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COP26 - A fragile win

16-minute read


Executive Summary

The 26th Conference of the Parties (COP) took place between October 31st and November 13th in Glasgow, Scotland. It was hosted by the UK, in partnership with Italy, two recent Green Bond Issuers[1] (see our article on Sovereign GSS Bonds). Postponed several times due to the Covid-19 pandemic, the COP 26 raised high expectations among civil society. It was the first rendez-vous for the “ratchet mechanism[2]” agreed in Paris in 2015 whereby countries committed to upgrade their commitments every five years. Countries were urged to introduce new nationally determined contribution (NDC)[3] to keep the 1.5° of the Paris Agreement’ objective alive. Prior to a batch of 124 updated NDC, global warming was meant to increase by 2.7°C by 2100. The new countries objectives announced in Glasgow are likely to lead to a global temperature increase ranging between 1.8 and 2.4°C, a non-anecdotal improvement, but still far off the 1.5°C trajectory.

This article published alongside a table analyses the main outcomes of the COP26 and assesses potential consequences on Sustainable Finance.

For Karen Degouve, Natixis’ Head of Sustainable Business Development present in Glasgow, “it would be unfair to call the outcome of COP26 a failure. The UN climate negotiation process is complicated. Multilateralism is complex by nature; it requires close to 200 countries, despite diverging economic and domestic interests, to act all together for international public good. Although the speed of work may seem inadequate, which is frustrating at times, I believe some real progress was made in key areas “ (full article here). We agree with COP26 president Alok Sharma, who depicted the agreement as a “fragile win” for climate.

Positive outcomes came out of the Glasgow Conference. If not all the expectations were met, one should wonder what the situation without such events would be. COP are not designed to enter into implementation specifics, but they help in emulating countries to do more, setting thematic priorities and sending signals and incentives to private actors.

A key improvement lies in the time-lapse shortening upon which countries are held accountable for strengthening and delivering on their pledges.  Today, in line with the Paris Agreement, NDCs are meant to be increased every five but there is a big push to accelerate the process to step up NDC ambitions every two years. Moreover, the finalisation of the enhanced transparency framework will harmonize national inventory report easing tracking of NDC progress and allowing reporting on and accounting for targets and emissions. 

Despite all the understandable criticisms, the United Nations Climate Change Conference has, and will continue to have in the future, a genuine role to play.



A. The objectives set before the Conference

B. The Glasgow Climate Pact main outcomes

      1. The finalisation of the “Paris Rulebook”, making it fully operational six years after its adoption

      2. The new batch of nationally determined contribution and their future standardisation

      3. The inclusion of the intergovernmental panel on climate change (IPCC)’s recommendations

      4. The historical direct reference to phasing down fossil fuels

      5. Halting all financing for fossil fuel development overseas and diverting the spending to green energy

      6. Mobilisation of the financial sector

C. Reasons for concerns or scepticism regarding several engagements taken during the COP26

      1. The Glasgow leader’s declaration on forest and land use, already a precedent that call for cautiousness

      2. The declaration on accelerating the transition to 100% zero emission cars and vans hampered by the   absence of major carmakers

D. The pledge gap has slightly narrowed while the action gap to staying below 1.5°C is widening

E. Cooperation hindered by the lack of action and financial solidarity

      1. Climate cooperation commitments, nice words to be confirmed in practice

      2. Finance, the richest still reluctant to pay for the poorest

      3. Climate finance, the broken promise

      5. The failure (again) of the loss and damage finance negotiation

A. The objectives set before the Conference

Before the Summit, the UK Presidency had set four priorities and negotiations objectives: 

