Thinking | 17 November 2021

COP26 outcomes and Australia’s pathway to net zero

By Meg Lee, Paul O’Donnell and Wolfgang Babeck

At the outset of the Glasgow Conference of the Parties (COP26), we reported on the widely criticised plan that Prime Minister Scott Morrison took to the conference[1]. The McKinsey modelling[2] behind the plan has subsequently been released and has similarly been criticised as comically flawed[3] and laughable by climate action groups due to the heavy reliance on 15% of our emissions reduction coming from unidentified future technologies. The modelling has also been criticised for not including any modelling of the physical consequences (and therefore costs) of climate change.

In this article, we take a look at how the Government’s plan fared at Glasgow and the outcomes of COP26 and what they mean for Australia’s pathway to net zero.

What were the main Glasgow outcomes?

Glasgow Climate Pact

The outcome document agreed on the final day of the COP26 meeting is known as the Glasgow Climate Pact, which records the parties’ carefully worded agreement on what the parties acknowledge, emphasise, recognise and decide and on key topics such as the following.

The science and urgency of climate change – the parties express ‘alarm and utmost concern that human activities have caused around 1.1 °C of global warming to date and that impacts are already being felt in every region’[4] and ‘stress the urgency of enhancing ambition and action in relation to mitigation adaptation and finance in this critical decade to address gaps between current efforts and pathways in pursuit of the ultimate objective of the Convention and its long-term global goal’.[5]

Adaptation – the parties ‘emphasize the urgency of scaling up action and support, including finance, capacity-building and technology transfer, to enhance adaptive capacity, strengthen resilience and reduce vulnerability to climate change in line with the best available science, taking into account the priorities and needs of developing country’[6]; and ‘Urges Parties to further integrate adaptation into local, national and regional planning’.[7]

Mitigation – the parties ‘recognise that limiting global warming to 1.5 °C requires rapid, deep and sustained reductions in global greenhouse gas emissions, including reducing global carbon dioxide emissions by 45 per cent by 2030 relative to the 2010 level and to net zero around mid-century, as well as deep reductions in other greenhouse gases’[8] and ‘Invites Parties to consider further actions to reduce by 2030 non-carbon dioxide greenhouse gas emissions, including methane’.[9]

Media reports[10] have told of the watering down of the final wording of paragraph 20 of the Pact, whereby the word ‘phase out’ was replaced with ‘phasedown’ in relation to coal power, reportedly as the behest of India and China.

The final wording of paragraph 20 of the Pact calls upon Parties to ‘accelerate the development, deployment and dissemination of technologies,  and  the  adoption  of  policies,  to  transition  towards  low-emission  energy systems,  including  by  rapidly  scaling  up  the  deployment  of  clean  power  generation  and energy  efficiency  measures,  including  accelerating  efforts  towards  the  phasedown  of unabated  coal  power  and  phase-out  of  inefficient  fossil  fuel  subsidies,  while  providing targeted support to the poorest and most vulnerable in line with national circumstances and recognizing the need for support towards a just transition.’

Finance and technology transfer – the parties ‘Re-emphasize the need for scaled-up financial resources to take into account the needs of those countries particularly vulnerable to the adverse effects of climate change, and in this regard encourages relevant multilateral institutions to consider how climate vulnerabilities should be reflected in the provision and mobilization of concessional financial resources and other forms of support, including special drawing rights’.[11]

Loss and damage – the parties ‘Acknowledge that climate change has already caused and will increasingly cause loss and damage and that, as temperatures rise, impacts from climate and weather extremes, as well as slow onset events, will pose an ever-greater social, economic and environmental threat’[12] and further, ‘(r)esolves to strengthen partnerships between developing and developed countries, funds, technical agencies, civil society and communities to enhance understanding of how approaches to averting, minimizing and addressing loss and damage can be improved’.[13]

Implementation – the parties ‘recognise the importance of protecting, conserving and restoring ecosystems to deliver crucial services, including acting as sinks and reservoirs of greenhouse gases, reducing vulnerability to climate change impacts and supporting sustainable livelihoods, including for indigenous peoples and local communities’.[14]

