With war, inflation and electoral chaos preoccupying world leaders, the Biden administration is looking for corporations to take center stage as the U.N. Climate Change Conference gets underway in Sharm el-Sheikh, Egypt.
In a shift, U.S. says companies are pivotal to climate talks’ success
While government action typically dominates these talks, political paralysis and public pressure are pushing companies to step up with their own emission pledges — and money to help poorer countries bearing the brunt of climate change.
Government funding alone can’t cover most of what vulnerable countries need, said John D. Podesta, senior adviser to President Biden on climate change, in an interview. Some $3.8 trillion in annual investment is needed in the next three years to meet the world’s climate goals, including reducing emissions and helping nations adapt to the impacts of climate change. Only 16 percent of that money is now flowing, according to a new report from the Rockefeller Foundation and BCG Research.
“Private-sector capital flows … that’s where the real money is,” said Podesta, who will be one of the first White House officials to arrive at the negotiations. “We’re talking billions when the need is trillions. We’ve got to unlock that [private-sector] capacity for people to make investments in building a clean-energy future or else we’ll miss both the development goals and the climate goals.”
There are few expectations for a breakthrough governmental climate deal at this year’s summit, one reason corporations are in the spotlight.
“Anything this hard does not get resolved with a global diplomatic committee,” said David Victor, co-director of the Deep Decarbonization Initiative at the University of California at San Diego. “It gets resolved with a small group of highly motivated actors who go off and do stuff and drag everyone else along.”
COP27, under U.N. guidelines, is designated to focus on “implementation” — executing past promises to cut emissions. That means that sweeping deals between governments are expected to be harder to come by, as discussions over financing clean-energy and climate-adaptation projects come to the forefront.
Many environmentalists are alarmed that the conference will not showcase bolder governmental commitments to slash emissions, and includes so much corporate underwriting.
Some administration aides have been warning that this financing debate could be politically disastrous for U.S. leaders, according to a person familiar with the planning, although the White House is moving to counter criticism.
In recent weeks, U.S. climate envoy John F. Kerry has been seeking support from other countries and companies to create a clean energy financing scheme to help poorer nations shift away from fossil fuels. Companies would be given credits for assisting this financing, which they could use to offset their own climate emissions.
The scale and details of this framework are not yet clear, but Kerry has recently been making the rounds with potential financiers, including a conference late last month in Seattle backed by Bill Gates, followed by one in London. At the Egypt summit, the United States will host a “call to action” event during which private companies announce plans for mobilizing capital and technology to help developing nations adapt to climate change.
Biden’s announced visit to COP27 will be just a four-hour stopover on Nov. 11, illustrative of how governments view this summit.
The president might be expected to use this world stage to brag about U.S. passage of the Inflation Reduction Act, but this new law was crafted to be domestically focused, aimed at addressing climate change through hundreds of billions of dollars in corporate tax breaks, grants and loans. It includes few new mandates, and no taxes or other broad-based requirements to guide companies on reducing carbon-dioxide emissions.
Following COP27, the White House plans to make international aid money a top priority in upcoming budget talks, Podesta said. But for now, it sees reforms to boost climate funding from multilateral development banks and efforts to get private-sector financing as more promising ways to raise the needed capital, he added.
That may set the stage for friction in Egypt. Leaders in the developing world are frustrated that Biden and other leaders of rich countries have yet to follow through on promises of major government aid, and they have struck a skeptical tone about private-sector financing ahead of the conference.
At COP27, negotiators are focused on pushing the wealthiest nations to provide help to developing countries, and companies will face renewed pressure to focus their efforts on the global south.
“Are we really delivering on climate change, or are we delivering on guarantees to insure profits for the private sector?” Egypt’s lead climate negotiator, Mohamed Nasr, said to journalists during a preview of the summit. “The thinking has to change. Investors should be thinking of their climate positive impacts as part of their assessment of projects and delivery for investors.”
One big target is the financial sector and the coalition it formed ahead of Glasgow of banks and investment firms pledging that they will invest their assets, now totaling $150 million, in alignment with the world’s goal of limiting warming to 1.5 degrees Celsius.
But some of the firms in the group, called the Glasgow Financial Alliance for Net Zero, chafed at a requirement that they phase out financing new fossil fuel projects, in alignment with the U.N. guidelines for curbing warming. The requirement was scrapped, drawing ire from climate organizations that are increasingly focusing their pressure campaigns on companies.
“Companies are stepping up on climate action because of how existential this is for them, but we are going to need to see a much bigger global plan,” said Peter Lacy, global sustainable services lead at the consulting firm Accenture.
About a third of the world’s top 2,000 public and private companies have committed to zeroing-out their emissions by 2050, according to Accenture’s research. But the firm found that 93 percent of them are on track to miss their targets unless they start moving faster.
The outlook was similar from Climate Action 100+, a network of investment groups that tracks the progress of 166 of the world’s biggest corporate emitters of greenhouse gas. When the group formed in late 2017, only five of those companies had net-zero targets. Now more than 120 do. But few of those companies now have credible plans for achieving that goal, according to a new report from Climate 100+.
“This is a critical climate summit for these companies,” said Elizabeth Sturcken, a managing director at the Environmental Defense Fund focused on corporate partnerships. “We need to see some progress this year and what companies have done with these commitments. They are in the messy part of doing the hard work. I predict we will see some failures, and we will also see some real successes, too.”
Morten Bo Christiansen knows how messy the work can be. He leads the decarbonization effort at Maersk, the giant shipping and logistic company that burns through 80 to 90 million barrels of oil per year. The firm has set a goal of zeroing-out its emissions by 2040, making it a favorite point of reference for Kerry and earning it a measure of prestige among the corporations participating at the summit.
But making progress on the commitment is complicated amid the lack of clear decarbonization rules from international regulators. The task, Christiansen argues, would be far fairer if there were a carbon tax that gave all companies a uniform incentive to cut emissions, by making the kind of investments Maersk is, in nascent technologies such as barges that run on clean burning methanol made with renewable energy and biomass. “We need a global solution,” he said.
Source: WP
