A new sustainable financial system can secure a net zero future for the world
There were many innovations from the Paris Agreement, but three were key. First, setting the clear objective of less than 2 degrees Celsius warming, with the stretch objective of 1.5 degrees. Second, the innovation of voluntary country plans (NDCs) that were then objectively added up to assess what would happen if countries met their commitments. Third, the involvement of the private sector and non-state actors, so that solutions to this enormous problem are bottom up as well as top down.
Since Paris, the concepts of Net Zero, Paris Aligned, and a 1.5 degree target have moved from the climate cognoscenti into the mainstream. Net zero is now an organizing principle that is cascading from the global to the country and the company.
But the climate crisis has not abated. The sobering reality is that the problem of climate change grew after Paris. Last year it was estimated that the world’s temperature would rise above 3 degrees Celsius by the end of the century.
This would cause catastrophic flooding, pollution, wildfires, drought, extreme weather, and destruction of species. We are already seeing the early warnings of this devastation.
Moreover, the scale of what’s required to achieve 1.5 degrees is sinking in: emissions need to fall by 7 percent a year over the course of this decade. Last year, many countries met this high bar, but only because large swaths of the economy were shut down—hardly something to be repeated. This underscores that we must invest and grow to get to net zero.
The UN Climate Change Conference (COP26) will be a watershed for finance. To that end, we are on track to deliver by COP26 the foundations for a system in which every financial decision takes climate change into account.
A Financial System for Net Zero
Markets require information to operate effectively. In Paris, the Task Force on Climate-related Financial Disclosures (TCFD), created by the Financial Stability Board, was just a concept. Three years ago in Hamburg, the final TCFD recommendations were delivered to Group of Twenty (G20) leaders. Today, virtually the entire financial sector demands TCFD disclosures, and over 2,000 major companies around the world are responding.
Despite these advances, coverage is still limited, and reporting still incomplete, particularly of critical forward-looking metrics. Now it is time for governments around the world to make TCFD disclosures mandatory and support the International Financial Reporting Standards Foundation’s intention to establish a new International Sustainability Standards Board to produce a climate disclosure standard, based on the TCFD. Momentum is building, with strong support at the recent Group of Seven (G7) and G20 meetings.
Better disclosure and a heightened sense of urgency are leading to a transformation of climate risk management. The central banks and supervisors’ Network for Greening the Financial System has, in just a few years, grown from its eight founding members to more than 90 authorities covering over 80 percent of global emissions.
Central banks in countries with 50 percent of global emissions are beginning to conduct climate stress tests of their financial systems. For COP26, our priority is to embed supervisory expectations for climate risk management and ramp up climate stress testing.
Commitment, alignment, engagement
Building on the foundations of reporting and risk management, the financial system can look outward, tackling climate change through commitments, alignment, and engagement.
Commitments begin with net zero objectives of countries. These have advanced from 30 percent of emissions when the UK and Italy assumed the COP presidency to over 70 percent today (see chart).
The Glasgow Financial Alliance for Net Zero (GFANZ) was created to meet enormous investment needs that could total over $100 trillion over the next three decades. Bringing together over 250 financial institutions responsible for $80 trillion in assets and anchored in COP’s Race to Zero, GFANZ is the gold standard for financial sector commitments to sustainability.
By Glasgow, all major financial firms should decide whether they too will be part of this solution to climate change. GFANZ is a big tent, but it will be the only tent in Glasgow.
GFANZ starts with commitments, but its real purpose is climate action through alignment and engagement.
Alignment means defining best practice net zero plans for companies and financial institutions, leveraging the valuable work already begun. Alignment also means robust assessments of the portfolios of financial institutions relative to net zero pathways.
Central banks, notably the European Central Bank and the Bank of England, are setting the tone as they examine how to revise their monetary policy operations to be more consistent with the legislated climate objectives and policies in their jurisdictions.