Collaboration – the parties ‘Recognise the importance of international collaboration on innovative climate action, including technological advancement, across all actors of society, sectors and regions, in contributing to progress towards the objective of the Convention and the goals of the Paris Agreement’.[15]

U.N. Secretary-General Antonio Guterres has stated that ‘The approved texts are a compromise, reflecting the interests, the conditions, the contradictions and the state of political will in the world today.’[16]

Negotiations at a climate COP are difficult as the outcome requires the approval of all major participants. Therefore, a joint communique often becomes the smallest denominator. Negotiations are complex as they include not only questions on climate, but also, whether and to what extent industrialised nations should compensate all those other nations that have not yet enjoyed the same right to industrialisation. In addition, and as addressed above, loss and damage payments for those countries who already severely affected by climate change such as many Pacific Nations are being discussed. To overcome this deadlock – similar to the stalled WTO/GATT negotiations, where countries for a considerable time have commenced entering into regional or bilateral foreign trade agreements (FTA) – we have observed a series of further declarations by the leaders of sub-sets of parties sitting behind the Climate Pact, including:

The Leaders’ Declaration on Forests and Land Use

The Leaders’ Declaration on Forests and Land Use was signed by over 120 countries, representing over 90% of the world’s forests, including Australia, Brazil and Indonesia. The parties to the declaration commit to working collectively to halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation.

The declaration states that the parties recognise the need for ‘transformative further action’ in the interconnected areas of sustainable production and consumption; infrastructure development; trade; finance and investment; and support for smallholders, Indigenous Peoples, and local communities, who depend on forests for their livelihoods and have a key role in their stewardship.

The commitments made are broad, but importantly include the need to implement and, if necessary, redesign agricultural policies and programmes to incentivise sustainable agriculture, promote food security, and benefit the environment.

While the declaration has been criticised by some as too vague and the implementation date of 2030 as too late, importantly, 12 countries (including Japan, the UK, the US, France and Germany) signed the Global Forest Finance Pledge committing to collectively provide US$12 billion for forest-related climate finance between 2021-2025.

The Global Methane Pledge

There was also a Global Methane Pledge, led by the United States and the European Union, by which more than 100 countries agreed to cut emissions of this greenhouse gas by 2030. The signatories represent 70% of the global economy and nearly half of anthropogenic methane emissions. Australia has not signed this pledge.

Importantly, the US and EU have also announced a significant expansion of financial and technical support to assist implementation of the Pledge of $328 million in funding to support scale up of methane mitigation strategies worldwide.

NGO, Climate Analytics[17], states that, if achieved, these methane reductions would close the 2030 emissions gap by 14%. The emissions gap is the difference between where global greenhouse gas emissions are heading under current national pledges and where we would need to be to achieve the goal of limiting global warming to 1.5°C in 2030.

Coal Pledge

A smaller sub-set of 40 countries went beyond the Glasgow Pact commitment of ‘phasing down’ coal and have committed to phasing out coal in electricity generation, some by 2030 and some by 2040. The signatories to the Coal Pledge include some of the world’s biggest coal burners: Canada, Poland, Vietnam, South Korea, Ukraine and Indonesia.

The parties affirm a shared vision is to accelerate a transition away from unabated coal power generation in a way that benefits workers and communities and ensures access to affordable, reliable, sustainable and modern energy for all by 2030, in line with the Sustainable Development Goal #7[18].

The commitments include that the signatories will cease issuance of new permits for new unabated coal-fired power generation projects and to end new direct government support for unabated international coal-fired power generation.

Interestingly, this pledge includes some signatories by so-called sub-nationals and includes the Australian Capital Territory Government, signed by Minister Shane Rattenbury MLA.

Glasgow Financial Alliance for Net-Zero (GFANZ)

In contrast to the above declarations, this alliance has been forged by industry, driven by the UN Special Envoy on Climate Action and Finance, Mark Carnie, a former Governor of the Bank of England. The Glasgow Financial Alliance for Net-Zero (GFANZ) has received commitments by 500 participating financial institutions with US$130 trillion under their control to voluntarily work towards a net-zero target and aligning their lending to the 1.5 degree Celsius Paris goal.[19]

What did Australia commit to at Glasgow?

