Climate change in the SOTR

Christopher Findlay, Tilak Doshi, and Eduardo Pedrosa 

In this commentary, we report and summarise some key results from the PECC SOTR report with respect to climate change, and we link those results to some of the outcomes in Glasgow from COP26. The latter is not a comprehensive coverage but rather those items highlighted in the SOTR.

The surveys of opinion leaders in the APEC region attached to the SOTR often pick up significant swings in opinion.

This year, one of the big shocks related to climate change.

The perception of climate change as a risk to growth has shot up in 2021, by 20 points (43 percent of respondents said climate change was a serious risk to growth, compared to 24% last year), almost doubling, and after being steady for the previous reports.

There are no greater instances of a shift of this magnitude in the history of the SOTR.

The views of the PECC respondents certainly align with the tenor of reporting of event and the text of the Pact from Glasgow. The latter refers to the urgency of enhancing ambition with respect to a response to rising global temperatures.

There was also a strong view among PECC respondents that climate change is having a negative impact at the economy and business levels. And 90% of respondents are expecting to see some response to this situation, and this level of expectation is consistent across parts of the region.

But there is an important signal about climate change policies – there is also a significant body of opinion that climate change policies are having a negative effect at the economy and business levels.

There are different interpretations of this result, remembering the earlier messages that action is required and that climate change itself is having a negative effect.

One could be that our respondents think the current national policies are wrong. We will look later at policy priorities. Respondents do want to see more policy action, but perhaps in different forms.

At the same, they may be recognising that the responses to the significant issue of climate change will involve some pain for them.

Some people in particular do see themselves as losers, in other words. Their views and reactions will be important to consider as efforts are made to build support for policy change. Certainly, the Glasgow pact refers to the ‘need for support towards a just transition” (para 36) (of workers in now polluting industries to new jobs).

Also, when it comes to policy design, the perceptions of respondents are out of line with actual parameters, particularly with respect to the sources of emissions of greenhouse gases.

There is a perception for example that the waste sector is as important as electricity from coal. Correcting those perceptions will be important for priority setting.

With respect to the origin of emissions, an outcome of interest in Glasgow was the inclusion of a reference to phasing-down the use of unabated coal power, an item not previously mentioned in the reports of the COP meetings. There was a debate that led to the change of ‘out’ to ‘down’ in the earlier draft, but another assessment is that of surprise that this text even survived.

Attention has been drawn to the roles of India and China in changing the text related to the use of coal, but other developing economies will share this interest, especially in the context of the failure to mobilise funding for adjustment. This matter was a major talking point in Glasgow, where the Pact noted the ‘deep regret’ (para 44) the failure to mobilise funding from developed countries at the goal of $US100b annually. It could only settle on a goal of doing so each year from now to 2025 at least, from which point a new collective goal would apply.

Respondents to the SOTR survey were, even before Glasgow, not convinced that sufficient funding would be available to allow developing countries to meet the expectations of them from the Paris Agreement with respect to mitigation and adaptation.

While APEC is not a funding agency, it has a role in regional leadership in the delivery of capacity building relevant to the various work programs from Glasgow, particularly the elements of the COP26 Catalyst for Climate Action (which relate to action on adaptation, access to finance, participating in carbon markets, and reporting and transparency).

With respect to policy choices, PECC respondents were given a menu of options, drawn from the UNFCC synthesis report.

Highly ranked from this list of options was an interest in energy efficiency, use of renewables, cutting transport emissions, forest management and better waste processing.

In addition, if we split the list of options according to measures related to mitigation and those related to adaptation, there is considerable interest among respondents in matters of adaptation, such as coastal protection, and the integration of attention to adaptation into other areas of urban planning and policy design. The Glasgow Pact urges the parties to further integrate adaption into planning (para 9).

It is also of interest that adaption (and finance to support it) were placed so high in the Glasgow Climate Pact, in sections II and III, which preceded mitigation (IV).

But according to the data available, only a small proportion (5%) of the government funds available are spent on adaptation. This is out of line with respondents’ expectations.

Also, the list of policy measures provided to respondents was actually a mix of outcomes and tools. Of which tools did respondents support the use?

Well, not price- or tax-based mechanisms, for example, carbon taxes, emissions trading and border taxes.

But then the question remains open about the preferred outcomes (energy efficiency, etc) would be achieved. Targets are not likely to be met by “wishin’ and hopin’”. One way or another a commitment of resources will be involved, the burden of which (and its effectiveness) will vary.

In this context, how can APEC help?

There is scope in this region to experiment with a variety of tools and mechanisms directed at mitigation, and then compare notes on the outcomes.

Respondents to the SOTR survey also identified a rich APEC agenda: get rid of barriers to trade in renewables equipment, get rid of fossil fuel subsidies, mobilise financial support for developing countries, build relevant structural reform capacity for decarbonisation and make the ESG processes more effective.

Likewise, the Glasgow Climate Pact refers (para 36) to transition to low emission energy systems, and the deployment of clean power generation and energy efficiency measures. In a much-reported outcome, participants at COP26 agree to accelerate ‘efforts towards the phase-down of…inefficient fossil fuel subsidies’, a less demanding ambition that in earlier drafts.

An APEC agenda is this respect is that to share experience of the application of modern digital technology to apply more efficient support for target groups on the grounds of inclusion, rather than subsidies which distort decision making.

There is lesser weight in the responses to the SOTR survey put on the work to facilitate linkages between carbon markets in the APEC region, but there is still some interest.

Markets for pricing carbon and those for the establishment of arrangements for offsets are two sides of the same coin.

There is considerable complementarity among members of APEC on which to base the development and application of these markets.

APEC also has considerable capability to offer in capacity building for the relevant complementary institutional development.

More likely is that APEC members will further develop these markets domestically before connecting them across the region. That domestic experience, however, are valuable to share.

There is now also a global reference point, since in Glasgow, participants adopted

“….the so-called Paris rulebook. An agreement was reached on the fundamental norms related to Article 6 on carbon markets, which will make the Paris Agreement fully operational. This will give certainty and predictability to both market and non-market approaches in support of mitigation as well as adaptation.” https://unfccc.int/news/cop26-reaches-consensus-on-key-actions-to-address-climate-change

Overall, the assessments are that the outcome of the Glasgow meeting have brought expected temperature changes down from well over 2 percentage points by next century, to something closer to 2 (or, optimistically, a little less) but still above the target of 1.5 (https://climateactiontracker.org/global/temperatures/). The Glasgow Pact therefore maintains the attention on the application of the ratchet mechanism from the Paris Agreement, and

requests Parties to revisit and strengthen the 2030 targets in their nationally determined contributions as necessary to align with the Paris Agreement temperature goal by the end of 2022, taking into account different national circumstances (29).

One interpretation of this outcome is that little progress was made in Glasgow, and the action was put off to next year. Those with a more positive view say that the Paris process is actually accelerated, with new plans to come within a year, rather than within five.

The debate on how to add to current commitments will continue, and is made more complex by the treatment of differentials among economies, which is an accepted principle, and by the differences in the formats and extent of their commitments.

In this circumstance, a further role of APEC is to continue to rehearse its vision of how its core operations, revolving around the cooperation among its members, from trade and investment to capacity building, can accelerate the response to the risk of a significant rise in temperatures.

Certainly, the respondents to the SOTR 2021 survey of opinion leaders would welcome practical responses by APEC in that respect.