The key development at Glasgow on Wednesday 10 November was probably the announcement of a US-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s. This seemingly took Boris Johnson by surprise, because he had just expressed pessimism about the progress on negotiations, and seemingly he was not notified of the impending announcement.
The Declaration has been reported by the mainstream media in Australia as if it were some marvellous breakthrough in negotiations. Journalists seem to have forgotten (or perhaps they never knew) that President Obama also issued a joint statement on climate change with Xi Jinping in 2015, just before the Paris Agreement (read here). This was also just before a massive expansion in Chinese construction of coal-fired power stations both domestically and abroad. Those abroad were facilitated by Obama forcing restrictions on the World Bank, preventing it from financing them, opening the field for the Chinese.
Nine Entertainment (The Age/SMH) even managed to get the contents of the Declaration wrong, stating that
‘Crucially, the statement notes both countries are committed to the Paris Agreement goal of limiting temperature rises to 1.5 degrees…’
In fact, the document read: ‘The two sides also recall the Agreement’s aim in accordance with Article 2 to hold the global average temperature increase to well below 2 degrees C and to pursue efforts to limit it to 1.5 degrees C.’ This was in accordance with the Chinese making it quite clear in Glasgow that the 2°C must remain, and to remove it would break the consensus (perhaps the Nine journalists should have subscribed to this Bulletin, where it has been explained a number of times).
The Declaration had all the hallmarks of a symbolic gesture to give the appearance of action, and China committed to nothing but to cooperate in future and its ‘commitments’ were vague in the extreme. While it recorded that ‘The United States has set a goal to reach 100% carbon pollution-free electricity by 2035’ this was reciprocated with ‘China will phase down coal consumption during the 15th Five Year Plan and make best efforts to accelerate this work.’ Making all those solar panels and wind turbines for the USA will doubtless make that more difficult.
Both countries have declared an intention to ‘communicate’ new Nationally Determined Contributions for 2035 in 2025. Of course, President Xi might well expect a change of US administrations in the 2024 elections, so they are promising little. Both have promised to’ work cooperatively to complete at COP 26 the implementing arrangements (“rulebook”) for Articles 6 and 13 of the Paris Agreement, as well as common time frames for NDCs.
So, despite the hyperbole, the Declaration represents little of substance, and it is worth remembering that Biden publicly criticised Xi for not turning up in Glasgow despite knowing (unless he was unaware) that the Declaration had been under negotiation since April and strategic tensions with China persist.
The outlook for a meaningful outcome remains pessimistic. The key remains meeting the finance requirements of the developing countries.
India has now put a deadline on its demand for $1 trillion, which it has now made it clear it wants by 2030. It seeks this amount to fund deployment of renewables, energy storage, decarbonisation of the industrial sector, and spending on adaptation to defending infrastructure on a warming planet.
Prime Minister Modi announced that India would increase its non-fossil fuel energy capacity to 500 GW by 2030; meet 50% of its energy requirements from renewable energy sources by 2030; reduce its total carbon emissions by 1 billion tonnes by 2030; reduce the carbon intensity of its economy by 45% by 2030; and achieve net zero emissions by 2070. But India wants the money to finance this, and a delegate has made it clear that ‘India will not update its NDC till there is clarity.’
It remains to be seen whether the financial sector will come to the party. One notable feature at Glasgow has been the willingness of business to step up to the plate, especially those companies focused on ESG (Environmental, Social and Governance) reporting. Pressure from investment funds and groups like Climate Action 100+, an investor group with 545 members managing a combined $52 trillion of assets, have driven much of this.
We have seen some divestment of coal assets by corporations such as BHP, Rio Tinto and Anglo American, but the important this to note is that they are not closing coal mines, but simply seeking to remove them from their portfolios. In other words, they are insulating themselves from ESG pressures rather than helping avoid climate change by ceasing mining coal.
Earlier this year, BHP sought to extend the life of its Mt Arthur mine by 20 years, while also seeking a buyer, making it clear that the object was to remove it from its balance sheet rather than reduce emissions. The investor group Market Forces was quickly on to this, and demanded they close the mine rather than sell it. When Rio and BHP sold their shares in a Colombian mine, they were purchased by Glencore, which sought and received the blessing of Climate Action, in return for promising to improve its future climate goals.
The activist financial groups are in fact now concerned at the consequences, unforeseen by them but very foreseeable, that their success in forcing the ESG-sensitive corporations to divest just moves ownership of coal mines by those less sensitive about saving the planet and, lacking a global presence, less vulnerable to pressure from the activist funds. There is, in fact, finance available for coal – just not finance maximally vulnerable to ESG activism.
This has been exemplified by the way in which Anglo American has responded by placing its South African coal assets in a spinoff company, Thungela Resources Ltd, which was handed to its existing shareholders to do with their equity as they wished, and with a senior Anglo executive appointed as CEO. Corporations that are active in a single jurisdiction not only enjoy considerable structural power to influence their government but are also less vulnerable to attacks on their reputation than global players.
Regarding the motivation of the corporations, we should also bear in mind that the resource requirements of renewables (steel, cement, copper, etc) promise massive revenues for the likes of BHP and Rio, so selling (not closing) coal mines to free up cash for investment in such commodities is also good for business.
Boris Johnson went out on a limb with Glasgow and has risked considerable political capital on an outcome that (when crunched in the ‘models’) limits warming to 1.5°C. That outcome remains very much in doubt, at a time when he finds his government embroiled in political scandal and facing an inconvenient energy crisis that has made something of a mockery of his planned shift to renewable energy. He even ran into criticism for the hypocrisy of taking a private jet rather than a train back to London for a dinner.
No doubt, some text will be developed and cobbled together, not by the deadline of 6pm Friday, but after the usual late-night negotiation on the last day. Whether it amounts to much and whether it is implemented is in serious doubt, but – like Chamberlain returning from Munich – Boris will return afterwards to London clutching something on paper. The only thing in doubt will be whether he catches a train or flies.