There can be little doubt that momentum is growing ahead of December\u2019s UN Climate Change
\nConference in Paris. A key question for investors is whether the conference will produce a meaningful
\nresult and therefore the impact it might have on capital markets over the long term. We haven\u2019t
\nforgotten the hope and expectation on show ahead of a largely calamitous Copenhagen conference in
\n2009. Rather, it\u2019s because of the previous disappointments \u2013 and moreover the strategic lessons that
\nhave been learned \u2013 that we believe there may be a more constructive outcome.<\/p>\n
The US and China step up to the plate<\/strong><\/p>\n One landmark moment ahead of this conference has been the Obama administration\u2019s pledge to cut China, meanwhile, has gone a long way to placating its \u201cus and them\u201d doubters in the West: politicians Another noteworthy pledge in terms of scale came from the G7, which in June committed to cutting INDCs set expectations<\/strong><\/p>\n We believe the Intended Nationally Determined Contributions (INDC) programme, where individual UN Will it be enough?<\/strong><\/p>\n While individual country pledges for emission cuts have generally gone further than had been widely expected, the question about whether they are deep enough to prevent a rise in global average temperatures of greater than 2\u00b0C above pre-industrial levels is important in terms of how the conference might progress. Climate Action Tracker estimates that the INDC pledges will lead to a 2.7oC[[http:\/\/climateactiontracker.org\/news\/224\/INDCs-lower-projected-warming-to-2.7C-significant-progress-but-still-above- How the gap between what is needed and what is pledged is construed will set the tenor of We will be watching the ongoing debate about who should bear the brunt of the financial cost and the Regional policies<\/strong><\/p>\n Of equal importance to what is agreed at the conference is how these policies are executed at the Our conclusions<\/strong><\/p>\n Overall, we remain pragmatic. UN climate conferences tend to be fraught events. Seeking agreement at With only a few weeks to go until the start of the UN Climate Change Conference in Paris, Charlie
\ncarbon emissions by 26-28 per cent by 2025 compared to 2005 levels, and deliver an 80% cut by 2050.
\nThis is big news. There has never been a climate conference before which the US has made such a
\ndefinitive commitment, and the country\u2019s reluctance to commit has often been an impediment to the
\nUN negotiation process. The fact it has come now marks a sea change in political attitudes and is
\nsymbolic of the legacy that President Obama wants to leave in his final term in office. His recent decision
\nto formally reject plans for the \u2018Keystone XL\u2019 pipeline adds to US credibility on the subject of climate
\nchange.<\/p>\n
\nwho have historically used the country\u2019s seemingly unmitigated growth in highly polluting industries as a
\nreason for not taking action to mitigate climate change. In March this year, China pledged that carbon
\nemissions would peak in the country by 2030. In June, this commitment was backed up by an even
\nstronger goal of cutting emissions by some 60-65 per cent from 2005 levels per unit of GDP over the
\nsame time frame. <\/p>\n
\ngreenhouse gas emissions from 2010 levels by the \u201cupper end of 40%-70%\u201d by the middle of the century. The BBC said that this commitment has \u201ceffectively signalled the end of the fossil fuel era\u201d.[[http:\/\/www.bbc.co.uk\/news\/science-environment-33055651
\n]]\nNot
\nonly does the goal reflect the key recommendations of the recent Intergovernmental Panel on Climate
\nChange scientific assessment report (AR5), but it came with the commitment by G7 leaders to strive for
\nan \u201cambitious, robust, [and] inclusive\u201d climate change protocol at the Paris conference.<\/p>\n
\nmember states have been invited to submit their plans for emissions cuts ahead of the conference, has
\nbeen a real cause for optimism. This \u2018bottom up\u2019 approach replaces the idea \u2013 shown to be futile in
\nCopenhagen \u2013 that an overarching global deal could be struck by establishing a cap on global emissions
\nwhich is imposed on countries from the \u2018top down\u2019. Almost 150 countries have made pledges under the
\nINDC scheme in recent months. In terms of the mechanics of the conference, we believe this scheme
\nmay prove to be a masterstroke of diplomacy. Regardless of their potential effectiveness, they have set
\nexpectations ahead of the conference, potentially averting some of the squabbles and backroom deals
\nthat featured in Copenhagen. <\/p>\n
\n2C-.html]] increase in global temperatures, while study by the Grantham Research Institute on Climate Change and the
\nEnvironment[[http:\/\/www.lse.ac.uk\/GranthamInstitute\/publication\/tracking-intended-nationally-determined-contributions-what-are-theimplications-for-greenhouse-gas-emissions-in-2030\/]] estimates that the INDC pledges will result in annual global emissions of between 53 and 61 billion tonnes of carbon dioxide in 2030, substantially above the 36 billion tonnes prescribed by the UN Environment Programme.[[http:\/\/www.lse.ac.uk\/GranthamInstitute\/news\/paris-climate-change-summit-could-go-halfway-to-avoiding-globalwarming-of-more-than-2c\/]]\n
\nnegotiations. Although we generally believe that nations should be commended for what has been
\npledged so far, this understandably is unlikely to be a view shared by all who attend the conference.
