weather taking hold across swathes of the planet. The UK hosts of Cop26 have set “keep 1.5° C alive” as the key aim of the conference, but leading figures have said the goal may be in doubt.
For the world to have a good chance of staying within the 1.5° C threshold, global emissions must decrease about 45% by 2030, compared with 2010 levels. Countries meeting in Glasgow will not hit this target, major figures at the talks conceded, but the race is on to close the gap between the pledges made and the 45% reduction needed.
India’s headline target, of reaching net zero by 2070, was criticised by some at Cop26 as being lacklustre and less than should be expected from a major country. Developed countries are being asked to meet net zero by 2050 at the latest, and developing countries by 2060. China has set 2060 as its goal but some analysts say the world’s biggest emitter is likely to meet it sooner.
India also pledged an increase in clean energy to 500 gigawatts by 2030 and a reduction in emissions intensity of its economy by 45% by the same date. It reckons its emissions are likely to peak by 2040, but some of its actions are dependent on receiving suitable finance.
“It’s still a huge if, because many of the net zero targets – including the net zero target from India – are conditional on international support,” Meinshausen said. “We need to see that happen.”
Nicholas Stern, the chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, said: “This was a very significant moment for the summit, with prime minister [Narendra] Modi pledging stronger action by India on climate change, with five new targets. This demonstrates real leadership, based on a track record of action and ambitious targets, that can deliver on both economic development and climate change, from a country whose emissions per capita are about one-third of the global average.
Dr Radhika Khosla, of Oxford University, said: “India’s commitment to net zero is a strategic stitching together of its climate ambition and its development priorities. The 2030 targets, of 500GW of non-fossil fuel capacity and 50% of electricity to be renewable, both require near-term changes in the energy system, which will be key to locking in the pathway for a longer term net zero target. With this raised ambition compared with its 2015 pledge, the demands for greater funding for developing countries has even more heft.
“The rich world must respond to prime minister Modi’s challenge to deliver a strong increase in international climate finance.”
Meinshausen said the goal of limiting heating to the 1.5° C goal still remained a distance challenge, with a roughly 90% chance it would be exceeded based on existing commitments.
Australia is one of the countries yet to come up with emissions-cutting plans in line with a 1.5° C limit. Meinshausen said: “Australia put forward a net zero pledge that is not conditional, but simply hollow and hard to believe, as it is not underpinned by any credible policies at home.”
ECT poses threat to Paris deal, says whistleblower, or Why activists fear little-known treaty could slow fossil fuel phase-out
Vital rulings on the world’s energy future are being made behind closed doors and others may be unknown.
The energy charter treaty (ECT) was signed in 1994 to protect the interests of western investors pouring money into the oil- and gas-rich nations of the former Soviet Union. Entering into force in 1998, the treaty generated few cases and even less attention.
That changed in 2014 when investors in the energy firm Yukos were awarded a record $50bn payout after a tribunal found that Vladimir Putin’s government had expropriated their assets to prevent Yukos’s then chief executive, Mikhail Khodorkovsky, from entering politics. The European court of human rights reached a similar verdict in the same week.
Khodorkovsky was arrested at gunpoint in 2003 and spent a decade in a Siberian jail on charges widely seen as politically motivated. He was not party to either compensation claim. The Russian government, which never completed its ratification of the ECT, is yet to compensate investors.
While the Yukos case grabbed attention, damages sought and awarded under the ECT are usually much smaller.
Most of the ECT’s 54 members are in Europe, the Balkans and central Asia, although Turkey, Japan and Australia are also among the signatories. The EU used to champion the treaty but increasingly finds it problematic.
During the first 15 years of the treaty, 89% of cases involved companies suing governments in central and eastern Europe and central Asia. But that has shifted: since 2014 more than two-thirds (68%) of ECT cases concern EU companies suing EU governments. Nearly one-third of cases involve Spain, as investors seek compensation for a change in renewable energy subsidies enacted in 2013.
The EU’s top court ruled in 2018 that arbitration clauses common to 200 investment agreements, including the ECT, were not applicable in intra-EU disputes. But the legal implications are unclear and activists remain fearful that the ECT could delay the phase-out of fossil fuels, threatening goals to limit global heating.