In a similar vein, the TCFD has conducted an extensive review of methodologies to assess metrics that measure how aligned portfolios are with the net zero transition.
The combination of forward-looking climate disclosure, net zero plans, and portfolio alignment metrics will pull forward investment, especially if there are credible and predictable climate policies from governments, like carbon pricing.
Developing economies
While estimates vary, most suggest that over a trillion dollars in additional investment annually for decades will be needed to build green energy in emerging market and developing economies.
To meet this need, we must turn billions in public capital into trillions in private capital by scaling blended finance, catalyzing stand-alone private capital flows, and building new markets.
Multilateral development banks are uniquely placed to mobilize private finance, but thus far the results have been modest, with only $11 billion mobilized in 2018. To orchestrate a step change in financing capacity requires four initiatives:
Private commitments: A GFANZ working group will build on initiatives to secure commitments of significant private financing capacity for projects to advance the net zero transition in emerging market and developing economies.
Public facilities: Multilateral development banks should identify and be prepared to dramatically scale up blended finance vehicles, instruments, and facilities that support significant mobilization of private capital.
Country platforms: The public and private sectors are coming together through initiatives such as Global Investors for Sustainable Development and the Climate Finance Leadership Initiative to build country platforms that will help address specific needs and broader challenges. With private finance focused on achieving net zero, country platforms must integrate Paris-aligned NDCs to attract capital at scale. Projects consistent with long-term country strategies that are certified as Paris-aligned are more likely to attract private capital and less likely to be subject to project risks, including changes in regulation.
High-integrity market for carbon credits: Carbon credits, which are generated by projects that reduce or remove emissions, such as afforestation, allow buyers to compensate for or neutralize any continuing emissions they have while moving to net zero. The conditions for this market are coming into place. Over 1,600 companies have committed to science-based targets. As they achieve them, companies need an appropriate mix of emissions reductions and credible carbon credits to neutralize and compensate for their ongoing emissions, including nature‐based solutions such as reforestation and the switch to greener power in developing economies.
To be clear: companies’ primary responsibility is to reduce absolute emissions. But while on the trajectory to net zero they should use high-integrity credits to compensate for their emissions.
At present, the market for carbon credits is small, fragmented, and of uneven quality. This market could grow to over $150 billion a year and facilitate major cross-border capital flows, as the vast majority of high-emission-reduction projects will be in emerging market and developing economies, with significant potential co-benefits for biodiversity and other UN Sustainable Development Goals.
The private sector Taskforce on Scaling Voluntary Carbon Markets, comprising 250 organizations and led by Bill Winters and Annette Nazareth, recently published its final recommendations on how to develop and rapidly scale a professional, global carbon market with the highest integrity, transparency, and credibility. The taskforce is working alongside other endeavors, like the Voluntary Carbon Markets (VCM) Integrity Initiative, to ensure the VCM finances meaningful, additional climate action.
Moving from blueprint to build is the next step. Two of the world’s largest financial centers—London and Singapore—are already stepping up to implement the recommendations and to maximize our very limited carbon budget. On these foundations of a new sustainable financial system, we can align the trillions of dollars of capital needed for companies and projects across all economies to secure a net zero future for the world.
MARK CARNEY is the UN special envoy for climate action and finance.
The theme of this year’s Earth Day is “Planet vs. Plastics” – a theme chosen to raise awareness of the damage done by plastic to humans, animals and the planet and to promote policies aiming to reduce global plastic production by 60 percent by 2040.
As our chart shows, global plastics use has increased rapidly over the past few decades, growing 250 percent since 1990 to reach 460 million tonnes in 2019, according to the OECD’s Global Plastics Outlook, which projects another 67-percent increase in global plastics use by 2040 and for the world’s annual plastic use to exceed one billion tonnes by 2052. As our chart shows, packaging is the largest driver of global plastics use, which is why a rapid phasing out of all single use plastics by 2030 is one of the policy measures proposed under EARTHDAY.ORG’s 60X40 framework.
