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Climate Leaders Summit restores American leadership, amid calls for accountability
Summit sets new standard for ambition at 50% emissions reduction by 2030, including realignment of all finance with net-zero by 2050, stricter reporting standards and climate-smart trade.
President Joseph R. Biden, Jr., convened a 2-day Summit of world leaders to focus on increasing climate ambition, starting on Earth Day. Though we are not yet feeling the effects of what happened, the Summit did make history and create new momentum for collaboration to prevent uncontrolled climate disruption.
First of all, the United States has made its most ambitious commitment to date for a rapid transition away from carbon-based energy. On Earth Day, Pres. Biden announced the U.S. would now aim to achieve between 50% and 52% reduction of global heating pollution by 2030, 100% decarbonization of the electricity sector by 2035, and net-zero carbon pollution economy-wide no later than 2050.
The plan was developed through consultation with diverse stakeholders, focuses on community-level investment and job-creation, and recognizes the critical role of new infrastructure and retrofitting to reduce emissions. It also marks the first time the U.S. has put forward an all-of-government approach to climate-smart transformation.
The scale of the challenge is almost comparable to Pres. Kennedy’s promise if landing a man on the Moon and returning him safely to Earth by the end of the 1960s. Similarly, Pres. Biden’s goal requires complex, widespread national action, on a timeline just longer than 8.5 years. What is different is we have the science and technology to do this; we didn’t in 1961.
The Glasgow Financial Alliance for Net Zero (GFANZ), chaired by Mark Carney, UN Special Envoy on Climate Action and Finance, unites over 160 firms (together responsible for assets in excess of US$70 trillion) from the leading net zero initiatives across the financial system to accelerate the transition to net zero emissions by 2050 at the latest.
43 banks from 23 countries (with assets of US$28.5 trillion) form the Net-Zero Banking Alliance (NZBA) today – which joins GFANZ – with its members committing to align operational and attributable emissions from their portfolios with pathways to net-zero by 2050 or sooner.
Financial regulation, including the requirement to disclose carbon funding and carbon risk liability, will help to secure forward progress on the commitments and investments laid out during the Summit. New regulatory and reporting requirements are vital, given last year’s CFTC report finding that unchecked climate disruption could cause the financial system to fail.
Responding to these escalating systemic risks, IMF Managing Director Kristalina Georgieva urged G20 nations to establish a global floor price for carbon pollution rising to $75 per ton by 2030:
Because of the urgency to act we propose an international carbon price floor among large emitters, such as the G20. Focus on a minimum carbon price among a small group of large emitters could facilitate an agreement, covering up to 80 percent of global emissions.
As Pres. Biden said, “the cost of inaction keeps mounting.” So, he added:
The United States isn’t waiting. We are resolving to take action — not only the — our federal government, but our cities and our states all across our country; small businesses, large businesses, large corporations; American workers in every field. I see an opportunity to create millions of good-paying, middle-class, union jobs.
The White House announced this week that:
The Treasury Department, in coordination with other U.S. agencies and regulatory bodies, as appropriate, will continue to promote improving information on climate-related risks and opportunities; identifying climate-aligned investments; managing climate-related financial risks; and aligning portfolios and strategies with climate objectives.
[U.S. Secretary of Transportation Pete] Buttigieg said that a majority of the “millions” of transportation jobs redesigning roads, laying rail lines and installing electric vehicle charging stations “will be available to workers without a degree,” a group that has suffered acutely during the pandemic-driven economic downturn.
The new US International Climate Finance Plan includes efforts to crowd in private-sector finance for climate-smart development:
The Millennium Challenge Corporation (MCC) will expand partnerships and the use of blended finance to catalyze private capital for climate projects.
The U.S. International Development Finance Corporation (DFC) will increase its climate-related investments beginning in FY 2023, so that at least one-third of its new investments are linked to addressing the climate crisis.
The Export-Import Bank of the United States (EXIM) will identify ways to significantly increase, as per its mandate, its support for environmentally beneficial, renewable energy, energy efficiency, and energy storage exports from the United States.
U.S. agencies, including DFC, U.S. Trade and Development Agency, EXIM, the Department of State, MCC, and USAID will work together to build a strong investable project pipeline.
The Plan also doubles U.S. commitment to international climate finance to $5.7 billion by 2024. E3G notes, however, that Bangladesh alone is already spending around $5 billion per year to cope with escalating climate impacts, including widespread internal displacement of people and whole communities.
We should remember major breakthroughs in business model innovation will be part of the new economy. The vast and complex landscape of innovation will be informed by science, aligned with an increasingly common zero-pollution standard, and will build resilience for communities, industries, food systems, and whole economies.
Major new cooperative agreements with India and China hold great promise, but the biggest breakthrough from the Summit is the announcement by the U.S. and Japan that they will reduce global heating pollution by 50% by 2030. This sets the new standard that all other nations, and financial institutions and enterprises, will need to compete to keep up with.
No nation or business can credibly claim it is positioned to lead if it is not, in fact, keeping up with the leaders.