  • Mitigation: secure global net zero by mid-century and “keep 1.5°C within reach”. Countries were asked to come forward with ambitious 2030 emissions reduction targets, including an acceleration of the phase-out of coal, the development of renewable energy, the curtailing of deforestation and switching to electric vehicles.
  • Adaptation: enable countries affected by climate change to adapt and to protect communities and natural habitats.
  • Mobilize private and public finance to achieve the first two goals. More than 10 years ago (at COP15 in Copenhagen in 2009), developed countries promised to mobilize $100 billion annually by 2020 to help developing countries mitigate and adapt to climate change. This promise has not yet been fulfilled: by 2019, the latest year for which data is available, only $80 billion flowed. COP26 aimed at fulfilling this past commitment and increasing the annual amount to finance the adaptation of the most vulnerable countries.
  • Implementation of the Paris Agreement: finalize the rules to operationalize the Paris Agreement - the so-called “Paris Rulebook”, to turn climate ambition into real action through increased collaboration between governments, businesses, and civil society.

B. The Glasgow Climate Pact main outcomes

COP26 has concluded in Glasgow with nearly 200 countries agreeing the Glasgow Climate Pact [4] to keep 1.5C alive and finalise the outstanding elements of the Paris Agreement.

1. The finalisation of the “Paris Rulebook”, making it fully operational six years after its adoption

The “Paris Rulebook” was defined in 2015 to provide guidance on how countries must carry out the vision for a zero-carbon future. Majority of its related topics were tackled at the COP24 in 2018 but few issues remained. Negotiations were planned to be held at the COP26 to find some solutions on carbon markets, to resolve the issues of transparency and broker an agreement that drives ambition from government over the coming years to keep 1.5°C alive.

At COP26, Parties agreed upon rules for carbon market mechanisms commonly referred to as Article 6, common timeframes for nationally determined contributions and enhanced transparency framework for reporting were finalised.

The “Paris Rulebook” includes the Article 6, which establishes a robust framework for countries to exchange carbon credits through the UNFCCC. Under Article 6, countries can use emissions trading as a support to reach their NDC. The new rules defined during the COP26 set a robust framework and addressed major issues for the internationally mitigation outcomes (ITMOs)[5]:

  • Double counting[6] is prohibited;
  • Countries agreed to a 5% fee for new credits issued under article 6.4 emissions, to be put on an "adaptation fund" for developing countries;
  • Only certified emission reductions produced between 2013 and 2020 under the Kyoto Clean Development Mechanism (CDM) will be transferred to the Paris Agreement (300 million over 4 billion). In addition, these credits will be discounted by 2% before to be transferred to the ITMO.

In Glasgow, Parties have also adopted the enhanced transparency framework[7] (as per the Paris Agreement Article 13), a transparency process which will hold countries to account as they deliver on their targets. From 2024, all countries will be required to report against this common framework making verification and assessment of progress on pledges a much less complicated task. They will now be required to report their greenhouse gas emissions in a comparable manner to build trust and confidence that all countries are contributing their share to the global effort.  In parallel, without a definitive agreement by Parties, the Pact "encourages" all parties to submit five-year pledges, starting in 2025 to cover the period to 2035, in 2030 an NDC with an end date of 2040, and so on every five years thereafter.

2. The new batch of nationally determined contribution and their future standardisation

The 124 new or updated NDCs communicated by 151 Parties include more stringent targets to reach the goal set in the Paris Agreement. Despite these announcements, the world is on a pathway to a global temperature increase ranging between 1.8 and 2.4°C (see part D), still far off the 1.5°C trajectory. In order to bridge this gap, Parties have agreed to revisit their commitments, as necessary, by the end of 2022 to put us on track for 1.5°C of warming, maintaining the upper end of ambition under the Paris Agreement. In the meantime, António Guterres, the Secretary-General of the United Nations, announced that he will create a high-level panel of experts to propose clear standards for measuring and analysing the "zero" commitments of non-state actors, which will submit a set of recommendations next year.

