Countries, corporates and COP27: Will net-zero targets keep 1.5C alive?

Research suggests nations and corporates are off track to keep 1.5C alive

A lot of the talks going into COP26 – and indeed during the first week – were focused on how whether the negotiations “could keep 1.5C alive”. Over the course of COP26, a flurry of new national climate targets were made, marking a decisive step forward in realising the ambitions of the Paris Agreement.

As the gavel came down on the Glasgow Climate Pact, created at COP26, the International Energy Agency (IEA) published research based on the updated climate commitments made during COP26. These include India’s net-zero target for 2070 and how more than 100 nations have pledged to cut methane by 30% by 2030.

The IEA estimates that, if these targets were met on time, the world would be on course for an 1.8C global temperature rise by the end of the century. Others put the trajectory at a slightly different number, most notably Climate Resource claiming the pledges would lead to 1.9C of warming. This is a more optimistic reading however. Climate Action Tracker (CAT) published new analysis during COP26, stating that they are likely to result in 2.4C of warming.

One of the key agreements of the Glasgow Climate Pact was that nations would agree to revisit climate targets with the aim, of strengthening them over the coming years. These formal country pledges (NDCs) were ideally meant to be updated prior to COP27.

Nations failing

However, new research from Energy Transitions Commission (ETC) finds that just 24 nations have submitted updated NDCs since COP26, and these are unlikely to shift the dial on the net-zero movement.

As of mid-October 2022, of the 24 new national updates, only Australia has substantially updated its emissions goals. Australia is the largest emitter to update its NDC with a new 2030 target for a 43% cut in emissions on 2005 levels. This, the ETC claims, has lowered the 2030 emissions gap by around 0.1 Gt.

Overall, the updated NDCs to date will “make only a very limited contribution to closing the 2030 emissions gap” and keeps the world on course for more than 2C of warming.

The ETC report finds that if new NDC commitments were delivered only 3.5 GtCO2 of additional emission reductions would be delivered by 2030, despite the fact that 85% of global emissions are covered by a net-zero target. However, keeping 1.5C alive would require emissions in 2030 to be 22GtCO2 lower than current trajectories and commitments made at COP26, if delivered, would close that gap by 9.5GtCO2.

This highlights an implementation gap between targets and action.

The ETC also warns that even with full implementation of formally submitted NDC targets, the world could be on course for 2.4C of warming, even with “further subsequent action”.

COP26 also introduced various sector-based agreements covering deforestation, methane, and coal phase out. However, the ETC warns that even if countries realise these commitments, the global average temperature increase would still reach 1.8C, overshooting the 1.5C target of the Paris Agreement.

Additionally, the ETC notes that the “ vast majority [of commitments] are yet to translate into formal country commitments, and critical agreements such as ending deforestation by 2030 are severely underfinanced”.

Indeed, combatting deforestation – likely to be buoyed by the recent election change in Brazil – and financing decarbonisation efforts are two of the critical catalysts listed by the ETC to drive significant change to keep 1.5C alive.

The report also notes that despite new pledges from major emissions contributors, an implementation gap exists between targets and progress. The EU’s REPowerEU package, the US Inflation Reduction Act, and in China’s 14th Five-Year-Plan are all welcome additions in efforts to meet 1.5C but the ETC notes that many developed countries will need to “overachieve or increase emissions reduction commitments” in order to account for growth in developing countries.

Then, of course, there is the need to combat current geopolitical and economic issues. The Covid-19 pandemic, supply chain disruptions and record energy and good prices may result in many regions focusing on short-term economic solutions rather than long-term net-zero trajectories.

“Despite the current global economic and political challenges, we must keep focused on the global crises presented by climate change. Each 0.1 °C rise above 1.5°C will have a hugely significant impact,” the ETC’s chair Adair Turner said.

“Many of the actions needed to build greater energy security could also drive a faster transition to a more resilient and stable low-carbon economy. Both full implementation of COP26 commitments and further progress at COP27 are therefore essential if the world is to have a 50-50 chance of limiting global warming.”

At the moment, top-level pledges from nations and regions remain, in many cases, just that. The material in the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Reporting Cycle outlines how the global temperature increase is now likely to exceed 1.5C by 2030 due to historic inaction at the national and international levels. Whether this is temporary or permanent depends, largely, on actions taken in the near term. Exceeding 1.5C permanently will likely put the world on course for 2.7-3.5C of warming by 2100 – an increase that will have devastating impacts on humanity and nature.

The main message from the report is that both nations and the private sector need to focus on “additional potential” surrounding net-zero pledges, such as accelerating efforts to end deforestation – currently under-reflected in NDCs according to the ETC – and how efforts to decarbonise transport and energy can turn pledges into action.

Corporate concerns

But what of corporate efforts to reach net-zero?

By the end of 2021, almost 1.400 companies signalled an intent to set 1.5C-aligned targets through the SBTi. The IPCC’s analysis in 2018 kick-started a fresh wave of support for 1.5C, which has quickly become seen as the only acceptable temperature goal in international climate discussions. The private sector is going this way too – the SBTi is increasing its minimum target-setting requirement to 1.5C and 2C-aligned targets will cease to be valid from 2025. It has also unveiled a new standard aligned to net-zero.

Additionally, more than 450 financial institutions representing $130trn of capital are members of the Glasgow Financial Alliance for Net Zero (GFANZ) initiative. Despite ending formal ties with the Race to Zero initiative, GFANZ has published enhanced guidance on how investors can measure key metrics of investment, lending, and underwriting activities with their net-zero commitments.

GFANZ’s Portfolio Alignment Measurement Report has been published to gain feedback from the finance sector on whether proposed frameworks will provide relevant metrics and data collection to ensure portfolios are 1.5C aligned.

It all sounds good on the surface, but much like national commitments to net-zero, the corporate world is suffering from an implementation gap.

New research from Accenture, published this week, has analysed the emissions commitments from the 2000 largest public and private companies around the world. The research found that only 34% of these firms are actually committed to net-zero and only 7% of companies are on track to achieve net-zero emissions for Scope 1 and 2.

Indeed, 93% of the world’s largest firms will fail their emissions commitments if they “don’t at least double the pace of emissions reduction by 2030”, Accenture notes.

The report also states that for companies with a deadline ahead of 2050, evening moving the date back won’t help them reach their emissions targets. Even in a scenario where companies accelerate emissions reduction to twice the current rates in the years to 2030 and then three times after – 59% would still fail by 2050.

“Amid global economic, political and environmental disruption, more companies than ever before have publicly committed to largely decarbonizing by around 2050. This heightened ambition is encouraging, but it is also clear that a steep acceleration of emission reductions is required,” Accenture’s chief executive Jean-Marc Ollagnier said.

“Maximising value from mature technologies, such as digital and certain renewable energies, while accelerating the deployment of breakthrough solutions like hydrogen will be critical. Most importantly, reaching net zero will require urgent and profound transformations, as it is about embedding sustainability into everything organisations do, redefining their purpose, culture, and business models.”