One of the major drawbacks this month includes a $500 million shortage in the Green Climate Fund (GCF), set to finance green projects in poor countries, after the US and Australia announced that they would not be contributing any new funds to the GCF. While a total of 13 countries such as Germany, Norway, and France are doubling their contributions, the $3.2 billion gap left by the US and Australia is still $500 million short.
The current GCF is set to run out by the end of the year, which is having impacts on Africa where 600 million people lack electricity—a massive opportunity for green development with the GCF. While the GCF is weakening, Russia is strengthening its relationship with African heads of states, with Russian President Vladimir Putin and Egyptian President Abdel Fattah el-Sisi holding a conference in Sochi discussing Russia-Africa deals on infrastructure and energy in the oil, gas, and nuclear industries. Thus, to avoid carbon-intensive development pathways in Africa, more needs to be done to fill the gap in the GCF.
Meanwhile, in Canada, an important election for climate change saw Justin Trudeau’s Liberal party win narrowly in the latest election with 157 electoral seats, giving Trudeau a minority government, where he has promised to put Canada on a path to net-zero emissions by 2050. For Trudeau’s net-zero emissions vision, however, he will need the support of parties like the New Democratic Party (NDP) with 24 seats, who have pledged to align their policies to limiting global temperatures to 1.5C. Canada’s climate alignment policies will rest on Trudeau’s ability to secure alliances with his minority government.
In other news, the Powering Past Coal Alliance (PCCA), a multi-stakeholder partnership led by the UK and Canada which brings together businesses, governments, and other organizations to establish a global phase-out of coal by 2050, has just admitted coal-dependent countries Germany and Slovakia as members making it 91 members strong. The PCCA, previously criticized for its limited effectiveness due to the low coal-dependency of its members, now holds increasing weight in its coal phase-out efforts with the admission of key stakeholders such as Germany. Hopes increase for the PCCA to develop international treaties such as a non-proliferation agreement for coal, which is increasing pressure for fossil fuel companies to transition to low-carbon strategies.
The Russian government is no longer supporting a proposed law to regulate the country’s emissions, writing a new version that eliminates legally binding targets and sanctions. The amended document also scrapped a section on a fund supporting carbon-cutting projects, as well as sections allowing the government to support the bill over time. These amendments came after the ministry of the economy held discussions with the Russian Union of Industrialists and Entrepreneurs (RSPP), many members of which are leaders of the country’s steel, oil, gas, and coal industries.
The major event of this month was the UN Climate Summit on 23 September. It followed a global strike that was billed as the largest climate protest in history; days before world leaders gather in New York for a three-day climate action summit convened by UN secretary general António Guterres. More than four million people took part in an unprecedented wave of climate protests across the world in the most powerful message to governments yet to take serious action. The tougher 1.5C goal of the Paris Agreement, backed by UN chief António Guterres and the majority of the world’s nations, requires achieving net zero global emissions by 2050.
Guterres asked leaders to come to the UN headquarters in New York and tell the world how they would meet that goal. A coalition of 77 smaller countries said they were committed to achieve net zero emissions by 2050 and 70 countries expressed their intention to set a more ambitious climate plan next year, evidence of “a boost of momentum and ambition,” Guterres said in his closing remarks. While there were inspiring signs of progress, the speeches did not impress, except for Swedish activist Greta Thunberg, who brought the hall to tears as she called out leaders for their inaction.
