A number of important decisions were made at COP26, including the Global Methane Pledge, signed by over 100 countries. This pledge aims to reduce global methane emissions by 30 percent by 2030. Many other declarations and alliances were also announced during Presidency events and press conferences.
The World Leaders’ Summit called for greater ambition, and a number of developed countries committed new financial pledges. The US, which has never made a climate pledge before, pledged the largest ever amount of money to the Adaptation Fund. Other notable pledges were from Germany, Japan, and Spain. Several countries also pledged to achieve net zero emissions by 2050.
The European Union (EU) said it would “fight” for a more ambitious outcome, calling for stronger rules on Article 6 of the Paris Agreement. It also called for enhanced transparency framework arrangements and a common timeframe for all parties to submit NDCs. Switzerland’s delegation stressed three priority areas for EIG: operationalization of rules, setting a finance target post-2025, and alignment of all financial flows with Paris Agreement goals.
The COP26 Outcomes Summary outlines the major issues discussed at the conference. The main goal of the conference was to reach a global net zero by mid-century, while keeping the maximum temperature rise within 1.5 degrees Celsius. The COP sought to achieve this by accelerating the phase-out of coal and mobilizing $100 billion in climate finance annually.
COP26 outcome outlines commitments to mobilize $100 billion a year to support climate efforts in developing countries
In the COP26 outcome document, countries made commitments to reduce emissions by at least two-thirds over the next five years, including a plan to phase out coal by 2050. This language differs from earlier drafts, which called for phasing out coal entirely. India was one of the nations that urged a change in the text. Scientists warn that a temperature increase of 1.5 degrees Celsius by 2100 will lead to catastrophic climate events, species extinction, water scarcity and conflict.
But despite the ambitious targets, countries failed to follow through on their pledge to mobilize this money. Originally, the pledge was supposed to begin as early as 2020. The fact that developed countries did not follow through has further fueled mistrust among developing countries. This is especially problematic because developing countries historically have done less to fuel climate change and are therefore far more vulnerable to its consequences.
Although developed countries have made many promises at the COP, they have failed to mobilize the required funds. At COP15 in Copenhagen in 2009, developed nations agreed to mobilize $100 billion a year. Yet they have not yet met this commitment. COP26 sought to address this by increasing the annual amount that developed countries commit to supporting climate efforts in developing countries. In addition, the Paris Agreement’s rules on climate finance were finalized. These rules are crucial in turning climate ambition into action.
Developing countries are also pressing for increased financial commitments. At COP26, developing countries pushed for increased financial commitments for adaptation and mitigation. Although most of this money comes from government treasuries, it can also come from the private sector.
Calls on multilateral development banks
The calls for a transformation of international financial institutions in the COP26 outcomes summary highlight the need for a multilateral development bank to provide massive investment capacity for the most vulnerable countries and implement climate action. The world bank and IMF are both institutions with the capacity to make important climate change investments.
However, there is a glaring omission in this outcome summary. Although MDBs were praised for their role in providing US$ 66 billion in climate finance by 2020, they conveniently left out their role in funding fossil fuel projects. Such investments could be either policy-based support or indirect investments.
The COP26 outcome summary also included the announcement of US$7.2 billion for a global forest finance pledge. This pledge will be delivered between 2021 and 2025 through results-based finance, capacity-building, and technical support. The commitments are expected to help reduce deforestation and promote the participation of Indigenous Peoples. They are also expected to ensure that the benefits of the financing flow to smallholders.
The COP26 outcomes summary also includes calls for a new finance facility for climate damage, as well as new dialogue on how to fund it. Although the dialogue on loss and damage remains short-lived and underdeveloped, it provides some space for concrete solutions to emerge, and could lead to progress on climate financing in the years ahead.
Other financial institutions
Other financial institutions are important contributors to climate action. Switzerland, for example, stated in the COP26 outcomes summary that it would “fight” for a comprehensive outcome. It also called for robust rules for Article 6 of the Paris Agreement, enhanced transparency framework arrangements, and a common time frame for all parties to meet their NDCs. The Swiss delegation outlined three priority areas for the EIG: operationalization of rules, setting a post-2020 finance target, and aligning all financial flows with the Paris Agreement goals.