Other major applications of plastics include building and construction, transportation as well as textiles, with the fast fashion industry particularly guilty of adding to the world’s plastic footprint. “The fast fashion industry annually produces over 100 billion garments,” the Earth Day organizers write. “Overproduction and overconsumption have transformed the industry, leading to the disposability of fashion. People now buy 60 percent more clothing than 15 years ago, but each item is kept for only half as long.” Most importantly, the organization points out that 85 percent of disposed garments end up in landfills or incinerators, while just 1 percent are being recycled.
Felix Richter is a Data Journalist
This article was first published in the Statista.com.
Algeria’s Tassili N’Ajjer plateau is Africa’s largest national park. Among its vast sandstone formations is perhaps the world’s largest art museum. Over 15,000 etchings and paintings are exhibited there, some as much as 11,000 years old according to scientific dating techniques, representing a unique ethnological and climatological record of the region.
Curiously, however, these images do not depict the arid, barren landscape that is present in the Tassili N’Ajjer today. Instead, they portray a vibrant savannah inhabited by elephants, giraffes, rhinos and hippos. This rock art is an important record of the past environmental conditions that prevailed in the Sahara, the world’s largest hot desert.
These images depict a period approximately 6,000-11,000 years ago called the Green Sahara or North African Humid Period. There is widespread climatological evidence that during this period the Sahara supported wooded savannah ecosystems and numerous rivers and lakes in what are now Libya, Niger, Chad and Mali.
This greening of the Sahara didn’t happen once. Using marine and lake sediments, scientists have identified over 230 of these greenings occurring about every 21,000 years over the past eight million years. These greening events provided vegetated corridors which influenced species’ distribution and evolution, including the out-of-Africa migrations of ancient humans.
These dramatic greenings would have required a large-scale reorganisation of the atmospheric system to bring rains to this hyper arid region. But most climate models haven’t been able to simulate how dramatic these events were.
As a team of climate modellers and anthropologists, we have overcome this obstacle. We developed a climate model that more accurately simulates atmospheric circulation over the Sahara and the impacts of vegetation on rainfall.
We identified why north Africa greened approximately every 21,000 years over the past eight million years. It was caused by changes in the Earth’s orbital precession – the slight wobbling of the planet while rotating. This moves the Northern Hemisphere closer to the sun during the summer months.
This caused warmer summers in the Northern Hemisphere, and warmer air is able to hold more moisture. This intensified the strength of the West African Monsoon system and shifted the African rainbelt northwards. This increased Saharan rainfall, resulting in the spread of savannah and wooded grassland across the desert from the tropics to the Mediterranean, providing a vast habitat for plants and animals.
Our results demonstrate the sensitivity of the Sahara Desert to changes in past climate. They explain how this sensitivity affects rainfall across north Africa. This is important for understanding the implications of present-day climate change (driven by human activities). Warmer temperatures in the future may also enhance monsoon strength, with both local and global impacts.
Earth’s changing orbit
The fact that the wetter periods in north Africa have recurred every 21,000 years or so is a big clue about what causes them: variations in Earth’s orbit. Due to gravitational influences from the moon and other planets in our solar system, the orbit of the Earth around the sun is not constant. It has cyclic variations on multi-thousand year timescales. These orbital cycles are termed Milankovitch cycles; they influence the amount of energy the Earth receives from the sun.
On 100,000-year cycles, the shape of Earth’s orbit (or eccentricity) shifts between circular and oval, and on 41,000 year cycles the tilt of Earth’s axis varies (termed obliquity). Eccentricity and obliquity cycles are responsible for driving the ice ages of the past 2.4 million years.
The third Milankovitch cycle is precession. This concerns Earth’s wobble on its axis, which varies on a 21,000 year timescale. The similarity between the precession cycle and the timing of the humid periods indicates that precession is their dominant driver. Precession influences seasonal contrasts, increasing them in one hemisphere and reducing them in another. During warmer Northern Hemisphere summers, a consequent increase in north African summer rainfall would have initiated a humid phase, resulting in the spread of vegetation across the region.
