Swiss Re has raised concerns about the adequacy of the commitments that have come out of the COP26 climate talks in Glasgow, suggesting that the pledges “do not unambiguously put the world on a sustainable carbon-reduction trajectory.”
Speaking to the media on Wednesday, Swiss Re group chief economist Jerome Jean Haegeli said that while the COP26 climate change conference has brought ambitious new pledges, the world is expected to miss the Paris Agreement target of limiting global warming to 1.5°C.
He noted that the summit prompted new targets and agreements on coal, methane and deforestation, but said global emissions are still on target to be more than double the level needed to stem an irreversible rise in temperatures.
“The bottom line message coming out of COP26 is that there is positive momentum,” he explained.
“It’s good that we are seeing new areas which haven’t been discussed before like principles for global carbon taxes, and it’s good to have certain agreements on phasing down coal investments. But it is also clear in my view that we need to come back to the design of what is needed to keep temperatures down.
“What we are seeing right now is just not enough for reaching the Paris Agreement,” he continued.
He said that the targets agreed in Glasgow set the world on course for a circa 2.4°C increase in temperature, surpassing the Paris Agreement target of limiting global warming to 1.5°C.
The comments follow a report issued by Swiss Re which called for more concrete action from governments and the private sector to mobilise systemic change and decisively advance the green transition.
It noted that among the top 10 greenhouse gas emitters, China, the US and India did not sign the pledge to transition from coal by 2050; and China, India and Russia did not join the methane pledge. In addition, Iran has not ratified the Paris Agreement.
Swiss Re warned that there is a risk that pledges may not materialise into action, as many of the biggest greenhouse gas emitters missed their less stringent 2020 targets.
While a total of 197 countries have signed up to the new climate pledges at COP26, based on all nationally determined contributions, global greenhouse gas emissions are forecast to increase by about 13.7 percent by 2030, instead of the 45 percent cut required under the terms of the Paris Agreement.
Swiss Re noted that Canada and the European Union, which have successfully cut emissions in line with targets, did so by using technology and regulation to decouple economic growth from emissions.
The carrier said that while the green transition offers no “silver bullet”, governments and the private sector jointly need to take a systemic approach reflecting the urgency of the issue.
Haegeli said it is “crystal clear” countries need a policy mix that combines pricing – such as a carbon tax – rigorous standards, support measures and fiscal incentives, lower investment barriers and targets, all underpinned by transparency.
“Having more transparency in terms of climate, climate exposure, climate data, climate stress testing is as important for the private sector as it is for the public sector,” he said.
Haegeli added that failure of governments to meet their required carbon budgets could have wider negative economic impacts and even lead to sovereign rating downgrades. Swiss Re estimates that global warming of above 2°C would result in global GDP losses of up to 14 percent as early as 2050 without more action.
“People are probably going to look at the carbon budget in a similar way as they are looking at fiscal balances and fiscal deficits,” he explained. “So for governments who are not meeting their carbon budget, it will have implications in terms of their sovereign ratings, but that’s also why the public sector has a lot of motivation to act.”