Written by Enrique Lendo, Business Development Mexico Advisor.
Twenty-twenty marked the beginning in the way to Glasgow, city in the United Kingdom that will host the United Nations Climate Conference in 2021, also known as the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 26). The Conference was originally scheduled for late 2020 but, due to the COVID-19 pandemic, was postponed until November 2021. The main goal of COP26 is to reach a universal commitment towards “Net Zero” emissions by midcentury.
The way to Glasgow began early in January with an unprecedented leadership from the private sector, which advanced hurriedly towards decarbonization. The World Economic Forum ranked climate change and environmental risk at top of its tables, while BlackRock announced it will stop funding fossil fuel investments. In August, British Petroleum presented its carbon neutrality strategy and ExxonMobil was expelled from the Dow Jones due to its loss of value. City Group announced a $250 billion-dollar green fund and Morgan Stanley disclosed for the first time the carbon footprint of its products. By December, 1,500 companies, with a combined value of $11 trillion dollars, and 30% of the oil industry had committed to Net Zero targets.
Subnational governments and citizens also hasted the pace to join the way to Glasgow. In July, Tamaulipas became the first subnational government in Mexico to put a price on carbon as California committed to banning gasoline vehicles by 2035. In November, the citizens of the United States elected a president who has set the fight against climate change as national priority. By the end of the year, 950 cities and provinces around the world had committed to carbon neutrality, and 74 % of US voters perceived climate change as an important issue to determine their decisions.
National governments arrived late to this race, but they will very likely set the stage in 2021. In September, China surprised the world with its Net Zero target before 2060, followed by Japan and South Korea with similar targets by 2050. In December, the UK and France convened a summit to celebrate the 5th anniversary of the Paris Agreement. By then, 110 countries had announced their intentions to set Net Zero targets by 2050. The US, Mexico and Brazil were not allowed to talk at the summit due to lack of commitment. However, that same day, Joe Biden announced the US will rejoin the Paris Agreement the first day of his administration and he will host his own climate summit in the first 100 days.
With the upcoming commitment form the US, 65% of global emissions will be carbon neutral by midcentury. Russia, India, Indonesia, Brazil and other large emitters will have to be dealt with in order to reach the goal set for Glasgow. Their commitment will depend on convincing them that environmental degradation does not constitute a political agenda but a demonstrated fact with increasing human and physical impacts. In 2021, there will be more floods like the one in Tabasco and more wildfires like the ones in California, and another $ 1.5 billion dollars’ worth of climate related impacts worldwide pushing the risk further up in capital markets.
The good news is that these markets are already responding by punishing dirty investments. In 2021, for the first time in history, investments in clean energy will overtake these of fossil fuels and by 2024 there will be more renewable energy installed capacity. Post-COVID economic recovery provides us with the opportunity to build back better, meet the Paris Agreement targets, propel investment, and create millions of new jobs.
In 2021, the way to Glasgow will continue. Committed countries will increase the pressure on polluting countries through diplomacy and trade sanctions. Capital markets will further decarbonize their portfolios. Citizen will demand politicians to enhance their commitment and subnational governments will reinforce their leadership.
what will you do in the way to Glasgow?
Article originally published in Reforma news paper
Written by Enrique Lendo, Business Development Mexico Advisor.
While the results in Gorgia and Arizona secured Joe Biden´s Victory, Tabasco faces the worst flooding in its history and uncertainty regarding potential support to rebuild it´s towns and economy. What happened in the states of Tabasco, Chiapas and Veracruz in the past days is not the result of atypical rain but a direct consequence of Mexico´s vulnerability to climate change. It is ironic to confirm that being Mexico an oil country, climate change is now collecting the bill.
According to Mexico´s Natural Disasters Trust Fund (FONDEN), 91% of the monies spent in disaster relief between 1999 and 2017 went to climate related events. Climate vulnerability is based on geographic and physical factors, but lack of urban planning and a culture of prevention, as well as weak capacities to reduce and manage the crisis, exacerbates the impacts. The economic cost of hurricanes and heavy rain events between 2002 and 2015 amounted to 18 billion dollars; while the flooding from last week surpassed 200 thousand people affected and 50 thousand homes damaged.
Mexico contributes with less than 2% to greenhouse gases global emissions. However, given our condition of highly vulnerable country it is imperative to flag that we are being part of the solution. What happens in other countries, especially high emitters, is particularly important. Joe Biden´s victory is a cause for celebration because it confirms the strategy that will drive the world towards decarbonization through green economic growth.
Never on the history, a president elect had such a clear environmental mandate. According to one exit poll, 74% of Biden´s voters considered climate change as especially important for its choice. Other poll concluded that 67% of all voters, not just Biden supporters, are in favor of increasing public investment in clean and renewable energy.
It is in this context that Biden proposes a “Green Deal” that will take the US to reach carbon neutrality in 2050 and its electricity sector to become 100% clean by 2035. In order to reach such goal, they will invest $2 trillion dollars of public funds that will leverage $5 additional trillions from the private sector and subnational governments; and also create 10 million new jobs. They will rejoin the Paris Agreement and consider trade sanctions to polluting countries.
After the electoral results in the US, there is no doubt that the preferences of citizens, consumers and investors are leaning towards decarbonization and green growth. A few days before the elections, China, Japan and South Korea joined the European Union with net zero emission targets by midcentury. With a similar target about to be announced in the US, 60% of the global emissions will be neutral by 2050. In the private sector the story is not too different, the value of oil and gas companies within the S&P 500 has gone from 15 to less than 3% over the last decade, predicting its eminent extinction.
With the US as its main trading partner, opportunities to develop Mexico´s low carbon potential are greater than ever. From investing in clean energy production to supply national and binational electricity markets, to manufacturing of goods and technology to service the growing demand of renewable energy, to propelling carbon emission offsets in the forest and agricultural sectors, possibilities are unlimited. Mexico is on the verge of the conditions that will define its future.
Article originally published in Reforma news paper.