Published: 2021-10-26 18:28:14 BdST
Executives, trade groups and policy experts say hopes for a deal are growing after negotiators at the 2019 summit in Madrid failed to settle how countries can account for international carbon trading as called for under Article 6 of the Paris climate agreement.
A lack of international agreement has held back the development of systems for putting a price on carbon. Having some way to measure the economic cost of emissions is a top priority of companies across many industries whose leaders want to cut greenhouse gasses, said Rich Lesser, global chair of Boston Consulting Group.
For executives, "if you had a global price on carbon, then it would be economically rational to pursue solutions and alternatives", Lesser said.
Dan Byers, who will represent major trade group the US Chamber of Commerce at the summit in Glasgow, called the final resolution of Article 6 "long overdue" to resolve technical issues such as how countries can monitor and verify carbon emissions.
He added that a factor favoring a deal is the climate focus of US President Joe Biden, who returned to the terms of the 2015 Paris climate agreement after predecessor Donald Trump pulled out of the accord.
"Having the Biden administration backing Paris, and at the table, is hugely important over the long run," Byers said.
Other issues that business leaders will track at the meeting starting Oct 31 include what new pledges national leaders might make to cut emissions, and how much money will be set aside to finance sustainable development in emerging markets.
Carbon pricing plans can range widely including carbon taxes that charge companies for emissions, or emissions trading markets that cap how much companies or countries can emit but allow them to trade permits to exceed those levels.
Many corporations expect carbon pricing plans will help them fulfill the now widespread "Net Zero" pledges, said Kelley Kizzier, a vice-president at the Environmental Defense Fund, a Washington advocacy group, and a onetime co-chair of the negotiating group over Article 6 at previous climate summits.
Specific issues to resolve in Glasgow for Article 6 include how to prevent two countries counting the same emissions cut, and how new carbon markets might help fund developing countries' efforts to adapt to climate change, she said. Even if a deal is reached, companies will still be left with the work of cutting their emissions, she added.
Just because a goal is set, "It's not rainbows and butterflies," Kizzier said.
Beyond carbon pricing, leaders are more divided on other topics that will be center stage in Glasgow such as the future role of fossil fuels in the world economy.
For instance, an investor group including PIMCO, State Street Corp and French asset manager Amundi has called on countries to take steps including raising their emissions-reduction commitments and ending fossil subsidies, and there have been separate calls for international banks to stop funding fossil fuel projects.
But energy executives say fossil fuels still have a role to play in the energy transition. New natural gas facilities in emerging markets would produce fewer emissions compared with existing coal-fired generation, said Aaron Padilla, a policy director for the American Petroleum Institute, whose members include big energy companies ExxonMobil Corp, Royal Dutch Shell and Norway's Equinor.
"There's still significant room for natural gas especially to displace coal as a source of production," Padilla said.
Financial companies face their own pressures. Companies with a combined $90 trillion in assets known as the Glasgow Financial Alliance for Net Zero have called for governments to set broad net-zero targets, for instance, and to price emissions.
But the group includes banks that still back fossil fuel projects, drawing criticism that they and the alliance's chair, UN special envoy Mark Carney, are missing a chance to force harder action. Richard Brooks, climate finance director for the activist group Stand.earth, said more should follow the example of France's Banque Postale, which said it would stop serving the oil and gas sectors outright by 2030.
"Many of the banks who are part of the alliance are getting kudos and green cover but not changing their day-to-day financial practices," Brooks said.
Asked about the criticism, Carney said in an emailed statement that member banks must set interim 2030 carbon reduction targets and decarbonization plans. "GFANZ has launched an ambitious body of work to accelerate implementation and action, which will be outlined at COP26," he said.