Eccentricity and the ice sheets
In our study we also identified that the humid periods did not occur during the ice ages, when large glacial ice sheets covered much of the polar regions. This is because these vast ice sheets cooled the atmosphere. The cooling countered the influence of precession and suppressed the expansion of the African monsoon system.
The ice ages are driven by the eccentricity cycle, which determines how circular Earth’s orbit is around the sun. So our findings show that eccentricity indirectly influences the magnitude of the humid periods via its influence on the ice sheets. This highlights, for the first time, a major connection between these distant high latitude and tropical regions.
The Sahara acts as a gate. It controls the dispersal of species between north and sub-Saharan Africa, and in and out of the continent. The gate was open when the Sahara was green and closed when deserts prevailed. Our results reveal the sensitivity of this gate to Earth’s orbit around the sun. They also show that high latitude ice sheets may have restricted the dispersal of species during the glacial periods of the last 800,000 years.
Our ability to model the African humid periods helps us understand the alternation of humid and arid phases. This had major consequences for the dispersal and evolution of species, including humans, within and out of Africa. Furthermore, it provides a tool for understanding future greening in response to climate change and its environmental impact.
Refined models may, in the future, be able to identify how climate warming will influence rainfall and vegetation in the Sahara region, and the wider implications for society.
Edward Armstrong is a postdoctoral research fellow, University of Helsinki
A new draft text on global stocktake has been published at the UN climate summit, COP28 UAE, on Wednesday morning. While the draft text does not contain the words “phase out”, it includes reference to transitioning away from all fossil fuels to enable the world to reach net zero by 2050.
The text published by the UN’s climate body calls on parties to accelerate and substantially reduce non-carbon dioxide emissions worldwide with a focus on reducing methane emissions by 2030. “We all want to get the most ambitious outcome possible,” Majid Al Suwaidi, COP28 Director-General, said on Tuesday.
The text, published early Wednesday, does not specifically refer to oil, but mentions the need to ‘phase-down’ coal. It says that it recognises the need for ‘deep, rapid and sustained reductions in greenhouse gas emissions in line with 1.5C pathways and calls on Parties to contribute to global efforts.
Among those efforts it recognises the need to triple renewable energy capacity by 2030 and doubling the annual rate of energy efficiency improvements by the same date. It also recognises the need to accelerate the phase-down of coal and accelerate towards net zero energy systems, utilising zero or low carbon fuels by mid century.
While the document does not mention oil or combustion engines, it does recognises the need for accelerating the reduction of emissions from road transport on a range of pathways, including through development of infrastructure and rapid deployment of zero and low-emission vehicles. It also recognises the need to phase out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible.
Finance specifics
On the subject of finance, the document said developed countries should continue to take the lead in mobilising climate finance from a wide variety of sources, instruments and channels, noting the significant role of public funds, through a variety of actions, including supporting country-driven strategies, and taking into account the needs and priorities of developing countries.
Such mobilisation of climate finance should represent a progression beyond previous efforts, the text said. It may provide small comfort to campaigners from developing countries who implored Parties to begin the phase out of fossil fuels and provide vastly improved access to funding for renewables.
The document highlights the persistent gap and challenges in technology development and transfer and the uneven pace of adoption of climate technologies around the world.
It further urges Parties to address these barriers and strengthen cooperative action, including with non-Party stakeholders, particularly with the private sector, to rapidly scale up the deployment of existing technologies, the fostering of innovation and the development and transfer of new technologies.
It also emphasizes the ongoing challenges faced by many developing country Parties in accessing climate finance and encourages further efforts, including by the operating entities of the Financial Mechanism, to simplify access to such finance, in particular for those developing country Parties that have significant capacity constraints, such as the least developed countries and small island developing States.
