Coal and climate finance are the focus of the third day of COP26

More than 40 countries, including Poland, committed in Glasgow yesterday to phase out the use of coal by either 2030 or 2040. However, the big disappointment was that the world’s largest coal producers and users of the most-polluting fuel did not sign the pledge. The absence of the US, Australia, China and India from the deal is a major blow to one of COP26’s stated aims – “consigning coal to history”. The ambition of the UK as host of this year’s summit, to make it the one that finally kills off coal, has been thwarted.

Day 1: BPCC’s green blog on COP 26 in Glasgow
Day 2: Methane emission pledge hailed as success on second day of COP26
Day 3: Coal and climate finance are the focus of the third day of COP26
Day 4: Youth activism flavours fourth day of COP26
Day 7: Barack Obama’s speech highlighted start of second week of COP26
Day 8: Gender equality – focus of eighth day of COP26 – overshadowed by new heat calculation
Day 10&11: China-US ‘breakthrough’ as final statement is hammered out
Summary: COP26 disappoints with the loss of strong commitment

For Poland, the commitment signed by prime minister Morawiecki means a 2040 deadline for a zero-emissions energy system, with gas as a stop-gap measure along the road to finishing with coal for good. By 2030, Poland has pledged to cut coal’s contribution to the energy mix to 56%, down from a current 70% (it’s worth remembering that in 2011, it was 93%!).

The countries that signed the agreement along with Poland included other major coal producers and coal burners such as Canada, Ukraine and Vietnam. All of them have pledged to end all investment in new coal power generation. As well as the countries that signed up, over 100 organisations also committed to back the pledge, including several major banks who have agreed to stop financing the coal industry. Coal is still responsible for the generation of over one-third of the planet’s electricity.

Another coal-focused agreement announced yesterday was a commitment by more than 20 countries including the US and the UK, to stop funding any fossil fuel development overseas by the end of next year, diverting around $8 billion a year saved into clean energy investments.

The use of coal has rebounded after a short-term fall in emissions caused by the lockdowns. The amount of greenhouse gases released in 2020 fell by 5.4%, but a report by the Global Carbon Project released yesterday predicts CO2 emissions will rise by 4.9% this year. The window to limit the global temperature rise to the critical threshold of 1.5C is rapidly closing, the report warns.

Green finance

The second major area of progress at COP26 yesterday concerned climate finance.

UK finance minister Rishi Sunak, told the conference that London had the ambition of becoming a global hub for net-zero investment. To close the gap between countries’ headline carbon-cutting commitments and the 45% reduction in emissions needed, part of the UK’s strategy is to focus on major areas of importance to the climate – “cash, coal, cars and trees”.

The Glasgow Financial Alliance for Net Zero (GFANZ), a coalition co-chaired by former governor of the Bank of England Mark Carney and Michael Bloomberg, made its presentation to COP26 yesterday. Launched in April 2021, GFANZ includes banks such as HSBC and Santander, insurance companies such as Aviva, as well as pension funds and private equity. In total, GFANZ members hold about $130 trillion of assets. They have pledged to cut the emissions from their lending and investment activities to zero by 2050.

Such a reallocation of capital can make a difference, however, this is private-sector only. By the end of this decade, investment in zero-carbon energy needs to increase threefold from its current levels. Despite the pledges of the private sector, the state sector dominates in world’s energy production. These publicly controlled corporations account for over two thirds of greenhouse gas emissions, and are not unduly troubled by the green intentions of privately owed banks and investment funds.

Investors will need to improve the accuracy of the carbon footprint of their portfolios; the EU’s Taxonomy for Sustainable Activities will help investors and firms assess what is truly green and what is mere ‘greenwash’. The accountancy profession wants to standardise the accounting and disclosure of climate outcomes.

Imperfect as a private-sector-only finance solution is, it is at least a major step forward. The funds have massive leverage through their investments to drive change within those firms that emit the most greenhouse gases, while investments in climate-focused R&D can also make a big difference.

Day 1: BPCC’s green blog on COP 26 in Glasgow
Day 2: Methane emission pledge hailed as success on second day of COP26
Day 3: Coal and climate finance are the focus of the third day of COP26
Day 4: Youth activism flavours fourth day of COP26
Day 7: Barack Obama’s speech highlighted start of second week of COP26
Day 8: Gender equality – focus of eighth day of COP26 – overshadowed by new heat calculation
Day 10&11: China-US ‘breakthrough’ as final statement is hammered out
Summary: COP26 disappoints with the loss of strong commitment