Prior to COP26, we published an article that identified several issues being discussed at COP26 that could be of critical importance to business.

During COP26, we followed the developments of these issues in a special Viewpoints series.

And now that COP26 is concluded, people are asking: What impact did it have? Where does the world stand on these issues?

You probably read the mixed reviews with regard to success of this COP. The New York Times reported Nov. 13 within minutes of the banging of the final gavel: “Global negotiators in Glasgow agreed to do more to fight climate change and aid vulnerable nations, but left crucial questions unresolved.”

What was resolved? For those of us who have studied agreements coming out of the COPs, this agreement, called the Glasgow Climate Pact is notably weak. The parties could only agree to language that “notes” certain issues or “urges” certain actions, as opposed to strong language that “decides” any points or “commits” parties to any defined metric.

The Pact does “reaffirm” the Paris Agreement temperature goal of holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 above pre-industrial levels but that will require all nations to slash their carbon dioxide emissions by nearly half this coming decade to hold warming below 1.5 degrees Celsius.

However, the Pact merely “emphasizes” the urgent need for parties (as opposed to “the parties agree to…”) to increase their efforts collectively to reduce emissions through accelerated action and implementation of domestic mitigation measures in accordance with Article 4, paragraph 2, of the Paris Agreement and merely “urges” parties that have not yet communicated new or updated nationally determined contributions (NDCs) to do so as soon as possible in advance of the next session of the Conference of the Parties (as opposed to “the Parties that have not yet communicated new or updated nationally determined contributions agree to submit by [insert date]”).

It also “urges” wealthy nations (as opposed to “wealthy nations agree…”) to “at least double” funding by 2025 to protect the most vulnerable nations from the hazards of a hotter planet. And it explicitly mentions the need to curb fossil fuel usage, the first time a global climate agreement has done so.

Here’s where the global conference ended up on key business issues we identified:

  • Carbon market mechanisms. Some resolution here. In approving the Glasgow Pact, world leaders formally approved rules for implementing Article 6 (specifically Sections 6.2 and 6.4) of the Paris Agreement. The rules were finalized on Saturday morning in Glasgow, and the package was adopted in the final plenary of COP 26.
    • Paragraph 6.2 Summary (Click here to view the text) Article 6.2 covers rules for bilateral and multilateral transfers between countries. The issue here was whether to implement a transaction fee to pay for adaptation in developing countries. In the end, the transaction fee did not appear in the rules as agreed, but there are still open issues to be taken up by the Subsidiary Body for Scientific and Technological Advice, which is a technical negotiating track that accepts requests from the Conference of the Parties (COP).
    • Paragraph 6.4 Summary( Click here to view the text) Paragraph 6.4 covers the creation of a centralized hub to replace the Clean Development Mechanism (CDM), and the biggest points of contention coming into Glasgow were whether countries would have to adjust correspondingly their carbon accounts when transferring emission reductions abroad and the degree to which Certified Emission Reductions (CERs) generated under the CDM could be applied towards NDCs. The resolved text sets out criteria for countries to use CERs from projects registered after Jan. 1, 2013 to meet their first NDC, or first adjusted NDC,, with no corresponding adjustment because the CDM predates that requirement, to be collected in an emerging “hub”. More work to be done here as well, including designating a 12-member supervisory body to oversee the emerging hub and tasking it with reviewing baselines of recognized credits.
  • Voluntary carbon market transactions. In addition to national carbon account, voluntary carbon markets are also acknowledged to reduce overall emissions, but the transactions themselves are not registered in national carbon accounts. No determination was made at COP26 with regard to the use of voluntarily reductions in meeting NDCs.
  • Climate Finance. The most that the parties could get to on this topic was a collective attempt to try to shame First Word countries, by merely urging further action.
    • The Pact “notes with deep regret” that the goal of developed country parties to mobilize jointly US$100 billion per year by 2020 in the context of meaningful mitigation actions and transparency on implementation has not yet been met, and “welcomes” the increased pledges made by many developed country parties and also the Climate Finance Delivery Plan: Meeting the US$100 Billion Goal, and the collective actions contained therein. The Pact further merely “urges” developed country parties to at least double their collective provision of climate finance for adaptation to developing country parties from 2019 levels by 2025, in the context of achieving a balance between mitigation and adaptation in the provision of scaled-up financial resources, recalling Article 9, paragraph 4, of the Paris Agreement. In the absence of wealthy nation commitment to this finance, the Pact “calls uponmultilateral development banks, other financial institutions and the private sector to enhance finance mobilization in order to deliver the scale of resources needed to achieve climate plans, particularly for adaptation actions.