| 06 May 2021 |

COP26: What are key stakeholders doing?

The United States of America

The US' withdrawal from the Paris Agreement caused many to worry for the future success of the agreement due to its large historical and continued contribution to climate change (representing more than a quarter of all historical CO2), and its important role on the global political stage. Its participation is therefore seen as key to the success of any global effort to combat global warming. There were also concerns that its departure would "demoralise" other nations in their efforts to reduce CO2 emissions.

However, President Biden's election win allayed those fears when he signed an executive order on his first day as President to re-join the Paris Agreement. The US hosted a two-day virtual climate summit (the "Climate Summit") on 22-23 April 2021, where it set out its new NDC target to cut carbon emissions by 50-52% below 2005 levels by the year 2030. The Climate Summit was a success and has arguably put the US back on the climate world stage. Read more about the Climate Summit.

China

China has had the highest greenhouse gas output in the world since 2004 (in terms of total emissions) and this trend is set to continue if its economy continues to grow without fully committing to decarbonisation. The Chinese President Xi Jinping took everyone by surprise in September 2020 when he announced that China would reach net zero emissions by 2060. Climate experts were therefore eager for the unveiling of China's latest five-year plan in March 2021 to see how the country would action its commitment to net zero. The plan has been met with disappointment since its unveiling, as many have said it does not go far enough, highlighting that China's emissions intensity target is the same as the one outlined in the previous five-year plan. China could however still decide to lead the way for emerging markets such as India to carbon neutrality outside of its five-year plan. At the US-hosted Climate Summit in April 2021 China did not unveil a new NDC under the Paris Agreement and instead chose to restate its commitment to ensuring that its emissions peak before 2030, while reaching carbon neutrality by 2060.

The European Union

The EU recently shared its goal of becoming the first climate-neutral 'continent' by 2050 and committed to reducing its greenhouse gas emissions by 55% below its 1990 levels by 2030. The European Union exceeded its 2020 target to reduce its emissions by 20% compared to 1990 levels - through increasing its share of renewable energy by 20% and committing to make a 20% improvement in energy efficiency. As part of its programme to tackle climate change, the EU developed the EU Emissions Trading System ('ETS') which takes a 'cap and trade' approach to cut greenhouse gas emissions. Companies from energy-intensive industries can buy and sell emissions allowances as necessary and this initiative has largely been a success, as around 40% of EU greenhouse emissions are regulated by the ETS.

More recently, the European Parliament has adopted a resolution to introduce an EU carbon border adjustment mechanism which would impose a charge on certain imports from less climate-ambitious countries to aid the global drive to decarbonise. However, this has been met with concerns from certain international governments: for example John Kerry, the US climate change envoy, urged the EU to delay enacting this measure until after COP26 citing that it will have huge implications for economies and trade. Read more about the EU's recent provisional political agreement on the European Climate Law.

India

India is the world's third-biggest emitter of greenhouse gases, behind the US and China. India's emissions are on trend to rise as it continues to fuel its economic growth with fossil fuels. Coal India is the largest coal producing company in the world and coal provides 70% of the country's electricity. India stands to be one of the nations most significantly impacted by the devastating effects of climate change because of its geography, large rural population, and high levels of poverty. India is, however, making strides to do its part in combatting climate change and recently Prime Minister, Narendra Modi, committed to deploy 450GW of renewable energy by 2030. India's budget unveiling in February 2021 revealed the Government's plans to focus on rebuilding the economy following COVID-19 but not at the expense of the environment, with several measures intended to enhance India's environmental protection efforts.

Ahead of COP26, however, India has yet to commit to net zero or indeed submit its revised NDC as required under the Paris Agreement. Following a visit from COP26 President, Alok Sharma, in February 2021 many are optimistic that net zero is at forefront of India's climate agenda and expect a commitment to net zero to follow in the next few months although nothing was unveiled at the US Climate Summit in April 2021.

What will Travers Smith be doing in the run-up to COP26?

Over the coming months, Travers Smith will be updating this page to keep you informed of all the key developments and news in the run-up to COP26. Travers Smith is involved in a number of different initiatives connected to COP26.

For example:

Jonathan Gilmour, our Head of Derivatives and Structured Products at Travers Smith, has recently been appointed to the Principles & Contracts Working Group of the Taskforce on Scaling Voluntary Carbon Markets. Launched in September 2020, this is a private sector initiative working to scale a workable carbon credit market so companies can meet their carbon reduction commitments through purchasing carbon offsets.
Travers Smith's Environment Committee is actively committed to helping the firm reduce its overall carbon footprint and acting in an environmentally friendly and sustainable way. For more information on our efforts in this area, please see our Environment page here.
Please also see our Sustainable Business Hub – where you can find resources designed to help you and your business to anticipate regulatory developments, proactively manage risk and achieve your ESG focused business objectives.

This page was first published on 1 April 2021 and is regularly updated to reflect the latest developments.

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