COP26: Pressure Mounts for Oil and Gas Phaseout, Eventually

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Pressure on the oil and gas industry is growing at COP26, as some governments and financiers look to build on momentum from efforts to phase out coal to address other fossil fuels. But while these moves by coalitions of the willing could certainly add to the perception that oil and gas are next in the firing line, this may not translate into any immediate commitment to target fossil fuels directly by the wider “conference of the parties” — where decisions there must be backed by all.

The talks have resulted in some significant advances to end the use of coal, with a coalition of 190 countries and organizations last week agreeing to phase out unabated coal-fired power generation and end support for new coal power plants. This includes developed and developing countries and major coal-consuming nations and adds to growing global momentum on this front. A group of 25 countries and development finance agencies, including the UK, Italy, Canada and the US, also vowed to end direct public support for overseas fossil fuel projects, including oil and gas, by the end of 2022, with the Netherlands joining that group this week. It's estimated this could shift over $19 billion in public financial support from fossil fuels to clean energy projects.

Rising Pressure

COP26 President Alok Sharma said he expects moves to limit fossil fuel financing will follow a similar trajectory to those initiatives meant to curb the use of coal. “These are ... living statements. If you look at the Powering Past Coal Alliance, we have added to that at this COP," he said. "It has grown over time, and I hope the same thing will happen with the statements that have been agreed today." Climate campaigners also said that the pledge is a "game changer" and suggested it would put oil and gas in the same position where coal found itself eight years ago, when international commitments to end financing for coal-fired power projects started to snowball.

Additional pressure on the oil and gas industry is coming from the financial sector, with the International Financial Reporting Standards Foundation and other bodies launching a new board to develop consistent climate and sustainability disclosure standards for financial markets. This is intended to help inform investors how companies are responding to climate issues. Over 450 financial institutions controlling $130 trillion in private capital pledged as well to align their portfolios with the goal of limiting global warming to 1.5°C.

Beyond these initiatives, there’s perhaps less to worry oil producers in the official COP negotiations, which are focused more on finalizing elements of the Paris Agreement, such as Article 6 on carbon trading, than making bold new commitments. The UK is however hoping to produce a "cover text" or COP26 summary declaration that sets out the need for strong climate action including accelerating efforts to reach net-zero emissions by 2050 and keep hopes of 1.5°C alive. But reaching agreement on this could prove challenging, with some countries, including China, objecting to what they see as moving the goalposts from the Paris Agreement.

First Draft Illuminating

Some were hoping that this cover text might also highlight the new announcements and initiatives announced at COP26 in areas such as methane emissions and limiting financing for fossil fuel projects, by calling for a definitive phaseout of fossil fuels. However, Greenpeace says that while a second draft of the text released early on Wednesday calls for an accelerated phaseout of coal and fossil fuel subsidies, this is still not enough. "We need to see a deal that commits countries to coming back every year with new and better plans until together they get us over the bar and we can stay below 1.5°C of warming," said Jennifer Morgan, executive director of Greenpeace International.

Ordinarily, the early drafts of a COP text are relatively ambitious and become weaker as countries work in caveats for themselves. This has campaigners worried. Greenpeace is calling on negotiators to overcome objections from fossil fuel-producing countries like Saudi Arabia and Australia, which have "blocked fossil fuel reductions even being mentioned in the last 25 COP texts.” Given that the next two conferences will be held in Egypt and then the United Arab Emirates, campaigners fear that now is “crunch time” for getting the COP text to commit to a fossil fuel phaseout.

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