Climate change matters: a roundup of events in September
The ESG team takes a close look at the latest carbon emission targets that have been submitted ahead of December's UN climate change conference.
Climate change negotiations
As the UN climate change negotiations (COP21) draw closer and the 1 October deadline for countries to submit their Intended Nationally Determined Contributions (INDCs) approached, we saw a flurry of carbon emission reduction news.
No less than 68 countries submitted their INDCs in September. As at 5 October, around 90% of global emissions were covered under current pledges.
Commitment from LDCs
The recent spate of INDC announcements and the high level of commitment seen from the least developed countries (LDCs) demonstrate a strong willingness on the part of these governments to reach an agreement to address climate change and its social and economic impacts.
Indeed among LDCs there have been some ambitious targets put forward. However, they also require financial support in order for these pledges to be achieved and climate change finances are expected to be a key part of the Paris negotiations in December.
Strong commitment from large emitters
The Brazilian pledge has been well received, as it is the first developing country to commit to an absolute economy-wide emissions target, as opposed to aiming for a target relative to business-as-usual, which is what other developing countries have done so far.
Brazil has committed to reducing greenhouse-gas emissions to 37% below 2005 levels by 2025 (for example, South Korea’s goal is to cut emissions by 37% from 2030 business-as-usual levels).
Although environmental NGOs have criticised the target, as it effectively allows Brazil to increase its emissions over the next decade (given 2012 emissions were already 41% below 2005 levels), the setting of an absolute target by a large developing country sends a positive signal about their level of commitment.
It shows that the Brazilian government is serious about reducing emissions, regardless of the fact that developing economies generally require more flexibility as the progress of their development could depend upon emissions-producing processes such as industrial activity.
The other positive news in the month came from the reaffirmation of the US and China’s Joint Announcement on Climate Change that was issued last year.
During September’s Climate Week in New York (21-28 September), the Chinese President unveiled new restrictive policies towards carbon intensive activities and committed $3.1 billion to a South–South Climate Cooperation Fund to help developing nations combat climate change.
It was also announced that the Chinese national carbon trading scheme is to be rolled out in 2017.
This is meant to help China achieve a goal set with the US last year, of ensuring that emissions peak around 2030.
The much-anticipated Indian INDC pledge was submitted four hours before the deadline of 1 October.
The country committed to cut its economic emissions intensity by 35% by 2030. The Indian government also promised to develop its clean energy sector and focus on land restoration through forest planting.
Large countries’ disappoint
On a less positive note, some large countries have submitted disappointing pledges.
Indonesia has committed to an unconditional 29% emissions reduction by 2030 from business-as-usual levels (this becomes a 41% reduction conditional on the receipt of $6 billion worth of aid).
Meanwhile, South Africa committed to ensuring that emissions peak between 2020-2025, plateau for about 10 years and then start to fall.
The government provided a target range for emissions between 2025-2030.
The submissions are disappointing because neither the Indonesian government nor the South African authorities have provided enough detail on how their goals would be achieved.
The UK Met office published a new report stating that global temperatures are likely to be record-breaking in 2015 and 2016 due to the reversal of natural climate cycles in the Pacific and Atlantic oceans amplifying man-made global warming.
Meanwhile, Arctic sea ice reached its annual minimum in September, raising new concern about the risk of permafrost thawing.
A scientific study (published in Nature) looked at the economic impacts of the melting of the Arctic permafrost (and the subsequent release of carbon dioxide and methane gas) and estimated it could cost the global economy an extra $43 trillion by the end of the next century.
Energy systems at risk
A new report from the World Energy Council warns that global energy systems (including power stations, distribution grids and networks) are at risk from the effects of climate change such as flooding, severe storms and rising sea levels.
This could have a potentially catastrophic knock-on effect on global infrastructure.
The report aims to highlight the importance of climate change adaptation and the need for the issue to be addressed at the UN climate change negotiations in December.
Adapting energy infrastructure to cope with the pressures of the effects of climate change is likely to add significantly to the already-estimated $48-53 trillion that needs to be invested, on a global basis, in energy infrastructure by 2035.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.