\nBolivia, for example, which is a high risk country when it comes to climate change, is likely to be vocal
\nabout the short comings of the INDC pledges, and we expect similar protests from a number of NGOs on
\nthe side-lines of the conference. <\/p>\n
\ntransfer of financial aid and technology from richer to poorer countries very closely. However, we believe
\nany tension is likely to be limited in most part due to what we believe may prove to be one of the most compelling policy developments in the lead up to the conference so far. The draft negotiating agreement
\nreleased in early October suggests that the INDCs should be reviewed every five years (while avoiding
\n\u2018backsliding\u2019). If agreed, this could have significant implications for our investment area and bolster
\ninvestment in rapidly developing, disruptive technologies \u2013 the development of which will be a shaping
\nforce behind future policy commitments, in our view.<\/p>\n
\nregional and individual country level. Regional policies carry a lot of weight in an investment context and
\nthat is an area in which we conduct a great deal of research. One of the most highly debated of these
\nhas been carbon pricing, and this is the policy of choice for a number of European oil majors which have
\ncalled for some form of carbon trading mechanism as part of the conference outcome. This is unlikely, in
\nour view. The establishment of a global market for carbon emissions would simply be too challenging,
\nand the problems faced by the EU Emissions Trading System have created some trepidation about
\nintroducing a multinational trading scheme. Nevertheless, we do believe that carbon pricing (which
\ninvolves trading systems or explicit taxes) will remain an important part of the solution and will continue
\nto be developed at a local level, even if it may not formally become part of the agreement in Paris.
\nA further significant development ahead of Paris has been the proliferation of local-level INDC-style
\ncommitments from a range of cities, regions, counties and investors under the NAZCA (Non-State Actor
\nZone for Climate Action) scheme. This programme was established as part of the Lima Paris action
\nagenda in 2014, with an aim of helping to provide confidence to governments ahead of the Paris talks. At
\nthe time of writing there had been some 6,600 pledges, many of which go beyond those of the INDCs.
\nThis includes large economic zones, such as California, the 8th largest economy in the world, which has
\nmade a significant pledge to reduce carbon emissions by 50% by 2020 versus 1990 levels, and 80% by
\n2050. We continue to monitor the impact of programmes like these on investment patterns and the
\npotential opportunities they can create for environmental solutions businesses. <\/p>\n
\nthe supranational levels is bound to be challenging, especially given the economics and myriad vested
\ninterests involved. However we remain optimistic and believe that now key emitting countries such as
\nthe US and China have shown willing, the stage is set for constructive talks. And while there will
\ninvariably be shortcomings for now in terms of how aggressively the scientific community says the world
\neconomy needs to decarbonise, the potential introduction of a five yearly review of INDCs presents
\ncause for optimism that the goal of limiting global warming to 2o
\nC may ultimately be achieved, and has
\nthe potential to underpin the longer term growth of our investment area. <\/p>\n","protected":false},"excerpt":{"rendered":"
\nThomas, Head of Strategy, Environmental Investment, is optimistic about the talks.<\/p>\n","protected":false},"author":1,"featured_media":47071,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1655,1826,1682,1848,1651,2087,1650,2068,1685],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/47073"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=47073"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/47073\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/47071"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=47073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=47073"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=47073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}