COP25: a missed opportunity to agree carbon market rules and raise climate ambition

After a marathon two weeks, the COP25 climate talks drew to a close yesterday in Madrid. It came as a surprise to all that despite the growing urgency of climate-related issues, governments postponed their discussions on carbon market rules until next year in 2020.

This failure to raise climate ambition in line with the science illustrates the difficulty of reaching an agreement between all parties on what are clearly imperative and complicated issues.

The “Chile-Madrid Time for Action” document agreed at the COP calls on governments to revise their national commitments by 2020. However, these talks have fallen significantly short of government leadership that matches the science and action we need to address the climate emergency.

The resistance of some countries to be more ambitious in climate action reflects a major disconnect with the sense of urgency echoed throughout the year by the IPCC’s scientific report, the UN Environment Programme’s Emissions Gap report, the special UN Climate Action Summit in New York in September and the climate strikes and protests.

As Peter Bakker, our President and CEO, said during the week at COP: “The outcome of the COP-25 is a bitter disappointment. We absolutely must see major economies stepping up their ambitions in 2020.

All of us – business, the financial sector, civil society, scientists, citizens of all ages and countries all over the world – recognize that climate change is now a global emergency. To keep a safe operating space for humanity requires urgent action by governments and business to move to net-zero emissions no later than 2050 aligned with the 1.5ºC target.”

The lack of government ambition at COP25 contrasted starkly with the determination shown by companies, cities and regions to accelerate climate action. COP25 President Minister Carolina Schmidt of Chile presented a renewed alliance of countries and non-State and sub-national actors demonstrating concrete and ambitious climate action aligned with science. The Climate Ambition Alliance now counts 74 countries, 14 regions, 401 cities, 786 businesses and 16 investors all working to achieve net-zero CO2 emissions by 2050. In addition, business ambition was raised in Madrid, with the number of companies pledging to achieve net-zero emissions by 2050 doubling since September to 177. 

Last week, the European Union sent strong signs of leadership, with the European Council agreeing that the EU will become carbon neutral by 2050, and through the newly adopted European Green Deal, which puts climate action at the core of Europe’s long-term economic and industrial growth strategy.

Business and WBCSD are working in partnership with countries, regions and cities that are embracing the transition to net-zero.

Business believes that Article 6 is a critical part of the Paris Agreement that will help unleash investment in low-carbon solutions. Getting these rules right in a manner that ensures environmental integrity and the avoidance of double counting was considered a priority for COP25.

With the negotiations on Article 6 failing to deliver for the second year running, WBCSD is concerned that this represents a missed opportunity for governments to commit to higher ambition through markets which enhance cooperation and drive accelerated business investment.

WBCSD encourages countries to develop clear and consistent long-term carbon pricing policies as part of their Nationally Determined Contributions (NDCs), to help accelerate progress towards a decarbonized future and achieve the Sustainable Development Goals.

Including the cost of carbon in products and services will drive demand to low-carbon options and accelerate market transformation. Companies should disclose full information on climate risks and opportunities – both transition and physical – aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This is necessary to ensure that the cost of capital reflects companies’ true risk profiles and consequent finance flows to low-carbon options.

We warmly welcome the decision at COP25 to continue the Marrakech Partnership for Global Climate Action which will continue supporting collaboration in climate action across governments and all areas of society, including business.

WBCSD brought three clear priorities from business to COP25:

• raise ambition on national climate plans;
• agree the rules of implementation for the global carbon market mechanisms under the Paris Agreement; and
• provide a continued role for non-state actors in the COP process.

During COP25, we organized engagements relating to Industry and Circular Economy under the Global Climate action agenda and participated in over 30 related events. In all these discussions it emerged clearly that businesses have the solutions and want to do more to accelerate action, but need governments to step up ambition and provide long-term and stable policy frameworks to support it.

With the role of nature now truly at the heart of the fight against climate change, we are engaging as a key player in major partnerships on Natural Climate Solutions and in the ‘Business for Nature’ coalition, to accelerate action that recognizes the role nature and biodiversity will play in supporting climate action. 

WBCSD’s new climate action initiative, SOS 1.5, will help companies to fulfill a vision of net-zero emissions by 2050. As all eyes turn to Glasgow for the November 2020 COP discussions, the role of the UK Presidency of COP26 will be more urgent than ever to impel governments to raise the ambition we need.