Following two weeks of negotiations at the 2021 United Nations Climate Change Conference (COP26), the Glasgow Climate Pact was signed by 197 countries on 13 November 2021.
The agreement will set the global agenda on climate change for the next decade and reaffirms many aspects of the 2015 Paris Agreement, including the objective to keep global temperatures at 1.5°C above pre-industrial levels by the end of the 21st century, as well as outlining intermediate measures to keep this goal within reach.
One of the most striking COP26 obligations includes asking countries to republish 2030 emission reduction plans with more stringent targets by the end of 2022 rather than 2025. The deadline was brought forward following the release of Climate Action Tracker’s global update of nations’ current 2030 trajectories.
If nothing was to change, by 2100, global temperatures would reach 2.4°C above pre-industrial levels, exceeding the target of 1.5°C, demonstrating the urgency and gravity of the situation.
Below, we outline the key takeaways from the agreement and highlight the most affected UK industries.
Deforestation
The summit's first major announcement came in the form of more than 100 countries - representing 85% of the world's forests - agreeing to end and reverse deforestation by 2030, supported by £14 billion in public and private funding. Aside from destroying indigenous peoples and wildlife habitats, deforestation increases carbon dioxide emissions.
Part of the £14 billion funding will be allocated to developing countries to restore damaged land, tackle wildfires and support indigenous communities. Other governments have also pledged to ensure more sustainable supply chains, removing deforestation from the global trade of food and other agricultural products such as palm oil, soya and cocoa.
Certified supply chains are expected to tighten supply of goods and filter down to a consumer level via rising prices across numerous products, since the above are common ingredients across multiple consumer items.
According to conservation organisation WWF, palm oil is found in almost 50% of supermarket packaged products, from fast-food, to toiletries and cosmetics.
Palm oil’s wide presence is due to its versatile composition, being colourless as well as odourless, and efficiency as a crop. A more tightly regulated supply chain is expected to inflate prices downstream.
Industries most affected:
Chocolate & Confectionery Production
Cosmetics & Toiletries Retailers
Phasing out fossil fuels
The agreement has also called for the accelerated phasing down of unabated coal power - that is, coal power that is not mitigated with technologies to reduce carbon dioxide emissions - and inefficient fossil fuel subsidies.
While coal power plants have helped build economies around the world, the greenhouse gas emissions produced by coal plants, such as carbon dioxide, sulphur dioxide and particulates upon combustion, must be reduced to push global emissions into decline and tackle a key contributor to climate change.
The UK has made significant strides in reducing its reliance on fossil fuels over the past decade.
As a result of government intervention, the proportion of UK electricity generated by burning coal has dropped sharply from 28.2% in 2010, to 1.8% in 2020; this is in stark contrast to 19% across the globe in 2019. Renewables’ share of the energy mix increased from 6.9% to 43.1% over the same period, according to the Department for Business, Energy and Industrial Strategy.
The UK is well placed to meet its target of ending coal power by October 2024, and reducing emissions by 68% and 78% of 1990 levels by 2030 and 2035 respectively. The ultimate goal is for net-zero emissions by 2050. The Glasgow Climate Pact is expected to accelerate investment and uptake of renewable energy across the UK, with wind and solar taking the lead.
In September 2021, the government announced £265 million in annual subsidies to fund and develop ongoing projects related to renewables; of the fund, £200 million has been allocated to offshore wind farms, where wind is stronger and more consistent; £55 million has been allocated to emerging technologies, including tidal; and the remainder will be used to help onshore projects, including wind and solar. A sustained move away from fossil fuels is also expected to drive demand for green technology.
Industries most affected:
Renewable Electricity Generation
Curbing methane emissions
More than 100 countries have pledged to cut methane emissions by 30% by 2030, compared with 2020 levels. Methane is the primary contributor to the formation of ground-level ozone, a hazardous air pollutant and greenhouse gas, approximately 80 times more potent at warming than carbon dioxide.
Livestock emissions, arising from manure and gastroenteric releases, accounted for an estimated 24.3% of methane emissions in 2020, according to the International Energy Agency.
