MUFG research released today suggests that the UN Climate Change Conference UK 2021 (COP26) could play a vital role in reducing global warming if it facilitates coordination, cooperation, and cohesion among global economies.

Increased scientific evidence of human-induced climate change has increased the urgency, however, given the scale of the task, the backdrop of the pandemic, and geopolitical tensions, there is no shortage of challenges.

The report looks at:

  • Key themes of progress at COP26 and how to measure success
  • The energy crunch in the context of the transition
  • What various transition pathways could look like for energy companies
  • How the versatility and flexibility of hydrogen could drive widespread de-carbonisation

According to Ehsan Khoman, Head of MUFG's EMEA Emerging Markets Research team, COP26 is a critical milestone and perhaps the last chance to meet key climate objectives of limiting global warming to 1.5C and reaching zero emissions by 2050.

"What is clear is that there are indisputable challenges with the transition towards a greener carbon neutral state. Whether policymakers at COP26 can move from pledges to action that will address the fine print in how the energy transition should collectively work, will ultimately determine if the journey will be orderly or not," according to Khoman.
“This historic opportunity comes as global energy markets struggle with an acute supply/demand imbalance which is causing a spike in energy prices. This is saddling the already delicate and complex deliberations of how two opposed but also intertwined energy systems can coexist until the engineering challenges that will lead to a sound renewables-led future, can be solved," he added.

The research highlights a number of opportunities that could be agreed upon at the summit, stemming from the correlation between carbon pricing in driving de-carbonisation forward, carbon footprint disclosures on products and services to enhance consumer choices, and how the rise of ESG is driving capital towards de-carbonisation. To drive technological innovation forward, the research suggests that a cumulative US$50-60 trillion of green infrastructure investments is needed to meet net zero by 2050.

Of particular focus is the consumer sector and how it can play a pivotal role in reducing emissions through government regulation and consumer choices, according to the report. Governments could mandate carbon footprint disclosure on products and services, empowering consumers to choose goods that have low carbon footprints. Khoman explains:

“There is a huge opportunity at the moment to leverage consumer pressure on global companies to de-carbonise their value chain, finance carbon offsets and aim for a net-zero label."

Some companies have taken the initiative to introduce a novel carbon labelling scheme in the United Kingdom, supported by the government and multinational consumer goods companies.

“The introduction of carbon labelling would have a positive effect on consumer choices and the impact they have on the environment. However, in order for carbon labelling to be successfully implemented, global economies need to work in unison. The challenge is huge given the scale of this task, combined with the test of the pandemic and global geopolitics," Khoman concludes.

Click here to view the full report.