Energy Minister Angus Taylor has summarised Australia’s commitments at Glasgow as follows[20]:

At COP26 Australia updated and enhanced our Nationally Determined Contribution (NDC) under the Paris Agreement to include our net zero emissions by 2050 target, our latest emissions projections to 2030 that will see Australia achieve up to a 35 per cent reduction by 2030, and seven new targets in the form of our low emissions technology stretch goals, which will be critical to achieving our 2030 and 2050 targets through our technology not taxes strategy.

Importantly, Australia has now formally committed to net zero by 2050 in the National Determined Contributions. This is an important step that should not be underestimated, as it sets a context for actions by State and local governments, private industry and financiers in Australia.

Prior to Glasgow, Australia had expressed a clear position that it had no intention of tightening our 2030 targets. While there has been no change to the formal commitments, the reference to achieving 35% reduction by 2030 goes beyond our formal target of 28% and is reliant on the commitments by the States and Territories.

The Glasgow negotiations didn’t lead to any change in the government’s plan. The plan remains a focus on ‘technology not taxes’, so we do not expect to see any legislation being put forward by the coalition. Indeed, much of the focus of the Prime Minister since arriving home from Glasgow has been on technological solutions such as electric vehicles and on reassuring the coal industry that the ‘phase down’ commitment does not spell the end of the industry in Australia and that it will be thriving for decades to come[21].

What are the implications for Australia?

While the government’s announcements remain high-level, the approach being taken by the government and the commitments made by other nations would seem to have a number of broad-level implications for Australia. We think these include:

  • Pursuit of large-scale projects – much of the Federal Government response to climate change has involved the pursuing of large-scale ‘head-line’ projects (such as Snowy 2.0 or Project Marinus). The Federal Government’s focus on technology would appear to mean that this focus will continue.
  • Growth of hydrogen – the commitment to phase down coal usage will require current large consumers of coal to move away to other forms of energy. The lack of any obvious alternate source of such energy (and limitations on the ability of many countries to make up this gap through domestic renewable energy) should provide long-term under-pinning for Australia’s hydrogen industry (providing a way to export Australia’s solar resource).
  • Continued shift in domestic demand – the exponential rise in the roll-out of domestic rooftop solar has caused major shifts in demand curves and network loading. The focus on shifting to EVs will continue this – although potentially arresting the decline in domestic consumption served from the grid. The usual (and difficult to shift) patterns of domestic consumption would seem likely to be reinforced by this given that, in the same way that large numbers of domestic consumers currently come home and turn on multiple appliances, they would also seek to charge their EVs at this point.
  • Questions around long-term coal demand – the push-back from large coal consuming nations on phasing out coal use appears to mean that world coal demand will not drop precipitously. However, the commitment to instead ‘phase down’ consumption would seem to signal a long-term decline in demand, which may call into question the opening of new coal basins in Australia given the resources in existing basins.

[1] Available at: Australia’s Long-Term Emissions Reduction Plan
[2] Available at: Australia’s Long-Term Emissions Reduction Plan
[3] Greenpeace quoted in: 'Comically flawed': Climate experts criticise Australia's net zero modelling
[4] Paragraph 3 Glasgow Climate Pact
[5] Paragraph 4 Glasgow Climate Pact
[6] Paragraph 6 Glasgow Climate Pact
[7] Paragraph 8 Glasgow Climate Pact
[8] Paragraph 17 Glasgow Climate Pact
[9] Paragraph 19 Glasgow Climate Pact
[10] Coal trajectory is set whether it's 'phase out' or 'phase down': Russell
[11] Paragraph 29 Glasgow Climate Pact
[12] Paragraph 37 Glasgow Climate Pact
[13] Paragraph 45 Glasgow Climate Pact
[14] Paragraph 50 Glasgow Climate Pact
[15] Paragraph 53 Glasgow Climate Pact
[16] See media release: Secretary-General's Statement on the Conclusion of the UN Climate Change Conference COP26
[17] The Global Methane Pledge and 1.5°C
[18] The 17 Goals
[19] Global finance industry says it has $130 trillion to invest in efforts to tackle climate change
[20] Refer Press Release at: Australia Welcomes Positive Outcomes at COP26
[21] Barnaby Joyce says Nationals did not sign Cop26 pact and Australia is ‘happy with targets’ 

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