Five issues to watch for at COP26 in Glasgow

Green leaf with a water droplet

Environmental Alert

Commodities Alert

Energy Alert

By:

As many as 10,000 international climate negotiators at a time will fill Glasgow’s massive SEC Centre when COP26 officially kicks off on November 1. The COPshort for Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC)is the Convention’s highest body. Its charge is to negotiate an international approach to addressing climate change before time runs out.

Last year was the first time the COP had failed to convene since the Convention came into force over two decades ago, with one global crisis interrupting efforts to solve another. Hopes had already been high for COP26 even before the pandemic paused it. The pent-up potential has only heightened those expectations as the COP returns to the continent where it most recently and notably forged the historic Paris Agreement.

The gaze of humanity, including legions of policymakers, business leaders, and activists, will be on Glasgow. Here are five issues to follow.

1 – The COVID COP

Past conferences have sometimes landed in the wake of tragedy, but none so universally disruptive as the pandemic. For negotiators who mark years by COP numbers, the global shutdown upended expectations around timing that were built into the outcomes of prior climate talks.

For instance, the Paris Agreement sets 2023 for the Parties to conduct a global stocktake to assess collective progress toward achieving the treaty’s long-term goals. The stocktake process was intended to play out over three years, with its technical phase beginning this year. But since COP26 was supposed to be last year, many of this year’s outcomes that would have informed the stocktake will instead coincide with its launch. This calendar confusion was especially pronounced for the COP’s two Subsidiary Bodies, which meet between COPs and have struggled to make up for multiple sessions lost to the pandemic’s constraints.

Aside from timing questions, this COP will also be a more muted affair than usual. For much of this year, even whether the COP would meet in person was unclear, raising concern that reliance on Internet connectivity might hinder access for some developing country Parties. Holding an entirely in-person COP during this pandemic, however, means that delegates from many countries will have to quarantine upon arrival, even if they are already vaccinated.

Furthermore, although the venue will accommodate thousands of delegates, tightened capacity restrictions will limit access for stakeholders from industry and civil society. Both are usually active in ancillary discussions and help drive the narrative coming out of each COP.

2 – New reports highlight the moment’s urgency

The pandemic was a test of the international community’s ability to avert and respond to crisis, a central premise of multilateral climate action. The results exposed many challenges and gaps. Two recent reports suggest our time to overcome these challenges and gaps is shrinking fast.

First, the Intergovernmental Panel on Climate Change (IPCC) published the physical science basis of its Sixth Assessment Report in August, along with a more digestible Summary for Policy Makers. The projections are dire.

Even as the science behind climate modeling has improved, it now seems too conservative in some respects. Current global temperatures and other climatic phenomena correspond with the worst-case scenario, suggesting that climate change is accelerating faster and more dramatically than was previously expected. The IPCC report concludes that global temperatures will continue to rise until at least mid-century, and that only deep, rapid cuts in GHG emissions can prevent global warming of 1.5°C and 2°C over preindustrial levels during the 21st century. Those temperatures are significant because they represent the Paris Agreement’s long-term temperature goals. Scientists warn that we must keep temperature rise below these levels to avoid the worst effects of climate change.

Second, the UNFCCC secretariat published its Synthesis Report of the Parties’ currently submitted nationally determined contributions. Nationally determined contributions, or NDCs, are how Parties commit to climate action under the Paris Agreement. Each country formulates its NDC based on its unique national circumstances, with an expectation that the NDCs will become more ambitious over time.

Although the Synthesis Report finds a clear trend of GHG reductions over time, it also finds that current commitments will likely lead to a global temperature increase of at least 2.7°C by the century’s end – levels that may be catastrophic for millions.

Taken together, these reports put significant pressure on the Parties in Glasgow to set aside differences and find common ground before it is too late.

3 – The United States returns to Paris

Another significant change in the atmosphere for this year’s COP is the return of the US to the Paris Agreement. The US played an important role in building international consensus around the Paris Agreement at COP21. The following year, Donald Trump’s electoral victory over Hillary Clinton was announced during COP22 in Marrakesh, portending the country’s subsequent withdrawal from the pact.

Although President Trump announced his intent to withdraw the US in June 2017, the Paris Agreement provides that the earliest any Party could submit its official intent to withdraw was November 4, 2019, which is three years after Paris came into legal force. The US submitted its intent to withdraw on that earliest-permitted date, initiating the one-year withdrawal period. Withdrawal became official on November 4, 2020 – one day after the US presidential election.