While the ECT secretariat highlights the public information on its website, critics say the system is a black box. Hearings happen in private and investors are not obliged to reveal the damages they are seeking. The court has decided in favour of the investor in 49% of cases, and in favour of the defending state in 39% of cases, according to the Transnational Institute. All of these rulings are made behind closed doors, The Guardian states.
But other vital cases on the world’s energy future may be completely unknown. The ECT secretariat in Brussels has counted 142 cases under the treaty since the first in 2001, but the true number is certainly higher. Investors have no obligation to disclose the existence of a case, even to the ECT secretariat.
Indonesia dangling 2040 coal end date if – like South Africa – it’s offered a financial package #COP26 https://t.co/D7LGo97Rgk
— Ed King (@edking_I) November 3, 2021
Secretive court system poses threat to Paris climate deal, says whistleblower
A secretive investor court system poses a real threat to the Paris climate agreement, activists have said, as governments taking action to phase out fossil fuels face a slew of multimillion-dollar lawsuits for lost profits.
New data seen by the Guardian shows a surge in cases under the energy charter treaty (ECT), an obscure international agreement that allows energy corporations to sue governments over policies that could hurt their profits.
Coal and oil investors are already suing governments for several billions in compensation for lost profits over energy policy changes. For example, the German energy company RWE is suing the Netherlands for €1.4bn (£1.2bn) over its plans to phase out coal, while Rockhopper Exploration, based in the UK, is suing the Italian government after it banned new drilling near the coast.
“It’s a real threat [to the Paris agreement]. It’s the biggest threat I am aware of,” said Yamina Saheb, a former employee of the ECT secretariat who quit in 2018 to raise the alarm.
“The Paris agreement … means that we need to decarbonise in the current decade before 2030,” said Saheb, also a co-author of the Intergovernmental Panel on Climate Change’s report on mitigation. She has estimated that foreign investors could sue governments for €1.3tn until 2050 in compensation for early closure of coal, oil and gas plants – a sum that exceeds what the EU hopes to spend on its green deal in the next decade.
As compensation to companies is paid by public funds, governments would have less money to pay for new technology to make buildings, transport and industry greener. Saheb argued these payments could endanger the green transition. “It’s impossible to do everything,” she said.
Separate analysis of the treaty shared exclusively with the Guardian showed a 269% increase in cases in 2011-20 compared with the previous decade. “We are going to see in future many more cases,” said Lucía Bárcena, of the Amsterdam-based Transnational Institute, who compiled the data. Since 2013, two-thirds of the cases have been brought against western European governments.
“The energy charter treaty … has no cohesion at all with [EU] climate policies,” Bárcena said. “Trade and investment agreements are binding on states, which means if they break the contract then they have to pay huge amounts of money, while there is no other mechanism that binds countries to the goals that they are setting at Cop26. There is a big asymmetry.”
Absolutely astonishing that the PM can return from #COP26, talk about one minute to midnight for the climate, then refuse to rule out #Cambo oil field
The utter hypocrisy of it. I only hope the COP26 negotiators weren't listening pic.twitter.com/NlLUkUPGfu
— Caroline Lucas (@CarolineLucas) November 3, 2021
Representatives from the ECT’s 54 members are meeting next week for a ninth round of talks on modernising the treaty.
Signed in 1994, the treaty was intended to protect western companies investing in the oil- and gas-rich countries of the former Soviet Union. Only foreign investors, rather than domestic ones, can use the system, prompting longstanding complaints of privileged access. Campaigners now fear it could stymie the green transition.
“We obviously have to get out of the fossil field quite quickly and the energy charter treaty is in the way because it protects fossil fuels,” said Cornelia Maarfield, a senior trade and investment policy coordinator at the Climate Action Network Europe. “Our main concern is that once governments start taking decisions to phase out coal, gas and oil, they will run into difficulties with the investment protection chapter of this agreement.”
Germany’s RWE is suing the Netherlands for €1.4bn after the Dutch government decided to close all coal-fired power plants by 2030, including RWE’s Eemshaven plant, which began operating in 2015 with an expected life span of 40 years. RWE said it supported the energy transition in the Netherlands, and “the only issue is therefore the fact that the coal ban law does not provide for adequate compensation”.