In other promising news, the task of developing a "European green deal" has been handed to an executive vice president at the European Commission. Second in rank only to the president, nominee Frans Timmermans will have strategic oversight of several policy areas, as well as direct control of the climate portfolio. The European Central Bank is also aiming to play its role. Christine Lagarde, the next president of the bank, has hinted at abandoning the longstanding "market neutrality" principle to favour green investments. The former head of the International Monetary Fund told lawmakers in the EU Parliament that she would promote a "gradual transition" from high to low carbon assets. This comes at a time where more than 50 financial institutions - representing $2.9 trillion in assets - have pledged to unveil the carbon impact of their investments and loans. The cohort of banks, which include the US Amalgamated Bank and the Dutch ASN and Triodos Banks, will assess and disclose the greenhouse gas emissions generated by their financial products as part of the industry-led initiative Partnership for Carbon Accounting Financials (PCAF)
This month saw devastating wildfires ravaging the Amazon rainforest in Brazil. While fires are common in the Brazilian dry season, environmentalists blame the ongoing blazes on farmers illegally clearing forests for agriculture. According to Brazilian government data, the number of fire outbreaks so far this year has reached more than 74,000, up 84 per cent from the same period last year and the highest since records began in 2013. The Amazon is vital to absorb carbon dioxide from the atmosphere – a check on global warming – but concern about the forest has grown since Bolsonaro took office in January. First Germany and then Norway announced they would halt multimillion-dollar payments to the Amazon Fund, in light of president Jair Bolsonaro’s moves to industrialise the rainforest. The issue was also discussed at the G7 in Biarritz, France where an offer of $22m in aid was agreed - still to be accepted by Bolsonaro’s government.
The UN’s climate science report on land use was also released this month. It shines a light on the importance of afforestation and fuel crops to absorb carbon dioxide – and the associated risks of land degradation and increased desertification, which it said could have “potentially irreversible consequences”. Large-scale tree-planting and bioenergy production are important tools to limit global warming but could threaten food security, according to the report.
In Poland, shareholder activists won a landmark court ruling to block plans to build the Ostrołęka C coal plant in the country's northeast. In what was seen as a world first, utility Enea was forced to defend its use of coal in an economy that increasingly favours renewables. The justification behind the decision was that rising carbon prices and falling costs of wind power make the project not just environmentally damaging but financially unreasonable.
Finally, Greta Thunberg has arrived in New York where she will speak at the UN Climate Summit in September, following a 15-day zero-emissions journey on a solar-powered yacht.
This month found Europe sweltering in another unprecedented heatwave, with new temperature records set in the Netherlands, Belgium and Paris. The UK, meanwhile, reached 38.1C – the hottest July temperature ever recorded. The heatwave brings to a close a month that is likely to be deemed the hottest ever recorded on Earth. New analysis released by Carbon Brief found that the year as a whole could be the second or third hottest on record.
In the meantime, nominations for the presidency of the European Commission had a distinct climate focus. Ursula von der Leyen backed hiking the bloc’s carbon reduction target from 40% to 50% or 55% by 2030 and going carbon neutral by 2050. It was enough, together with pledges for a just transition fund, to secure the presidency with a slim parliamentary majority. But those policies are not entirely within her gift. They still need the backing of sceptical member states, notably countries that are still heavily reliant on coal such as Poland and Germany. Germany has been enduring public embarrassment in recent times as it admits the obvious: it will comprehensively miss its emissions goals for 2020 – not least due to its continuing, heavy reliance on coal to generate electricity. However, the latest news on German energy use has been very positive, showing that German coal power is now falling fast with reductions of more than a fifth in the first half of 2019 alone and with wind energy on track to overtake lignite this year as Germany’s single largest source of electricity.
Finally, governments have never been under so much pressure from the UN to ramp up their climate plans. UN chief António Guterres sent a personal letter to every head of state asking them to come to his climate action summit in September ready to announce how they are going to increase their 2030 targets and plan for carbon neutrality by 2050. This is an ambitious ask since only a handful of developed – mostly European – countries have committed to net zero by the middle of the century, with so far no sign that big emitters like China and India are ready to follow.
This month saw tremendous action from countries in announcing net zero emissions targets. Finland set one of the earliest national goals of carbon neutrality by 2035.
