A new wave of climate targets from the EU, US, Canada, Japan and the UK following the Leaders Summit on Climate
On April 22 and 23, a virtual Leaders Summit on Climate gathering 40 world leaders took place at the initiative of the US President. On this occasion, some of them announced new climate targets: the US presented its updated NDC, the UK presented its target for 2035. Brazil, Canada and Japan announced their targets as well. Before the Summit, the European Union adopted an ambitious Sustainable Finance package (see our article) and ratified the EU Climate Law Regulation, setting a legally binding goal to cut emissions by at least 55% by 2030 compared to 1990 levels.
The countries that presented new climate targets are presented in Map 1 and the representation of their targets compared to their precedent targets and historical GHG emissions are in Table 1.
Map 1. Landmap of countries new targets following the Leaders Summit on Climate (April 2021)
Sources: Leaders Summit on Climate declarations and submitted NDCs
Table 1. Historic GHG emissions and reduction targets of the EU, the UK, the US, Japan, Brazil and Canada (in millions of tCO2eq excluding LULUCF)
Description and analysis of the charts
The United Kingdom previously had a target to reduce GHG emissions by 68% in 2030 compared to 1990 levels. It added a new intermediary target to reach a -78% reduction in 2035 compared to the same baseline, which is line with its 2033 to 2037 carbon budget.
In 2016, the United States submitted its first NDC where targets were a 26-28% reduction of GHG emissions in 2025 and a 80% reduction in 2050 compared to 2005 levels. As pledged by President Biden, the updated NDC contains an economy-wide carbon neutrality in 2050 and an intermediary target to reduce GHG emissions by 50-52% in 2030 compared to 2005 levels, which is more ambitious than the previous goal as we can see in the chart.
For Japan, Canada, and Brazil, the two points represent the updated and the previous GHG emissions reduction targets for 2030 compared to 2013 levels for Japan and to 2005 levels for Canada and Brazil. The European Union has a target to reduce GHG emissions by at least 55% in 2030 compared to 1990 levels.
Sources: OECD Stat (1990-2018 GHG emissions) and countries’ announcements
On top of these GHG reduction targets, other participants announced new climate goals: Argentina, the Republic of Korea and South Africa for instance announced their intention to strengthen their NDCs.
The Republic of Korea announced its intent to stop state-backed funding of overseas coal-fired plants financing. France took a similar decision and shall halt public guarantee to export credit of oil projects by 2025 and gas projects by 2035 (see our article on France’s strategy on export financing).
Russia emphasized the importance of carbon capture and storage from all sources and warned to not forget the weight of methane in global GHG emissions.
China announced it will join the Kigali Amendment to the Montreal Protocol, which is an international agreement to gradually reduce the consumption and production of hydrofluorocarbons. Xi Jinping also declared that China will "strictly control coal-fired power generation projects, and strictly limit the increase in coal consumption over the 14th five-year plan period [which runs until 2025] and phase it down in the 15th five-year plan period”. In other words, it seems new coal-fired plants will still be constructed over the next 4 years As a reminder, installed coal capacity of China grew by 29.8 GW in 2020 alone (it decreased by 17.2 GW in the rest of the world). Moreover, some 247 GW of coal power are either under construction or proposed for construction, which represents 85% of proposed new coal-fired capacity in the world.
Moreover, according to some Japanese media outlets, the government is considering ending public support to overseas coal projects and announce it during the Leaders Summit on Climate like the Republic Korea but the acting Prime Minister of Japan did not. At a press conference in July 2020, the Minister of Trade, Economy and Industry announced that by 2030, coal-fired plants of power producers should have at least a 43% efficiency rate. As such, around 100 plants out of the 150 would be suspended or closed during the decade and the total coal capacity would be around 30 GW in 2030 (Japan aims at reducing coal’s share in the electricity mix around 26% in 2030). None of these measures about coal were however discussed during the Summit.
Following these announcements, here is a sample of national plans to phase out coal.
Table 2. Coal phase out targets
Canada, France, Italy and the UK have set 1.5°C compatible coal phase-out targets (by 2030 or earlier) but Germany follows with a phase-out date of 2038. Japan, South Korea, South Africa, and China, have net-zero emissions targets by mid-century commitments, but have not developed coal phase-out plans yet.
In a nutshell, these new climate targets are clearly a positive signal. NDCs are supposed to be strengthened on a regular basis. With the election of Joe Biden, there is growing momentum around international cooperation on climate change, which increasingly becomes a geopolitical and soft power topic. However, as explained in a recent article, the action plans and efforts to achieve these targets are of the utmost importance, and require scrutiny, including from financial market participants. The achievement of such targets require to mobilize a large range of policy and budgetary instruments: one of the tools could be to end public support and financing for fossil fuel projects like South Korea and France (see our article about on France’s strategy on export financing) while assessing the environmental impact of budgetary and fiscal measures, similarly to carbon footprint for companies, offers the opportunity to identify abatement potentials and to channel public funds, fiscal or budgetary, towards sectors that are lagging behind in terms of decarbonization, and to potentially ease efforts on those that are not. For more details, see our article the environmental assessment of budgets or “green budgeting”.