Other countries’ proposals in the COP26 outcomes summary focused on the need for greater financial resources for climate adaptation. The Standing Committee on Finance highlighted the need for US$135 billion to implement six12 detailed costed actions in 12 national adaptation plans. In addition, they called for the completion of work on the new finance goal at COP 27. Finally, they highlighted the need for a transparency package to support developing countries’ reporting.
The G20 and COP26 outcomes summary also highlighted the importance of other financial institutions and the importance of their contributions. In particular, the COP26 outcomes summary mentions the role of World Bank and other financial institutions in tackling climate change. In this context, they are essential to the success of the negotiations.
Private sector to enhance finance mobilization
A key aim of the COP26 outcomes was to increase the amount of finance available to combat climate change. The Paris Climate Pact has committed developed countries to mobilize $100 billion annually by 2020, and has extended this target to 2025. Developing countries, however, have expressed concerns about the lack of transparency and accountability around the mobilization of climate finance. They have also pushed for the extension of the long-term finance work program beyond 2020.
While multilateral development banks (MDBs) were absent from the COP26 outcomes, they were promised to align investments with the Paris Agreement by 20217. However, initial progress seems to have stalled. The MDBs’ COP26 statements and progress report were widely criticized for their lack of concrete details and for not committing to curtail financial support for coal and oil projects. In addition, coal and peat-fired power plants are universally considered out of line with the Paris Agreement.
The COP26 outcomes summary emphasized the need for developing countries to access good quality financing options. In particular, developing countries should be able to access grants instead of loans, which will reduce their debt burden. Moreover, the COP26 outcomes summary places loss and damage on the forefront, demonstrating that climate change is already causing serious and devastating losses. Some of these losses may be irreparable.
Another important objective of COP26 was to increase collective and qualitative commitments to climate finance for adaptation. The Paris Agreement requires developing countries to receive 20 to 25 percent of the total climate finance provided by developed countries. The current allocation of adaptation finance is not adequate. In developing countries, 20-25% of climate finance is allocated to adaptation, and many MDBs are responsible for delivering most of the adaptation finance in the form of loans.
Global Goal on Adaptation
In the Global Goal on Adaptation COP26 outcome statement, Parties considered the Adaptation Committee’s report and the proposals of the Presidency. These proposals included a footnote recognizing the African Group proposal, inclusion of adaptation items on the COP and CMA agendas, work on a global goal on adaptation, and reports from the Adaptation Committee for 2019 and 2020.
The World Leaders’ Summit, which was attended by over 120 heads of state, called for increased ambition. New financial pledges were announced by several developed countries. In fact, the UK Presidency announced a record USD 800 million in climate finance over the course of the conference. Additionally, the US announced its first-ever contribution to the Adaptation Fund, and additional financial pledges from Germany, Japan, and Spain. India also announced a new commitment to providing net zero climate finance.
The Global Goal on Adaptation (GGA) is an important component of the Paris Agreement. It will help develop climate finance mechanisms to support adaptation measures in developing countries. A GGA can only be achieved if countries take action to address climate change. In addition, the Paris Agreement includes a goal to limit global average temperature increase to 1.5 degrees Celsius.
The COP26 Outcomes Summary also includes a draft guidance for the Green Climate Fund. The SCF Co-Facilitators, Diann Black-Layne (Antigua and Barbuda) and Toru Sugio (Japan), proposed a draft guidance for the fund. However, the draft guidance was not adopted because the South African delegation opposed its use.
Financial mechanism for loss and damage
A new report from the UNFCCC’s Secretariat highlights the need for a financial mechanism for loss and damage. This is a crucial area for climate action, which needs financial support for developing countries to take action on climate change. The report also highlights the challenges of tracing, reporting, and defining loss and damage finance. It also highlights the role of Article 9.8 of the Paris agreement as a legal basis for addressing loss and damage.
The financial mechanism for loss and damage has a key role to play in ensuring climate justice. Inequity is a significant concern with loss and damage, as a dollar of loss for a poor family will have a very different impact than the same dollar for a rich family. The socioeconomic status of a family affects their ability to receive social assistance and recover from climate-induced losses. After the 2011 disaster in Nepal, only 6% of very poor households sought assistance from the government.
The Financial Mechanism for Loss and Damage is an important topic for the next UNFCCC meeting, where developed countries and developing countries will decide on how to implement the measure. However, the discussion over the fund could potentially fracturing the negotiations.
