In November 2021, world leaders came together in Glasgow to commit to more ambitious targets to reduce greenhouse gas emissions by 2030. The COP26 had 4 key achievements. Firstly, adaptations to the impacts of climate change are now deemed to be equally important as reducing emissions. Secondly, on the issue of finance, governments agreed on the need for much greater support for developing countries. Next, on the urgent issue of bringing down emissions, there was collective agreement by governments to explore ways of increasing actions to close the current emissions gap. Lastly, the guidelines for Article 6, relating to carbon markets, were finalised, hence ensuring a more level playing field for everyone. What have we accomplished since then? While pandemic recovery is still the main priority for developing countries, the attention of developed countries is now on the tense political landscape set by the Russian President’s, Vladimir Putin, invasion of Ukraine. Amidst this changing geopolitical landscape, climate change continues to persist, but the issue has been somewhat sidelined. Let’s take a look at what some of the latest findings say.
The new IPCC report
The latest IPCC report came out in March this year and reports stark new findings on how the current global warming of 1.1oC is impacting natural human systems, and how our ability to respond will be increasingly limited with every incremental warning. There were 4 key findings discussed in the latest IPCC report.
Firstly, if warming is left unchecked, risks will be magnified. In recent years, heatwaves, droughts, wildfires and other extremes have increased in frequency and intensity far beyond natural variability. These hazards have substantially damaged ecosystems across the globe, and in some cases led to irreversible losses such as species extinction. Humans have also been hit with heightened food and water insecurities, greater incidences of food-, water-, and vector-borne diseases. If global warming is left unchecked, these climate hazards will inevitably increase.
Secondly, adaptation is hitting its limits. The report mentions that much of the world’s current climate adaptation measures are not necessarily effective. In natural systems, there are often hard limits or tipping points – which means that once an ecosystem is pushed beyond a limit, its resilience collapses and no amount of human intervention can make a difference. For example, warm water coral reefs may completely disappear if ocean temperatures continue increasing, there is no “adapting” to this. Similarly, actions taken by human systems also face soft limits such as insufficient financing, poor planning which could be addressed through more inclusive governance. However, these soft limits are often false and usually demonstrate institutions’ and governments’ lack of commitment to making significant change.
Figure 1: Bleached coral on the Great Barrier Reef in February 2017
Source: The Guardian
Thirdly, ‘maladaptation’ can make things worse. There is evidence of adaptation actions that further deepen existing social inequities and lead to adverse outcomes. One example would be when a sea wall is built to protect a settlement from sea-level rise and instead prevents rainwater from draining, leading to the emergence of flooding as a new hazard. Unfortunately, maladaptation especially affects marginalised and vulnerable populations.
Lastly, the window of opportunity is closing rapidly. There is an urgent need to couple adaptation measures with greenhouse gas emission reductions to enable “climate-resilient development”. We are on a path to exceeding 1.5oC warming within the next decade. The current development policies still accelerate greenhouse gas emissions and climate maladaptation risks, widening existing social inequalities. Things do look grim now but the new report offers hope that systems transitions offer an opportunity to bring about a step-change in the scale and effectiveness of mitigation and adaptation efforts.
The EU’s new taxonomy regulation is a classification tool that seeks to provide clarity for companies, capital markets and policymakers on which economic activities are sustainable. As a screening tool, it seeks to support investment flows into those activities. The EU taxonomy also reduces risk for investors by protecting them from greenwashing and helps companies to become more climate-friendly.
The rules for most sectors came into effect this year, covering investments including steel plants, electric cars and building renovations. So what makes a ‘green’ investment? The rules classify 3 types of green investments. Firstly, those that substantially contribute to green goals. Secondly, those that enable other green activities. Lastly, transitional activities that cannot be made fully sustainable, but which have emissions below industry average and do not lock in polluting assets or crowd out greener alternatives.
Figure 2: Milestones of the EU taxonomy
Figure 3: Main environmental objectives of the EU taxonomy
In the future, the taxonomy can be applied in new ways as well. For example, the forthcoming EU proposal for an EU Green Bond Standard is expected to use the Taxonomy as the benchmark for eligibility. Linking the Taxonomy to the Green Bond Standard would create a more direct link between EU capital markets and beyond.
With effective implementation, compliance with sustainability-related disclosures is expected to have considerable positive behavioural effects on financial firms, and indirectly on the business models of companies that are being invested in.
SG sets more ambitious targets
In 2022, Singapore has revised and set more ambitious climate targets. Singapore is looking to align its national goals with the Glasgow Climate Pact formed during COP26 last year. As such, Singapore’s carbon tax will be progressively increased to reach $50 to $80 per tonne of emissions by 2030 to meet our new target of achieving net zero emissions by or around mid-century. This is higher than the previous target of $10 and $15 per tonne by 2023 announced in Budget 2018. A large part of the revenue will be used to support decarbonisation efforts through investments into new low-carbon and more energy-efficient solutions to bring us closer towards our net-zero goal.
As green technologies have been improving significantly, alternative low-carbon solutions such as carbon capture and utilisation are looking more plausible and carbon markets are growing steadily. Soon, businesses will be able to use high-quality carbon credits to offset up to 5% of their taxable emissions from 2024. According to Finance Minister Lawrence Wong, this will create local demand for high-quality carbon credits and catalyse the development of functional and regulated carbon markets. Carbon markets not only enable companies to support decarbonization beyond their own carbon footprint, thus accelerating the broader transition to a lower-carbon future, they also help finance projects for removal of carbon dioxide from the atmosphere—delivering negative emissions, which will be needed to neutralize residual emissions that will persist even under the most optimistic scenarios for decarbonization.
Figure 4: How Singapore’s carbon tax will be progressively increased
The 5th UN conference on Least Developed Countries (LDC5) is set to take place in March 2022 and the conference will discuss unique and urgent issues LDCs face and the necessary support to ensure economic growth does not take place at the expense of their fragile ecosystems and diminishing natural resources.
The first-ever Middle East and North Africa Climate Week organised by UN Climate Change (UNCC) is also set to take place this year. It will mark a significant milestone in the lead-up to COP27 which will take place in Egypt this year. This climate week will focus on regional climate action and collaborations needed to build climate-resilient economies and societies, and integrate climate action into pandemic recovery.
As the world picks up speed in its race against climate change and moves forward from COP26, the events of this year will shape critical conversations and influence public policy decisions around one of the most defining issues of our time. Some of the impacts of climate change are already here today. Others are inevitable due to all the carbon we’ve emitted over the last few decades. But the IPCC report is clear: the worst can still be avoided. As Greta Thunberg aptly describes, “The one thing we need more than hope is action. Once we start to act, hope is everywhere.”