The UK and France set in law the boldest carbon-cutting commitments of any G7 economy to date and plan to have net zero emissions by 2050. Both economies have significant ground to cover to live up to their long-term ambition. The UK spent an annual average of $11 billion in fossil fuel subsidies between 2015 and 2016, according to data from the Overseas Development Institute (ODI). The same data shows that France spent an average $8.02 billion a year in fossil fuel subsidies during the same period.
At the EU level, 24 of the European Union’s 28 members indicated support for the European Commission’s proposed carbon neutrality by 2050, up from 8 countries initially, but the motion still did not pass.
Saudi Arabia succeeded in burying the UN's special report on 1.5C warming, as interim climate talks wrapped up in Bonn, to the outrage of vulnerable countries.
The scene is set for a showdown on carbon trading rules at the big summit in Santiago this December. That and a battle over "double counting" will be fiercely fought at COP25. Additionally, the G20 Summit took place in Osaka, Japan on 28-29 June.
At the conclusion, G20 leaders adopted a “G-19+1” approach reconfirming their commitment to climate action, with the US restating its intention to withdraw from the Paris Agreement. Finally, bowing to pressure from scientists and academics, the International Energy Agency has started exploring a scenario in line with a 1.5C global warming limit.
This month saw the elections of the European Parliament, where a record 71 greens have been elected making the strongest ever showing across Europe. This follows a proposal by eight European countries to ramp up European climate action, by calling on the EU to sign up to a European Commission plan to achieve net-zero greenhouse gas emissions “by 2050 at the latest”.
To enhance carbon mitigation, the EU is preparing a fleet of satellites to monitor CO2 emissions around the world in more detail than ever before. Subject to budget, three high-tech craft will be launched into orbit in 2025, ready to inform the UN’s global stocktake three years later.
In the meantime, Oil & Gas majors were under increased scrutiny this AGM season with regards to their climate policies. BP shareholders overwhelmingly voted (> 99% of shareholders) in favour of a proposal put forward by Climate Action 100+ that mandated for the company to disclose more information about how the company is to align with the Paris Agreement, while two resolutions for BP and Equinor to set credible Scope 3 targets gained a lot of publicity but did not receive majority support.
Finally, the record-breaking 2018 summer heatwave in Japan in which more than 1,000 people died “could not have happened without human-induced global warming”, a study finds. The research is the latest in “attribution science”, a field that aims to quantify the “fingerprint” of climate change on extreme weather events, such as heatwaves, floods and droughts.
One of the big political events this month was the EU-China summit. Expectations on climate were low, but the two parties managed to present a united front. Overcoming their differences on trade to agree on a joint statement, they expressed the importance of climate leadership.
A separate energy pact called for cooperation on renewables, energy efficiency and the LNG market. China also launched an “international green development coalition”, in the face of growing concern about its coal investments.
The environment ministry hosted an event on the “green belt and road” as part of a leaders’ summit in Beijing to promote Chinese investment in partner countries. However, investment deals emerging from China’s belt and road summit on 25-27 April show continued support for controversial coal projects, despite leaders’ green rhetoric. This comes at a time when finance ministers from 23 countries have pledged to back climate action through their policy, tax and spending decisions.
In a coalition launched at the World Bank and International Monetary Fund (IMF) spring meetings in Washington DC, the coalition signed up to the “Helsinki Principles” for climate-friendly growth.
Additionally, the members of the Network for Greening the Financial System (NGFS) called for collective action and have issued recommendations which have been published in its first comprehensive report. Taken together, these recommendations reflect the best practices identified by NGFS members to facilitate the role of the financial sector in achieving the objectives of the Paris agreement.
March saw the release of the 2018 Global Energy & CO2 Status Report by the International Energy Agency.
Global energy-related CO2 emissions grew 1.7% in 2018 to reach a historic high, after a temporary plateau between 2014-16. It was the highest rate of growth since 2013, and 70% higher than the average increase since 2010. The increase in emissions was driven by higher energy consumption resulting from a robust global economy, as well as from weather conditions in some parts of the world that led to increased energy demand for heating and cooling. Coal-fired power plants were the single largest contributor to the growth in emissions observed in 2018, with an increase of 2.9%, or 280 Mt, compared to 2017 levels. As a result, coal-fired electricity generation accounted for 30% of global CO2 emissions.