The National Farmers’ Union, which represents 55,000 UK farmers, has set a target of net-zero emissions in British farming by 2040, although the 2030 target is expected to hasten the adoption of technology to produce food as efficiency and environmentally friendly as possible.
For farmers, this may include employing biotechnology and greenhouse gas-focus genetic selection and breeding, increasing the use of animal feed additives or optimising the animal feed mix to reduce enteric (intestinal) fermentation, and to expand feed-grain processing for improved digestibility.
In addition to changing how food is produced, reducing consumption of animal protein and dairy, and substituting it with less emission-intensive protein sources, such as from legumes, fish and plant-based milks, are considered the most effective method to achieve desired emissions reduction targets.
The literature on the impact of reducing meat and dairy consumption varies, with some studies indicating a vegetarian option would only reduce greenhouse gas emissions per person by 3%, while others suggest a reduction in emissions per person by between 20% and 30% reduction in emissions per person if meat consumption was halved. Irrespective of the number, without changing emissions associated with livestock and its products, it is difficult to make progress.
The government is expected to play an integral role in this shift, with its Climate Change Committee concluding that the UK must reduce meat consumption by between 20% and 50% in order to reach net zero by 2050.
The National Food Strategy, an independent review on the state of the UK food industry conducted in July 2021, posited a ‘meat tax’, although such a measure would be politically controversial and regressive; this would likely penalise lower income households, as the price increase on cheap cuts would be disproportionately higher than on items such as steak.
The government is expected to push change through campaigns to nudge consumer behaviour, subsidise the use and development of alternative proteins, and invest in in methane-reduction projects. Aided by government assistance, a continued effort to reduce methane emissions is expected to boost demand for biotechnology services, as well as meat and dairy alternatives.
Industries most affected:
Cereals, Leguminous Crops & Oilseed Growing
Mobilising financial firms
Following a failure to pledge US$100 billion (£74 billion) in funding to poorer countries grappling with the effects of climate change by 2020, developed countries have pledged to double the amount they spend from 2019 levels on helping emerging countries adapt to climate-change effects by 2025.
In addition, approximately 450 financial organisations, including banks, insurers and pension funds - which control US$130 trillion of assets (£96.8 billion) between them - have pledged to divert investment away from brown holding investments in coal, oil and gas, towards the development of green technology such as renewable energy, or to a mortgage product that subsidises highly efficient homes.
This obligation largely mirrors one of the Financial Conduct Authority (FCA). In June 2021, the FCA published a consultation proposing climate-related disclosure requirements for asset managers, life insurers and FCA-regulated pension providers, effective from 2022. The initiative is an attempt to involve private companies in meeting net zero targets, and to commit them to providing finance for green technology, helping to meet the objective of keeping temperature rises within the 1.5°C boundary.
Industries most affected:
Other
The world’s largest carbon dioxide emitters, the US and China, have pledged to boost climate co-operation over the next decade and agreed on a range of issues including methane emissions, the transition to clean energy and decarbonisation. Other notable agreements have included new rules on transparency, requiring all countries to report emissions and progress every two years.
New, and contentious, carbon trading market guidelines have been outlined under Article 6. The Article 6 framework is two-pronged: it consists of a centralised system open to the public and private sectors; and a separate bilateral system that will allow countries to trade credits that they can use to help meet their decarbonisation targets.
The framework is expected to funnel capital into the schemes that generate credits, such as tree-planting projects and carbon-capture systems, which are bought by those looking to compensate for their emissions.
Concluding remarks
COP26 and the subsequent Glasgow Climate Pact reiterates many aspects of the 2015 Paris Agreement, though it also introduces new aspects, such as the rules on transparency and Article 6.
For the most part, the UK is well placed to meet these commitments, with various legislation already in place to reduce the consumption of fossil fuels; the UK has banned the sale of new combustion engine vehicles from 2030; reduced methane emissions by offering subsides based on environmental credentials and efficiency; and enhanced transparency via FCA-mandated climate-related disclosures.
For the government, the key COP26 challenge will be delivering part of the US$100 billion (£74 billion) a year urgently needed by developing countries to help grapple with the fallout from climate-change disasters by 2025.
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