COP26 has just ended, it was the twenty-sixth annual summit organized by the United Nations to combat climate change. The results of the COP26, the climate change conference, are insufficient outcomes for many experts and also for many participants of the conference. In fact, the outcome of COP26 was the Glasgow Climate Pact which represents a great compromise between almost 200 nations, which holds together very different interests, priorities, and points of view; and unfortunately in the end it displeases everyone. But let’s see in particular what goals have been achieved with this conference.
Reduction of coal exploitation
The agreement provides a reducing plan for the exploitation of carbon which is currently responsible for 40% of annual carbon dioxide emissions. But there will be a gradual reduction not a phase-out, as countries such as Japan, Korea, and Australia planning to use it again as a pillar of the energy mix until 2030, the year in which coal should disappear instead.
The commitment to stop the deforestation process, which unfortunately has failed on the part of Brazil and Indonesia.
COP27 signed an agreement and established funds of less than $20 billion to eliminate deforestation by 2030. While Brazil alone demanded $1 billion a year just to protect the Amazon, Brazil went against signing this agreement and explained that it will strive to reduce only illegal deforestation to zero, and not the deforestation that is driven by agriculture, livestock, infrastructure, and miners. A similar position has also been taken by Indonesia, a key country due to the high presence of forests.
Aids to Poor Countries
The agreement also provides for more financial aid for poor countries, which are also those destined to suffer the most dangerous consequences of climate change. According to the agreements, by 2025 economic aids to these countries is expected to double compared to pre-Covid levels in 2019.
The final commitment
The main problem with the conference is that it is an extremely weak agreement. Although the president of COP26, the British Alok Sharma, promotes the Glasgow Climate Pact as an agreement that aims to keep the level of global warming below 1.5 degrees compared to the pre-industrial average. Other experts such as the Climate Action Tracker consider these policies insufficient to meet the Paris target. As the next photo highlights.
What are the effects of COP26 on businesses.
Although cop26 is difficult to consider a success, the commitment made in Glasgow will have repercussions on businesses and the macroeconomic environment. The plans signed to reduce carbon production will bring higher taxes and a lower level of quotas for the production of the same, which will have as a final effect the increase in the price of this fossil fuel.
Subsequently, at a global level, there are already stimuli that help companies to move towards the green transaction. From the impulses of investors and customers who demand increasingly sustainable products from companies with zero climate impact.
From a managerial point of view, there is a push to act concretely to realize the commitments and objectives announced in the corporate value of each company. The ways to materialize these commitments can be carried out by:
- Implement carbon transition as a pillar of business strategy. Not seeing this change as a cost, but as a strategy to minimize the risks of climate change and look for opportunities in alternative strategies and new energy sources;
- Determine the carbon price internally to reflect on the final price the negative externalities that the latter produces, thus creating incentives to speed up the green transition;
- Introduce ESG metrics in the remuneration plans of managers and employees, linking bonuses and salaries to specific sustainability objectives;
- Monitor your carbon footprint by extrapolating reports on the evolution of its impact.
These sustainable practices will become priorities in the years to come. Now the time for reflection is over: the time has come to act and look for the opportunities offered by the green transition.