COP21 and the weight of expectation

On 27 October 2015, the executive secretary of the UN Framework Convention on Climate Change (UNFCCC) addressed an audience of ethical and sustainable investors at an event hosted by Europeans for Divest Invest at the Guildhall in central London.

On 27 October 2015, the executive secretary of the UN Framework Convention on Climate Change (UNFCCC) addressed an audience of ethical and sustainable investors at an event hosted by Europeans for Divest Invest at the Guildhall in central London.

Serving as executive secretary since July 2010, Christiana Figueres is a Costa Rican diplomat and founder of the non-profit Center for Sustainable Development of the Americas. Over the last few years, Figueres and her associates have been working to build the political will necessary for the global agreement on climate change adopted in Paris on 12 December 2015.

Even before the Paris Agreement, many interested parties in the financial world have been watching for the ‘signal’: the prime indicator that the transition to a low carbon economic model is no longer a dream but an irrevocable certainty. Analysts in the knowledge economy have access to more data than ever before, but among all the diverse opinion and debate on climate change, what separates a genuine signal from emotive or reactionary ‘noise’? According to Figueres, the ‘signal-to-noise ratio’ has shifted dramatically over the last two years.

Contrasting her perceptions of signal and noise across various areas of the climate change debate, Figueres highlighted the positive progress made in recent times. There are those, for example, who consider meaningful action in carbon reduction to be the preserve of only a few committed countries. Challenging that belief was the powerful signal in the run up to Paris that a significant majority of surveyed countries submitted their Intended Nationally Defined Contributions (INDCs) commitments to reducing carbon emissions.

This represents a broad and diverse engagement encompassing all industrialised nations, all large developed countries and some surprising additions like Afghanistan and UAE. The submitted INDCs collectively account for 80% of the global carbon emissions in 2010. These reduction commitments were agreed prior to the conference in Paris, making negotiations less pressurised than in previous years.

Noise has also been generated by the contention that committing to a sub 2 degree global temperature rise is an impossibility. In contrast, the signal from the submitted INDCs is that they will collectively result in a 4-gigatonne reduction in greenhouse gas emissions (GHGs) by 2030 if fully implemented. This would dramatically change the course of growth in GHGs and result in a temperature rise below 3 degrees by 2030, comparing favourably to the 5 degree rise currently projected. While this is still some way short of the sub 2 degree threshold, it nevertheless indicates an increased confidence in its achievability.  

Despite a globally negative picture for investment in the coal sector, additional noise derives from the continued assertion of the strength of demand for coal, our cheapest and dirtiest fuel. Proponents of this view cite the rapid proliferation of new coal plants in China, undermining efforts elsewhere to invest in clean technology. The signal in response to this has been the recent closure of Chinese coal plants, especially around major cities. China has announced its aim for coal use to peak by 2020 with total emissions of GHGs in its economy levelling off by 2035. In addition, the right to clean air is a fundamental one and China has moved to secure it through tighter pollution controls. According to Figueres, India will follow suit.

From the perspective of the UNFCCC, the direction of international political will is fixed: no amount of counter lobbying will alter the current shift towards a global low carbon economy. What remains are questions about the ultimate destination and pace of the transition once the Paris Agreement has met its conditions for ratification and its signatories can start to work toward their contributory targets. The next 50 years needs to see an increase in the pace of associated development if we are to achieve the goal of carbon neutrality.

There remains a difficult relationship between the pace required and its cost but the quicker we move, the cheaper it will be. The quality of investment today will determine the quality of the global energy system and its impact on lives and habitations tomorrow. To this end, Figueres’ message for the financial sector was clear: we can forget about ‘business as usual’ as a response to climate change – it’s now ‘business as urgent’.