3. The inclusion of the intergovernmental panel on climate change (IPCC)’s recommendations

The Glasgow Climate Pact follows the 6th IPCC Climate Change 2021 report’s[8] recommendations and sets a target for non-carbon dioxide greenhouse gas emissions, focusing particularly on methane[9]:

More than 100 countries agreed to cut their methane emissions by 30% by 2030 under the “Global Methane Pledge”[10], an initiative launched by the U.S. and the European Union. In the meantime, major foundations and philanthropic groups pledged over US$325 million to help countries and industry dramatically reduce methane emissions from multiple sources[11]. According to the Global Methane Assessment from the Climate and Clean Air Coalition (CCAC) and the United Nations Environment Programme (UNEP), achieving this 2030 goal could reduce global warming by almost 0.2°C as well as preventing over 200,000 premature deaths, hundreds of thousands of asthma-related emergency room visits, and over 20 million tons of crop losses a year by 2030.

4. The historical direct reference to phasing down fossil fuels

As explained by Karen Degouve[12], Natixis’ Head of sustainable business development, who attended the summit: “Coal is by far the dirtiest and most carbon-intensive fossil fuel”. The International Energy Agency (IEA) has made clear that if it is not rapidly phased out, the world has no hope of staying within 1.5°C. Concretely, reaching this target means that no new coal-fired power plants could be built and that at least 40% of the world’s 8,500 existing plants must close by 2030. Before Glaslgow, no COP decision had ever made a direct reference to phasing out fossil fuels. The Glasgow Climate Pact, for the first time ever in a final COP decision statement, contains language calling upon parties to increase efforts to “phase down” unabated coal and inefficient fossil fuel subsidies, though it gives no firm deadlines. Even with the watered-down wording (“phase out” was the initial proposal, the adjective “inefficient” regarding subsidies was also added) and the carbon capture option, this should be considered as a major step forward. One could highlight the mention of leaving no one behind: “while providing targeted support to the poorest and most vulnerable”.


5. Halting all financing for fossil fuel development overseas and diverting the spending to green energy

In parallel, more than 30 countries, including the US, and public financial institutions, Group AFD, the French Development Agency, for example, signed a statement[13] committing to halt all financing for fossil fuel development overseas and diverting the spending to green energy. The statement says the signatories will “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5C warming limit and the goals of the Paris Agreement”.

6. Mobilisation of the financial sector

The Glasgow Financial Alliance for Net Zero (GFANZ)[14], led by Mark Carney, was launched in April 2021 with the aim of raising standards, driving ambitions, and ensuring the net zero commitments of financial institutions are transparent, credible, and consistent, using the criteria and architecture of the UN’s Race to Zero. At COP26, GFANZ announced that more than 450 firms across 45 countries representing more than $130 trillion of financial assets (over 40% of the global financial system) have committed to aligning their activities with the net zero transition.

Meanwhile, 100 central banks endorsed the Network for Greening the Financial System (NGFS) Glasgow Declaration. The Network announced that it will expand and strengthen its collective efforts to improve the resilience of the financial system to climate-related and environmental risks and encourage the scaling up of the financing flows needed to support the transition towards a sustainable economy.


[1] In March 2021, Italy issued its first Sovereign green bond and the UK issued its first Green gilt in September 2021.

[2] In theory, countries would submit new “intended nationally determined contributions” (INDCs) every five years, outlining how much they intend to reduce emissions. Each submission would be more ambitious than the last, namely, ratcheting up.

[3] Link to the NDC Registry.

[4] Link to the Glasgow Climate Pact.

[5] The ITMOs contribute to increasing the global ambition committed in the Paris Agreement by promoting low carbon technologies and accelerating the implementation of projects and programs.

[6] The Paris Agreement calls for rules on applying "corresponding adjustments" of national carbon inventories when one country uses internationally mitigation outcomes (ITMOs) to reduce its carbon footprint so that the credit cannot be claimed twice.

[7] COP21 - Transparency of support under the Paris Agreement – Article 13

[8] The IPCC 6th Assessment Report concluded in August 2021 that methane mitigation has the greatest potential to slow warming over the next 20 years.

[9] Limitation and/or reduction of methane emissions was already integrated in the Kyoto Protocol without setting any specific target.