One of President Joe Biden’s first acts in office was to reverse that decision. This means the US has never attended a COP where it was outside the Paris Agreement. Instead, it spent the last three COPs negotiating the implementation of Paris while waiting to exit. This led to the perception that the US was playing the spoiler, even as it negotiated for sound rules around climate market mechanisms.

The Biden Administration has been unequivocal that the US is truly back. But US zigging and zagging may have hurt its credibility with international partners. COP26 thus poses a key test of American engagement and influence in the process. The hope from the US is that its credibility will be buoyed by the Biden Administration’s ambitious regulatory agenda and its bold recommitment to international climate finance.

4 – Climate finance

Climate finance is a contentious issue at every COP. Finance is key to implementing the world’s climate goals, and energy is key to its development goals. Meeting both requires developed countries to support developing countries’ transitions to low-carbon energy.

Although President Trump cited financial costs as a reason to quit Paris, the Paris Agreement created no new financial obligations. It merely reaffirmed developed countries’ own prior commitments.

The most significant of these was the 2009 commitment from COP15’s Copenhagen Accord to mobilize US $100 billion in climate finance each year beginning in 2020. This commitment has been called “the bedrock of the entire international climate finance system.” Differences in how developed countries report on their financing efforts have complicated assessment of their progress toward that goal. And Parties disagree regarding the right balance of public and private finance, and the extent to which public climate finance should be additional to other development finance commitments. In all events, that the US $100 billion goal has not be met is widely accepted.

Delivery on that goal will thus be an urgent topic at COP26, especially with the Long-Term Finance (LTF) program for monitoring these financial flows which had been set to end in 2020. The Parties will try to achieve here what they could not at COP25 in Madrid and agree on a post-2020 arrangement for this function. They could choose to continue LTF, assigning it a role under the Paris Agreement, or they could replace it with something new. They could also simply rely on the financial arrangements adopted under the Paris Agreement, which incorporate many procedural and substantive elements of LTF. And with the US $100 billion commitment now set to continue through 2025, the Parties will also need to decide whether to adopt a more ambitious financial goal for after 2025.

5 – International carbon markets

Finally, governments and the private sector alike are hoping the rules for the proposed market mechanism under the Paris Agreement will at last emerge from COP26.

Carbon markets around the world have experienced significant increases in trading volume in recent years as companies and others seek to profit from reduced emissions. Harnessing these market forces is considered critical to achieving the Paris Agreement’s goals. To that end, Article 6 of the Paris Agreement permits Parties to adopt voluntary cooperative approaches to achieving their NDCs.

The vehicle for market-based voluntary cooperation under Article 6 will be “internationally transferred mitigation outcomes,” or ITMOs. These ITMOs represent reductions in global emissions achieved in one country and then traded to another country to be counted toward the buying country’s NDC.

Finalizing the rules for the Paris Agreement’s market mechanism, often referred to as the Sustainable Development Mechanism (SDM), is the last unfinished component of the Paris Agreement Work Programme. The Work Programme is the set of mandates for the Parties to agree on the rules for implementing the Paris Agreement, sometimes referred to as the Paris Rulebook. Although the rest of the Rulebook was completed on schedule in 2018, the markets mandate is now years overdue, with the Parties unable to reach accord.

Among the primary obstacles to agreement are the status of emissions reduction credits from other international trading regimesespecially the Kyoto Protocol’s Clean Development Mechanism (CDM)—and the avoidance of double counting emissions reductions.

Critics argue that the methodology underlying CDM projects calls into question whether those projects deliver the reductions promised. Those advocating a more stringent methodology for project approval under the SDM want those older CDM credits retired. If that happens, countries that engaged with the CDM in good faith could be left holding the bag. This also relates to the question of double counting, which Article 6 prohibits. To avoid double counting, project host countries make “corresponding adjustments” to the reductions counted toward achieving their NDCs. But a separate provision of Article 6 introduced an ambiguity on this point, and some Parties want market rules that effectively permit double counting for host countries. The EU and others, however, are steadfast in their opposition.

Resolving this impasse will determine whether the SDM is a credible institution for mitigating climate change. It will also provide certainty to public and private actors eager to engage in the market once it finally emerges.

 

DLA Piper is the only law firm formally representing a Party in negotiations under the UNFCCC. For more information about COP26 and how to engage with the process, please contact the authors via CommoditiesGroup@us.dlapiper.com.  You may also be interested in our COP26 portal