Another German utility, Uniper, is reported to be seeking between €850m and €1bn for the early closure of its Maasvlakte coal-fired power plant near Rotterdam, which opened in 2016. The company declined to confirm the damages it was seeking, saying: “Uniper is convinced that shutting down our power plant in Maasvlakte after only 15 years of operation would be unlawful without adequate compensation.”
The London-listed Rockhopper is suing Italy after MPs in 2016 reintroduced restrictions on drilling for oil and gas within 12 nautical miles of the coast. Rockhopper, which has never revealed the size of its claim, said in September it was suing for “very significant monetary damages on the basis of lost profits” after the Italian government rejected its oil exploration plans on the Ombrina Mare project in the Adriatic Sea.
Rockhopper said: “The Italian government issued licences and encouraged significant investment in oil and gas exploration based on this platform. Clearly it is not equitable to change the rules halfway through. It is also important to note that Italy continues to produce significant quantities of oil and gas within 12 miles of the coast.”
Investors are known to have filed 142 cases against governments since the ECT came into force in 1998. But these are only the known cases. Even the ECT’s Brussels-based secretariat acknowledges it does not have a complete picture, because investors are not obliged to reveal legal action under the ECT.
Urban Rusnák, the secretary general of the Energy Charter Secretariat, rejected the view that the treaty would hamper governments getting out of fossil fuels, saying it did not proscribe energy policy. “The treaty does not ban the governments [from stopping fossil fuels] There is nothing like automatic punishment.”
You could offset it, and pay someone else to say something nice in a few years time
— Doug Parr (@doug_parr) November 3, 2021
He suggested governments could quit fossil fuels without disputes under the ECT if they took a smart approach. “If the government is clever enough and they care about their investment climate, they can manage around,” he said.
Rusnák, who grew up in communist Czechoslovakia, stressed the importance of the ECT in upholding the rule of law. “Some recent requests of climate activists to ban all fossil fuels without any compensation are coming very close to what happened in Czechoslovakia … when the regime in 1948 decided to expropriate all industries for a good reason of social justice,” he said. “My point here is not about individual cases. It’s about the system. Either we as a western civilisation really believe what we have agreed: we have to honour our agreements, and if conditions change we have to sit down and negotiate how we will get out of it.”
Neither did he agree with a proposal by NGOs that EU governments should quit the ECT en masse. “It is legally possible but the consequences are dire,” he said, referring to a 20-year sunset clause that meant signatories remained bound for two decades. “Please be serious about the reform … Otherwise you will be locked in a treaty that you don’t like for 20 years.”
Saheb argues the treaty is beyond reform because central Asian member states will veto any weakening of protection for fossil fuels. “The EU countries should withdraw altogether as one,” she said. “If we withdraw altogether we could agree to cancel this clause and then we could move on with our energy transition.”
— Green New Deal Rising (@GNDRising) November 3, 2021
COP26 coalition worth $130 trillion vows to put climate at heart of finance
Banks, insurers and investors with $130 trillion at their disposal pledged on Wednesday to put combatting climate change at the centre of their work, and gained support in the form of efforts to put green investing on a firmer footing.
And in another development at the COP26 U.N. climate conference, at least 19 countries are expected to commit on Thursday to ending public financing for fossil fuel projects abroad by the end of 2022, two sources said.
In an earlier announcement at the meeting in Scotland, financial institutions accounting for around 40% of the world’s capital committed to assuming a “fair share” of the effort to wean the world off fossil fuels.
A main aim of the COP26 talks is to secure enough national promises to cut greenhouse gas emissions – mostly from burning coal, oil and gas – to keep the rise in the average global temperature to 1.5° C.
But how exactly to meet those pledges, particularly in the developing world, is still being worked out.
Above all, it will require a lot of money.
U.N. climate envoy Mark Carney, who assembled the Glasgow Financial Alliance for Net Zero (GFANZ), put the figure at $100 trillion over the next three decades, and said the finance industry must find ways to raise private money to take the effort far beyond what states alone can do.
