COP25: the UN climate change conference, Madrid, Spain

This year’s annual UN climate change conference attended by 197 countries and nearly 27,000 delegates was the longest on record and ended on Sunday 15 December amid frustration and disappointment at what little progress was achieved.

The aim of the conference was to finalise the processes required to implement the Paris Agreement by agreeing the rules for carbon markets and international cooperation. This would demonstrate the intent and relevance of the UN’s approach to climate change. Unfortunately, these aims were not achieved, resulting in Greta Thunberg calling it ‘some kind of opportunity for countries to negotiate loopholes’.

Key issues

• Scientists found that the world would not achieve carbon neutrality on the current targets pledged. In order to attain this, scientists recommended that carbon usage was cut by more than 7% per year for the next 10 years.
• Despite the scientists’ findings, the delegates focused on narrow technical issues only rather than putting forward an updated national climate plan (or Nationally Determined Contributions – NDC being the formal term) to achieve carbon neutrality by 2050 (to keep the global temperature rise this century to below two degrees Celsius above pre-industrial levels). Disappointingly, no agreement was reached on the rules for a carbon market between countries.
• The delegates also failed to form the framework around “loss and damage” – whereby vulnerable countries that are suffering climate-linked damage are able to claim economic losses from the richer, developed nations.

What was agreed?

• A partial admission that carbon-cutting targets are too weak (but no increase was agreed).
• There was formal recognition of the need to bridge the gap between what scientists advised was necessary to avoid dangerous climate change and the current targets pledged which are significantly insufficient.
• All delegates are to put forward new, improved carbon cutting plans before the next climate change conference, COP26, to be held in Glasgow.
• While the richer, developed nations failed to agree to provide the requested “new and additional” money for loss and damage claims, they did agree to produce evidence that they had kept their promise (to pay 2% of all certified emission reduction sales annually from 2011 to 2020) on climate change to date in advance of COP26.
• All other issues were deferred to be resolved at COP26.

Highlights

• It was announced on day one of the conference that the number of insurers who have reduced and/or eliminated investment in the coal industry has doubled in the last year to 17.
• Denmark passed a Climate Law, setting targets to reduce gas emissions by 70% by 2030.
• The EU pledged to achieve carbon neutrality by 2050 (to be enforced by way of legislation), to reduce gas emissions by 40% by 2030, to commit 25% of its long-term budget to climate action and commit €100 billion to help member countries to move to renewable energy sources. The EU would also impose measures, by way of a carbon tax, on those member states that failed to achieve the targets set.
• 73 countries are now committed to carbon neutrality by 2050 including five new countries (South Korea, Ireland, Monaco, Switzerland and Fiji) pledging to do so at this conference.
• 39 countries this year committed to including oceans in their future NDCs.

What does this mean for Boris Johnson’s new government?

• It was hoped that all minor technical issues would be resolved at this year’s conference, paving the way to discuss emissions cuts for 2030 at COP26. However, the majority of issues have been deferred which will encumber next year’s talks and Mr Johnson will face an uphill struggle in leading other nations to agree a 10 year plan. This is exacerbated by the US intention to withdraw from the Paris Agreement and many other major countries unwilling to agree such an ambitious target.
• Environmentalists have said that in order to succeed, the UK will need to lead by example and meet its own medium-term climate targets before persuading other nations to agree a 10 year emissions reduction programme. This will be no mean feat given we have pledged to remove gas from all homes (27 million) and replace it with renewable energy sources by 2050.
• The 10 year plan conflicts with Mr Johnson’s £28.8 billion road-building plans and his policy to expand the aviation industry and experts have warned that fully electric cars will not solve the problem completely.
• Brexit will also complicate matters; the EU will be imposing a border tax on countries that fail to cut greenhouse gases but the US will not discuss climate change in any trade deal.

Comment

COP25 made it clear that as things stand, the current targets for 2050 are not achievable. Significantly more ambitious targets need to be set and met. In light of this, insurers and corporations should continue to focus on and invest in their own climate resilience plans rather than wait for legislation to be implemented. Further, as losses (estimated at billions of pounds) incurred due to climate change risk has proven to outweigh investment in fossil fuels, perhaps it is time for insurers to lead the way and reduce and/or eliminate investment in the oil and gas industry.