The entry into force of last year's Paris Agreement was a great achievement but, it is just the start. A huge amount of investment is needed to meet climate targets by cutting emissions, and to help countries to adapt to the changing climate, and most of it is going to come from the private sector.
"COP of Action" - The work starts in Marrakesh
The 22nd Conference of Parties (COP22) to the United Nations Framework on Climate Change (UNFCCC) meeting in Marrakesh is the opportunity to create the conditions to allow that investment to flow, through the Green Climate Fund and tools such as carbon pricing.
Paris set the ambition and Marrakesh will set out the frameworks that will enable the ambition to be achieved. These will include quantified goals for mobilising climate finance, including the $100 billion a year that is meant to flow through the Green Climate Fund.
The Moroccan COP Presidency has said that it wants to see concrete action in Marrakesh to help strengthen ambition, support domestic actions to help countries achieve their nationally determined contributions, increase collaboration and mobilise finance, technology and capacity-building support before and after 2020. It has backed this up by increasing its own GHG reduction goal to 42% by 2030, from 32%.
Investment is needed to decarbonise all sectors of the economy – but particularly in renewable electricity generation, and more efficient heating, cooling and transport – and to make new and existing infrastructure robust enough to cope with future changes to the climate such as rising sea levels, desertification and more extreme weather events.
The role of the corporate world and civil society in COP talks has become increasingly important in recent years. Many businesses have called on governments, both national and regional, to introduce carbon pricing to place a cost on greenhouse gas emissions high enough to change behaviour and reduce emissions. To meet their targets, governments will have to make other changes, too, introducing new policies and regulations. Meanwhile, companies are stepping up their own ambitions on cutting emissions in their own operations and their supply chains through initiatives such as the We Mean Business coalition and the Science-Based Targets initiative.
This will create risks for certain sectors, particularly if they are carbon-intensive in their production processes or dependent on hydrocarbon-based raw materials. It will be important to understand and quantify these risks, and investors have called on businesses to step up their disclosure of climate risks.
The post-Paris world creates opportunities
One key area of focus is the urgent need to increase ambition pre-2020 to increase the chances of limiting global average temperature rises to less than 2°C – and much of the work needs to be done by the private sector. We need to unlock the potential of areas such as energy efficiency, where the technologies are available that can be deployed at scale now and are proven to deliver real, measurable, effective emission cuts.
Energy efficiency can deliver about a third of the missing emissions needed to meet the Paris targets, and save costs at the same time. But investments in the sector are not happening as quickly as they should – about $1.2 trillion a year needs to be invested, which is triple the current levels, says the UN SE4All Global Tracking Framework. We must remove investment barriers and to develop investment-grade policies and instruments that can leverage private sector finance at scale.
Sustainable finance
ING's strong focus on sustainability makes it a key player in climate financing, whether that is individual projects in areas such as renewable energy, financing for the circular economy, green bonds or energy efficiency. We are working on ways to make financing efficiency projects easier through our membership of the Energy Efficiency Financial Institutions Group (EEFIG), a working group jointly convened by the European Commission and UNEP FI to increase levels of investment in energy efficiency.
Paris Agreement – where did we leave off?
The entering into force of the Paris Agreement less than a year after it was agreed was a massive shock but also a pleasant surprise. It was accompanied by the agreement of a deal to cut emissions from aircraft and an initiative to phase out HFCs, one of the worst greenhouse gases.
The Paris Agreement ratification was born out of China and the US's shared desire to tackle climate change, which drew in the rest of the world, even though that shared vision may no longer exist. But it is also a reflection of the fact that, as we approach the end of a year that is set to be the hottest ever, the reasons that all nations still need to act to tackle the threat of climate change haven't changed.
The Paris Agreement was a legally binding deal between 195 countries to work to a common objective of limiting temperature rises to "well below 2°C by 2050". It is backed up by increasingly robust scientific evidence that climate change is happening, it is man-made and its consequences will be wide-ranging and momentous if significant mitigation and adaptation action is not taken – and soon.
Paris differs from previous climate change agreements because of its bottom-up approach and collective spirit. All countries share the same GHG emission reduction goal but it is up to them to decide how to contribute to it. Countries will be encouraged to meet their ambitions through the peer pressure engendered by regular reviews.
We have come a long way since last year's COP meeting in Paris, but there is still much to do. The work starts in Marrakesh – 'the COP of Action'.
Stephen Hibbert is Global Head of Energy & Carbon Efficiency, ING Wholesale Banking and chair of the Climate Finance Forum of the Climate Markets & Investment Association (CMIA)