[10] Link to the Global Methane Pledge.

[11] Methane is about 84 times more powerful at warming the climate than carbon dioxide over the short term. Since it only stays in the atmosphere for about 12 years, compared to hundreds of years for carbon dioxide, reducing the amount of methane human activities are adding to the atmosphere can have a quick impact on global warming.

[12] Link to the article here.

[13] Link to the Statement.

[14] Link to the website.

C. Reasons for concerns or scepticism regarding several engagements taken during the COP26


1.The Glasgow leader’s declaration on forest and land use, already a precedent that call for cautiousness

The Glasgow leaders’ declaration[15] on forests and land use endorsed by 141 countries, representing 90.94% of forest worldwide, is seen as one of the most successful achievement of this COP. It emphasises the critical and interdependent roles of forests of all types, biodiversity, and sustainable land use in enabling the world to meet its sustainable development goals; to help achieve a balance between anthropogenic greenhouse gas emissions and removal by sinks; to adapt to climate change; and to maintain other ecosystem services. Parties therefore commit to working collectively tohalt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation”.

Hopefully this announcement will not be a veined promise. Indeed, the Glasgow leaders’ Declaration on Forests and Land Use has already been preceded by the New York Declaration on Forests[ii] back in 2014. At that time, a target of no deforestation by 2030 was set, with an interim goal of a 50 percent reduction by 2020. A 2019 study found that rates of forest loss were 41 percent higher in the years after that declaration than in those preceding it, and that an area the size of the United Kingdom was being lost annually. One can observe that Brazil signed despite soaring deforestation of the Amazon rainforest under President Jair Bolsonaro. According to data published by an NGO monitoring deforestation in Brazil, TerraBrasilis[iii], on November 19th, 2021, Brazil's Amazon rainforest saw its highest annual rate of deforestation in over 15 years, after a 22% climb from the previous year.


2. The declaration on accelerating the transition to 100% zero emission cars and vans hampered by the absence of major carmakers

Representatives of governments, businesses, and other organisations with an influence over the future of the automotive industry and road transport, committed to rapidly accelerate the transition to zero emission vehicles to achieve the goals of the Paris Agreement. Together, they will work towards “all sales of new cars and vans being zero emission globally by 2040, and by no later than 2035 in leading markets”. The scope of this commitment is weakened by the absence of the largest car-makers, including Volkswagen, Renault-Nissan or Toyota.


D. The pledge gap has slightly narrowed while the action gap to staying below 1.5°C is widening


According to the latest updated analysis conducted by the International energy agency (IEA)[iv] of the all the new countries’ pledges to reach net zero emission, including India pledged to hit net zero emissions by 2070, the 100 countries promising to cut emissions of methane by 30% by 2030, the end of deforestation by 2030 and others, COP26 climate pledges could help limit global warming to 1.8 °C, still far from the 1.5°C targeted.

Figure 1 - IEA, Temperature rise in 2100, by scenario

Source: IEA, Paris

The IEA is clear: “Governments are making bold promises for future decades, but short-term action is insufficient. What is essential is for governments to turn their pledges into clear and credible policy actions and strategies today. Ambitions count for little if they are not implemented successfully. Tracking and accountability will be critical to ensure countries and companies are following through on their promises.”

On its side, Climate Action Tracker[19] estimated that with 2030 pledges alone – without longer term targets – the world was on track for a 2.4°C warming by 2100. “The vast majority of 2030 actions and targets are inconsistent with net zero goals: there’s a nearly one-degree gap between government current policies and their net zero goals” said Bill Hare, CEO of Climate Analytics, a CAT partner organisation.


Figure 2 - CAT warming projections. Global temperature increase by 2100

Source: Climate Action Tracker

Moreover, some of the measures endorsed during the COP26 seems to be over evaluated. According to the Global Methane Pledge, delivering on the 30% reduction pledge “would reduce warming by at least 0.2°C by 2050”. However, a rapid analysis published by Carbon Brief[20] suggested that global cuts of “around 50% will likely be needed to realise the 0.2C saving”.