“The money is here – but that money needs net zero-aligned projects and (then) there’s a way to turn this into a very, very powerful virtuous circle – and that’s the challenge,” the former Bank of England governor told the summit.
? 1/ Any progress is welcome to Keep 1.5C alive, but we need extreme caution about declaring success on the basis of vague and often vacuous net zero targets three or more decades hence. What matters most is this decisive decade.https://t.co/L96OkhcJSw
— Ed Miliband (@Ed_Miliband) November 3, 2021
Carney’s comments reflect a problem often cited by investors who, in the face of a myriad of climate-related risks, need to be sure that they are being accounted for in a transparent and preferably standardised way globally.
“Some of the key interlocking pieces of the finance puzzle are now coming together,” said Nick Robins of the Grantham Research Institute on Climate Change and the Environment.
However, others were not convinced.
“These happy headlines conceal a wealth of loopholes and opportunities for backsliding that we cannot afford if we are to avoid climate breakdown,” the Environmental Justice Foundation said in an emailed statement.
“Net zero pledges mean nothing without fossil fuel divestment. Time for financial institutions to put their money where their mouth is and stop funding climate-destroying fossil fuels,” the NGO’s CEO Steve Trent added.
Carney has led an effort to ensure that financial institutions account for and disclose the full climate risks of their lending or investments, forcing the wider economy to price in costs that until now been largely concealed.
These include not only the direct effects of more frequent extreme weather events, but also costs such as a loss of government subsidies for fossil fuels, or the knock-on health and environmental costs of greenhouse gas emissions.
Kristalina Georgieva, head of the International Monetary Fund, said it was crucial to incorporate climate data into everyday macroeconomic reporting.
I am pleased to announce that I’ve decided to go net-zero on swear words and bad language. In the event that I should say something inappropriate I pledge to compensate that by saying something nice. #COP26
— Greta Thunberg (@GretaThunberg) November 3, 2021
The change in private sector financial institutions was highlighted by British COP26 President Alok Sharma who said:
“What we have seen over the last few years is a big move in the private sector and financial services sector to go green … in the 1990s, clearly (then) climate finance, investing in green, was not mainstream. I do believe it is now mainstream.”
China’s central bank governor, Yi Gang, said Beijing was working on a new monetary policy facility to provide cheap funds for financial institutions to support green projects, and that the People’s Bank of China (PBOC) and the European Union would soon publish a shared definition of green investment.
And the vice chair of the global Financial Stability Board, Dutch central banker Klaas Knot, said a mandatory global minimum standard for disclosure of climate risks was now needed for both financial stability and the provision of sustainable finance.
Jane Fraser, CEO of Citigroup, a GFANZ member, said it was remarkable that the initiative would influence $130 trillion in funds, but that it needed scale to work.
“If you don’t work together, you’re going to come up with a lot of nice really speeches, but you’re … in danger of being divorced from reality,” she said.
Investors are certain to welcome the launch of a global standards body to prevent companies giving a flattering picture of their climate policies and business practices in what is already a multitrillion-dollar global market for environment, social and governance (ESG) targeted funds.
“If you don’t have basic information on a globally comparable basis … you increase the risks of greenwashing enormously,” said Ashley Alder, chair of IOSCO, the global umbrella body for securities regulators, which helped set up the International Sustainability Standards Board (ISSB).
Private sector enthusiasm for mobilising climate-friendly investment also requires the assurance that governments are setting emission reduction goals that are ambitious enough to meet the 1.5 Celsius goal – something that is by no means certain to happen by the end of COP26 on Nov. 12. read more
U.S. climate envoy John Kerry told a meeting of world mayors the pledges made so far gave the world only a 60% chance of capping warming at 1.5 Celsius.
U.S. climate envoy John Kerry said on November 3 that current commitments on cutting carbon emissions meant the world had a 60% chance of capping a rise in the average temperature at 1.5 degrees Celsius
Speaking at a breakfast event with world mayors at global climate talks in Glasgow, he said with the most recent commitments made at COP26, around 65% of global GDP was now covered by implementable climate change plans.
“But that means 35% isn’t. And we can’t do it without that 35%,” Kerry said. “You don’t get this done unless we are all in.”