Nonetheless, for the third year in a row, the number of coal-fired power plants under development worldwide dropped steeply in 2018 while coal plant retirements continued at a record pace, according to a new report released by Global Energy Monitor, Greenpeace India and the Sierra Club. The decline in most coal power growth indicators reflects an increasingly constrained political and economic climate for coal plant developers, including financial restrictions by over 100 institutions and coal phase-out plans in 31 countries.
This comes at a time when extreme weather impacted almost 62 million people in 2018, according to the World Meteorological Organization (WMO), while the fallout from Cyclone Idai in Mozambique, Zimbabwe and Malawi continues.
Elsewhere, in an interesting development for sustainable finance, the EU’s taxonomy of sustainable activities has been approved by the European Parliament, paving the way for its adoption into regulation later this year.
February 2019 saw the release of several new reports on climate change effects.
The international aid organisation CARE International reported that at least half of the world’s most underreported humanitarian crises are directly caused by climate change. This ranges from typhoons in the Philippines to the amplified effect of el Nino which has caused major crop failures in Madagascar.
Meanwhile, the United Nations Food and Agriculture Organisation released a report warning that the world’s capacity to produce food is being undermined by humanity’s failure to protect biodiversity. The report found evidence that the natural support systems that underpin the human diet are deteriorating around the world. The report said that over the last two decades, approximately 20% of the earth’s vegetated surface has become less productive. In an equally stark warning, the Institute for Public Policy Research warned that human impacts on the environment have reached a critical stage, potentially eroding the conditions upon which socio-economic stability is possible.
The start of 2019 saw the world’s elite gather in Davos for the annual World Economic Forum.
The top risk highlighted by likelihood by participants in the survey of the annual Global Risks Report was physical risk, such as extreme weather, from a rapidly changing climate. Climate change featured prominently as a theme at the event.
David Attenborough was interviewed by Prince William about the urgent need to take greater action on climate change. Greta Thunberg, the 16-year-old climate activist who started the wave of student climate strikes told leaders, “I want you to act as you would in a crisis. I want you to act as if our house is on fire. Because it is.”
Meanwhile, new data emerged showing the Arctic is melting at an accelerating rate and faster than predicted - and separate data showed the same thing happening in Antarctica. This suggests sea level rises will occur sooner than predicted.
December 2019 saw the close of the latest round of international climate change negotiations.
The talks did not make significant progress towards implementing the 2015 Paris Climate Accord. This is largely because the key question of how countries will step up their targets on cutting emissions remains unanswered.
On current targets, the world is set for 3C of warming from pre-industrial levels, which scientists say would be disastrous, resulting in droughts, floods, sea level rises and the decline of agricultural productivity.
The US, Russia, Saudi Arabia and Kuwait blocked the proposal to heed the warning of the IPCC scientists and shift the emphasis to a 1.5C target.
The main breakthrough was, however, in agreeing standards for how the ‘rulebook’ for how governments will measure, report and verify their emissions-cutting efforts. This is key because it ensures all countries will be held to account in a uniform manner and thus making it harder to cover up inaction.
December marks the start of the 24th international climate negotiations, which this year are taking place in Poland.
Whilst it is too early to say exactly what will be agreed, investors should expect increasing regulation and political momentum building towards increased action.
On the first day of the conference Sir David Attenborough, the renowned English broadcaster and natural historian, made an impassioned speech warning that the collapse of civilisation is on the horizon should world leaders fail to act.
This is off the back of recent stark warnings from the IPCC that we have only a few years to act to avert catastrophic climate change and a report from WWF that humans have destroyed 60% of all species since 1970.
This conference is widely viewed as the key follow up to the 2015 Paris Climate Accord where pledges now need to be met with firm commitments and funding.