Figure 3 - Mitigation benefit from methane emission cuts (red lines) and additional climate benefit of phasing out coal by 2040 on top of a 30% methane reduction pledge (black).

Source: Carbon Brief, 2021

Meanwhile, an investigation from the Washington Post[21] revealed that the CO2 emissions reported by the countries to the UN are largely underestimated. Between 8.5 (more than the United States yearly emission) to 13.3 (almost equivalent to Chinese yearly emission) billion tons of CO2 are omitted as a result of accounting twists.


Figure 4 - Global CO2 emissions vs reported emission

Source: Washington Post (2021)


[15] Link to the Declaration on forest and land use change.

[16] Link to the New York Declaration on Forests.

[17] Link to TerraBrasilis website monitoring Brazil deforestation.

[18] Link to the IEA publication.

[19] Link to the Climate Action tracker publication.

[20] Link to the Carbon Brief study on the Global Methane Pledge.

[21] Link to the article.

E. Cooperation hindered by the lack of action and financial solidarity


1. Climate cooperation commitments, nice words to be confirmed in practice

A positive outcome of the Conference from an international cooperation standpoint came from the US and China joint climate declaration[22]. The world's top two greenhouse gas-emitting countries, which together account for about 40% of the world's annual carbon emissions, thus agreed to intensify their cooperation and to address climate change by reducing methane emissions, “phasing down” coal, promoting decarbonisation, protecting forests and conducting technical cooperation. This announcement follows the ice-breaking US-China Joint Statement Addressing the Climate Crisis[23] in April 2021 and confirms that climate change issue is regarded as a buffer zone in the middle of the strong political tension between the two superpowers. 


2. Finance, the richest still reluctant to pay for the poorest

E3G, an independent European climate change think tank, reminded[24] during the COP26 that extreme impacts are already hitting countries earlier and harder than expected, and these will increase significantly in years to come, even if current mitigation targets are met. In 2020 over 30 million people were displaced[25] by weather-related disasters, primarily in Asia, Africa, and Central America. Climate-related disasters totalled $210 billion in 2020[26] and 85% of the global population has been affected by climate-driven extreme weather events[iv]. The economic cost of loss and damage in developing countries is estimated to range between $290 and 580 billion by 2030, rising to between $1-1.8 trillion by 2050.


3. Climate finance, the broken promise

Back in 2009 at the COP15, in Copenhagen, developed countries pledged to mobilise $100 billion a year to less wealthy nations by 2020, to help them adapt to climate change and to mitigate further rises in temperature. The goal was formalised at COP16 in Cancun. At COP21 in Paris, it was then reiterated and extended to 2025. Today the result is beyond dispute, they failed.

In a report published by the OECD in September 2021[27], OECD Secretary-General Mathias Cormann said, “Climate finance continued to grow in 2019 but developed countries remain USD 20 billion short of meeting the 2020 goal of mobilising USD 100 billion”.


Figure 5 - Climate finance provided and mobilised (USD billion)

Source: OECD annual climate finance provided and mobilised by developed countries for developing countries for the period 2013-19 (2021).


The report finds that public climate finance from developed countries reached USD 62.9 billion in 2019. Bilateral public climate finance accounted for USD 28.8 billion, down 10% from 2018, and multilateral public climate finance attributed to developed countries accounted for USD 34.1 billion, up by 15% from 2018. The level of private climate finance mobilised was down 4% at USD 14.0 billion in 2019, after USD 14.6 billion in 2018. Climate-related export credits remained small at USD 2.6 billion, accounting for just 3% of total climate finance.


Figure 6 - Thematic split of climate finance provided and mobilised (USD billion)

Source: OECD annual climate finance provided and mobilised by developed countries for developing countries for the period 2013-19 (2021).