He also highlighted the importance of the world hitting its goal of halving global emissions by 2030 if it wanted to get to net zero emission by mid-century.
“2050 is also gone if you don’t get 2030.”
Global standards body takes aim at company ‘greenwashing’ claims
“Greenwashing” by companies eager to massage their environmental credentials and increase their appeal to ethical investors came under scrutiny on Wednesday with the launch of a standards body that aims to weed out unjustified climate claims.
The International Sustainability Standards Board (ISSB) seeks to build on and replace a patchwork of voluntary disclosure practices that have had mixed success, with “baseline” global standards that companies could use to tell investors about the impact of climate change on their business.
The aim is to bear down on companies giving a flattering picture of their climate policies and business practices, designed to meet concerns of investors in what has become a multitrillion-dollar global market for environment, social and governance (ESG) targeted funds.
“We are really focused on greenwashing,” said Ashley Alder, chair of IOSCO, the global umbrella body for securities regulators, which helped set up the ISSB. “It’s super important, and if you don’t have basic information on a globally comparable basis, then you increase the risks of greenwashing enormously.”
“They (the new standards) are a baseline but they are not basic,” said Alder, who also heads Hong Kong’s securities watchdog, adding that the new board is a ‘pathway’ to mandatory reporting of climate risks.
The ISSB, unveiled at the UN’s COP26 global climate summit in Glasgow and whose board and chair will be based in Frankfurt, will publish its first batch of global norms for climate-related company disclosures next year.
“The current debate about greenwashing is a symptom and it will not go away until we have a clear, enforceable global set of standards,” Gerald Podobnik, finance chief of Deutsche Bank’s corporate division, told an event at the Glasgow summit.
First standards in 2022
The new body’s parent, the IFRS Foundation, published prototype climate disclosure standards for the ISSB to discuss and put out to public consultation ahead of adoption in the second half of 2022.
It will be up to each country to decide if it will apply and enforce the ISSB standards, but Klaas Knot, president of the Dutch central bank, told the climate summit that a voluntary approach to disclosures was reaching its limit.
“This is a major step forward for reporting around sustainability and towards the development of a truly international corporate reporting system,” said Michael Izza, chief executive of the ICAEW, a professional accounting body in Britain.
Alder said IOSCO was considering a possible assurance framework to ensure rigorous checks on whether the ISSB standards are properly applied by companies, as is already the case for financial reporting where outside auditors check accounting rules are followed. read more
“We do see that assurance is one of the legs of the stool that is necessary to ensure there is maximum confidence around reporting under these standards,” Alder said.
IOSCO could also formally endorse the new standards, meaning its members, who account for 95% of the world’s securities markets, would then be obliged to implement and enforce them.
The success of ISSB will hinge on backing from major countries, but the European Union has already moved ahead with its own disclosures, which are more ambitious as they require companies to also explain how their operations affect climate change.
“To be effective, the standards will need to be brought into regulation around the world, together with associated enforcement, monitoring, governance and controls, assurance, and training,” said Veronica Poole, global IFRS leader at accountants Deloitte.
Investors tell Big-4 auditors they risk AGM rebellion over climate accounting
Major investors have warned the world’s top four audit firms they will vote to stop the firms working for the companies they invest in at AGMs from next year if audits do not integrate climate risk.
The challenge, laid out in letters from an investor group managing around $4.5 trillion that were seen by Reuters, marks an escalation in the group’s efforts to ensure investors were armed with robust information.
The investors have been pushing auditors to improve for several years amid concern they were misrepresenting the true health of companies by not factoring in potential hits from the impact of climate change and associated policy changes.
Ahead of the COP26 climate talks in Scotland, the group had called for governments to force companies and auditors to file accounts in line with the world’s goal of limiting global warming by mid-century. r
The letters dated November 1 and sent to Deloitte, EY, KPMG and PwC by the investor group pointed to recent research showing more than 70% of assessed 2020 audits had fallen short.
The group includes asset managers Sarasin & Partners, Pictet and Aviva Investors (AV.L) and pension schemes including RPMI Railpen. The investors said that after three years of discussions with the firms, they “cannot afford to wait another three years” for audits to improve.
