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Finance Forward 10/29/2021

COP26: what to expect and where do the most heavily-emitting European companies stand?

ODDO BHF2 Minutes

In general, we should not expect too much from COP meetings

COP26 is due to open this Sunday 31 October in Glasgow and will run until Friday 12 November. Postponed by a year because of the pandemic, it is presented as the most important since COP21 in 2015. In Paris, the states had undertaken to reduce global greenhouse emissions by 45% in 2030 compared to 2010, and then achieve net carbon zero in 2050, in the hope of limiting climate warming “well below” 2°C by the century's end. Moreover, they had pledged to raise their emissions reduction targets after five years.

In addition, the COP meeting in Glasgow is likely to focus global media attention, after three consecutive summers in which natural catastrophes in Australia, the US, Canada, Germany and Russia have increased worldwide awareness of the climate emergency.

To this end, the states have sought to demonstrate their willingness, with the European parliament voting as early as 2019 to strengthen its target out to 2030 (-55% in 2030 vs 1990). China, which accounts for 28% of global emissions, announced in September 2020 its aim of reaching its emissions peak in 2030 and becoming carbon neutral in 2060. Joe Biden had the US rejoin the Paris Accord, from which his predecessor had withdrawn the country. In the last few weeks, we have seen more announcements from various countries with very high emissions (UAE, Turkey, Saudi Arabia, Russia, Australia) looking to be net carbon zero by 2050 or 2060.

However, these statements of good intent have very little credibility without a legally binding time frame or a precise game plan for exiting fossil fuels. At the same time, it is unrealistic to expect such decisions from this COP meeting. This stems in part from the very structure under which these summits operate: in practice, when the heads of state arrive in Glasgow, a certain number of points will have been largely discussed in advance, and their role will consist in negotiating the trickiest points of the final press release down to the last word. Jean-Marc Jancovici, chair of the Carbone 4 consultancy firm and the Shift Project, sums it up as follows: “A COP meeting is like a general meeting of 198 co-owners, where each country-owner has a vote, whether it owns a broom cupboard or a two-floor apartment on the top floor, and where they have to unanimously agree on a plan to renovate the building from top to bottom, without a manager, draft resolutions, and where the costs will be covered by each in relation to the surface area”.

None of the 25 previous COP meetings that have taken place since 1995 has resulted in an overall reduction in greenhouse gas emissions, the latter having reached a historical peak in 2019. According to the UNDP, since the start of 2020, € 300bn has been invested worldwide in new fossil fuel capacity, an amount in excess of the investment in renewable energies. According to the IEA’s last World Economic Outlook, with policies as they stand at present, global heating is likely to exceed 2.5°C in 2100 and be in excess of 2°C taking account of the current commitments. We are therefore some way off being in line with the Paris Agreement.

 

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Conflict of interests:
ODDO BHF CORPORATES & MARKETS, a division of ODDO BHF SCA, limited sharepartnership - Bank authorised by ACPR. ODDO BHF and/or one of its subsidiaries could be in a conflict of interest situation with one or several of the groups mentioned in this publication. Please refer to the conflict of interests section at the end of this document.
This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The
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