On Wednesday 24 November Glennmont Partners hosted a lunchtime seminar at the Intercontinental London Park Lane hotel, exploring the theme of Post-COP26: What does this mean for investors in renewable energy? Chaired by Glennmont co-founder, Peter Dickson, attendees heard from Frank Gordon, Director of Policy at the Association for Renewable and Clean Technology, and Tom Burke, Chairman of the independent climate think tank E3G, both of whom had attended the Conference in Glasgow. The speakers discussed the wider climate challenge, their assessment of the progress made at COP26, and their expectations for the future of climate policy.
Frank Gordon, Director of Policy at REA
Frank Gordon, Director of Policy at REA, began with an overview of COP26. He relayed how the Glasgow Climate Pact obliges signatories to provide US$100bn funding to support adaptation efforts in less economically developed countries by 2023, alongside commitments on deforestation, carbon markets, methane, and a just transition. He drew attention to the key wording of “phase down of unabated coal power”, the review of Nationally Determined Contributions in 2022, and the One Sun, One World, One Globe commitment on transmission grids and renewables.
In terms of what this means for investors, he spoke of the near-complete recognition of the need to move away from coal power, the strengthened rulebook for carbon markets globally, and a belief that the various agreements delivered in Glasgow should feed into more supportive international policy for renewables around the world.
Reflecting on the industry reaction from COP26, maintaining momentum was highlighted as key, through such upcoming milestones as the 2022 GHG emission reduction commitments and via locking down the detail and implementation of the conference’s pledges. He said the phasing down of coal was particularly welcome, with the direction of travel set against fossil fuels internationally. The global nature of these changes was also highlighted, with industry expecting no immediate changes to European policy as other parts of the world ‘catch up’ on climate policy. Furthermore, the new rules for trading carbon credits potentially leading to financial support for international renewable projects was identified as a key development.
Tom Burke, Chairman of E3G
Delivering the keynote, Tom Burke, Chairman of E3G, described the political challenges of trying to get 200 countries to align on climate change, commenting that only tax is more complicated. He noted that the main issue in gaining consensus is the question of how to constrain the economy from wrecking the planet. He said that Glasgow represented ‘a turning point’ as the science of climate change gets more terrifying, but that failing to meet our tough mid-century deadline to stop burning fossil fuels will mean climate policy has failed. He added that a safe and secure climate is a public good, but to achieve this will likely involve a difficult and messy relationship between the public and private sector.
Turning to the tone of COP26, he reflected that it was much more cooperative and workmanlike than previous summits, in large part due to recent global events leading to a greater responsiveness from governments over climate concerns. More specifically, he believed carbon pricing regulators are starting to put a price on carbon in the right place, which was encouraging. He also highlighted coal’s significance in the final agreement, making the point that phasing out coal cannot be achieved without first phasing down.
In terms of what comes next, he warned that there is a significant risk of climate policy failure. He said we are going to move faster towards net zero, but it will be shifting and turbulent, with the acceleration of the five-year ratchet to an annual occurrence a reflection of this newfound urgency. He concluded by setting out how climate change is ultimately a battle between physics and politics that the former will always win – and that as the pressure to solve the climate crisis increases, the level of uncertainty is also likely to rise.