At the next season for corporate annual general meetings, the auditors could “increasingly expect to see” investors vote against their reappointment if they failed to meet expectations, the letters said.
In the letter to Deloitte, for example, the group said the auditor was responsible for 19 of the companies assessed in the research, including oil major BP, miner Glencore and building materials company CRH .
“While we have identified some welcome signs of leadership, notably at BP, based on our analysis overall these audits have not met our expectations,” the letter said.
“Outside the UK, the picture is worse. Of the remaining 16 audits undertaken by Deloitte, only three mention climate risk. None provides the visibility we seek on the potential financial implications of a 1.5C pathway, which global leaders have committed to delivering.”
Paul Stephenson, managing partner audit & assurance at Deloitte, said the auditor agreed that “climate-related risks should be accounted for and disclosed appropriately in annual reports and financial statements.
“We are clear that along with investors, professional bodies, regulators, standard setters and audited entities we have an important role to play in enhancing confidence in the information provided to markets,” he said.
Cath Burnet, Head of Audit at KPMG UK, said the firm had trained all its auditors last year on the impact of climate change risk on companies, in addition to the accounting and reporting implications.
“Our role as auditors includes challenging the recognition and measurement that climate has on the financial statements, as well as challenging narrative where it is misleading or inconsistent,” she said.
A PwC spokesperson said that “to increase transparency in this area, our future audit opinions on larger UK listed companies will further explain how material climate-related risks have been addressed.
“We welcome investor engagement in this area which will help drive company disclosure and the setting of clear climate related goals.”
EY said in an emailed statement that the firm’s audit teams “continue to consider the risks that climate change brings to the companies we audit, where it relates to financial reporting.
“We are actively involved in developing standards and are supportive of ongoing work to establish a framework that companies and auditors can report against which would provide more consistent reporting for investors.”
The world’s leaders meet in Glasgow this week aiming to accelerate climate action in an effort to cap global warming at no more than 1.5° C above pre-industrial norms by mid-century. read more
After first writing to the Big Four audit firms in 2019, the investors said structural changes linked to climate change and associated policy action were accelerating, citing a recent United Nations report that issued “code red for humanity” over climate change.
“This is driving a more robust policy response globally,” the latest letters said.
“Auditors that fail to test accounting assumptions taking these structural shifts into account are, in our view, failing in their duty to shareholders.”
Canada will at some point boost target for carbon emissions cuts – Trudeau
Canada’s Liberal government, whose goal of cutting carbon emissions is running into opposition from the country’s powerful energy industry, plans to aim for still deeper reductions, Prime Minister Justin Trudeau said on November 3, Reuters reports.
Trudeau has already committed Canada to reducing emissions by between 40% and 45% below 2005 levels by 2030. The country’s independent budgetary watchdog says this will be a challenge, given the speed and scale of changes needed.
Trudeau made his remarks to reporters after outlining Canada’s plans to the COP26 climate conference in Glasgow.
“I look forward to presenting even more ambitious targets in the future. But we will ensure that before we set new targets we are able to achieve the ambitious targets that we’ve just set out here,” he said.
Polls consistently show the environment is among Canadians’ top concerns and Trudeau has made climate change a priority since taking power in 2015.
After failing to win a parliamentary majority in a September election, Liberal officials said some progressive voters had been disappointed in the government’s green record.
Yet energy producers and their political allies in the province of Alberta have complained that they view the existing targets as too ambitious. Canada is also the world’s fourth largest oil producer and carbon emissions are among the world’s highest for every barrel of oil it pumps.
In September Trudeau pledged to immediately cap emissions from the oil and gas sector, which is responsible for 26% of national emissions, and require lower emissions in five-year intervals, starting in 2025.
Trudeau also said he was confident the world could limit the rise in temperature to 1.5° C above pre-industrial levels and avoid the worst impacts of climate change.
“One of the things we recognize is that we’re going to need to be continuing to push our levels of ambition … pushing on the development of new solutions, of technologies, of new ways of growing our economy,” he told reporters in Glasgow.
“These are the things we need to do. So yes, I am confident we’re going to be able to stay on that track to 1.5 (degrees) C.”