The OECD report also shows that out of the overall climate finance in 2019, only 25% went to adaptation (up from 21% in 2018), 64% went to climate change mitigation activities (down from 70% in 2019), and the reminder to crosscutting activities, while the Paris agreement aimed for a balance between mitigation and adaptation. More than half of total climate finance targeted economic infrastructure – mostly energy and transport – with most of the remainder going to agriculture and social infrastructure, notably water and sanitation.

As per some analyst, the OECD’s number should be taken with great care. Oxfam, in its 2020’s report “Assessing progress towards the $100 billion commitment[29]” argues that most loans continue to be counted at their full-face value, rather than as the amount of money given to a developing country once repayments, interest and other factors are accounted for (the grant equivalent). There are also significant inaccuracies in how the climate component of broader development projects is counted. Taking account of these issues, Oxfam estimated public climate financing at only $19 billion–$22.5 billion in 2017–18, around one-third of the OECD’s estimate.

In addition, developed countries have no clear framework to report these figures and can put some financing contributing to climate change. So, in 2017-2018, Japan reported over $700 million in climate finance towards its ‘Matarbari Ultra Super Critical Coal-Fired Power Project’ in Bangladesh. Japan defends the loan as climate finance because the plant produces less greenhouse gas emissions than a similarly sized plant using subcritical technology.

According to a report published by the world resource institute (WRI) in October 2021[30], it seems that not all countries are paying their fair share. Although rich nations collectively agreed to the $100-billion goal, they made no formal deal on what each should pay. If Japan and France have transferred more than expected it seems that Australia, Canada, Greece and mainly the US fell far short of what they should have contributed. 


Figure 7 - Progress (% based on 2018 figures) towards fair share of $100 billion climate finance target

Source: Nature (2021)


5. The failure (again) of the loss and damage finance negociation

Defined by the United Nations Framework Convention on Climate Change (UNFCCC) in 2012, the notion of “Loss and Damage” refers to the idea that rich countries, which are historically the biggest polluters and have benefited the most from the economic development the last two centuries, should finance the repair of the damage caused by global warming in poorer countries. In its article about COP26, Carbon Brief[32] reminded that during the Paris Agreement in 2015, loss and damage was set as the “third pillar” of international climate policy among with Climate change but it has often been overlooked in climate negotiations. Unlike the first two pillars – mitigation and adaptation – there had, prior to this COP, never been any specific funding set aside for loss and damage. Instead, the COP19 in 2013 established first the Warsaw International Mechanism for Loss and Damage (WIM) associated with Climate Change Impacts (Loss and Damage Mechanism).

In 2017, a strategic workstream to the WIM was established with the aim of generating finance for loss and damage of at least $50 billion per year by 2020, with plans to increase to at least $200 billion per year by 2030. To our knowledge, this objective as not been reached.

The Santiago network[33] developed during the COP25 aimed at catalysing technical assistance for the implementation of relevant approaches for averting, minimize and addressing Loss and Damage in developing countries. But again, no mentions of financing reparations have been included by the network. 

A priority for many developing country groups at COP26 was to “operationalise” the Santiago network, providing it with money and staff, and assigning it with responsibilities so that nations could use it to request assistance. Unfortunately, the COP26 agreement provides few answers. The pact only acknowledges the need for more in-depth negotiations on this subject and emphasizes the importance of the Santiago Network. In the end, the subject is postponed to the agenda of the COP27 to be held next year in Sharm el-Sheikh, Egypt.

[22] Link to the statement.

[23] Link to the statement.

[24] Link to the full article.

[25] Source: United Nations Office for Disaster Risk Reduction.

[26] Source: Global Insurance.

[27] Source : Mercator Research Institute on Global Commons and Climate Change.

[28] Link to the OECD report.

[29] Link to the Oxfam full report.

[30] Link to the WRI full report.

[31] European Union promised $5 billion by 2027, the United States, $11.4 billion by 2024, Canada to double its international climate finance commitment to $5.3 billion over the next five years.

[32] Link to the full article.

[33] About the Santiago Network.