It's Biden Time for Global Climate

of the world. They're going to give us a summary of some of the main things that happened at the summit and put it into context during what is looking like a big year for dialogue and commitments on climate with the UN Climate Change Conference or COPY approaching this upcoming November in Glasgow. Among the reiteration of some existing commitments, there were a few new commitments and a few statements that bring us a step closer to understanding what some

countries will actually be doing. And remember the five w's, who, what, when, where and why? Those are increasingly well trodden territory when we're talking about climate, but it's really the how that last question that doesn't fit with the five ws that is turning out to be the really tricky part. As a reminder, b n EF does not provide investment or strategy advice, and you can hear a more complete disclaimer at the end of the show. But now let's talk

about the Biden Climate Summit from last week. Vicky Ali, thank you for joining today, Thank you for having us, Thank you very much. So we're here today to talk about the climate summit that took place at the end of last week. So it was a two day summit that the United States facilitated. There's a notable climate summit already happening this year, so copy is coming up just in November. And I really got me thinking when they announced that the summit was going to be taking place,

what were they hoping to achieve? And what did they achieve? Potentially we'll get to that. What were they hoping to achieve at this summit that wasn't already going to be happening at copp in November. I think we can say that there are like were two main aims of the event. So the first one is that the US is back in Paris, is back in the Paris Agreement. So it was a chance for the US to re establish itself to say here we are, we are committed to tackling

climate change, and we're raising our climate ambition. And then at the same time so we do indeed have COP

twenty at the end of this year. One of the reasons why it is an important COP is that it's the beginning of this cycle that was this kind of reporting pledging cycle that was agreed in the Paris Agreement, where countries or parties they make their pledges, then there's a kind of comparison of all the targets together known as the Global stock take, and then on the basis of that assessment, parties are meant to increase their ambition. And so this summit was an opportunity for countries to

make more ambitious pledges. That was the aim was to kind of galvanize efforts towards a tackling climate change. So those were the main goals of the summit, but yes, it may be a different matter as to whether they were actually realized. There's some pre COP energy here and trying to get everybody really ready for what will hopefully

be a year very much focused on these issues. Were there any countries noticeably absent from the Biden Climate Summit from my perspective, Actually, it was noticeable about how many countries did attend. So even countries or leaders that have been less than ambitious about tackling climate change or vocal about the need to tackle climate change, say Saudi Arabia or Russia or Turkey, they were all there. So we

had peuty In, Bosonaro, Rdigan, Amblo, Mexico was there. They weren't necessarily making more ambitious pledges, but there were certainly in the room. I think the only country among top ten emitters I was missing was Iran, and that's naturally expected why it wasn't invited. The only other major economy that was not the head of state was not invited was Thailand for the obvious political reasons, but Thailand did have representation at the event with having a minister attending.

So we have a tremendous turnout. Not a ton of new commitments, but definitely everybody thinking about the yearhead but a few new commitments that were definitely notable, So why don't we go through those? Sure? Absolutely so, probably the one at the top of that. This would be the US is and your emission reduction target for thirty So this is as part of its NDC, that's its nationally

determined Climate plan. So all parties have to put together these climate plans, covering them in the next decade or so. And they announced their new target, which was a certain

amount of step in the right direction. We estimated that if the US had, say, maintained the same level and ambition as its five target, and it just extended it out thirty, then the target would have been in a thirty something about thirty eight percent reduction below two thousand five levels, whereas what they actually proposed was fifty to fifty two. So it is a step in the right direction, yes, But then which we may want to talk about later,

there's a question markus to it's actually achievability. So another one that actually put forward a new target was Japan, but i'll hand that over Alley, thank you, Vickie. So in the case of Japan, the original target was to decrease emissions by twenty six percent in twenty thirty relatively to the two thousand thirteen basis, And this time around a prime minister just in the run up to the summit, announced that they would increase the target to fort sent

emission reduction by twenty relatively to two thousand thirteen. There have been a bit of a debate in Japan around what to set the new target at the Ministry Environment apparently wanted to increase it by reduced emissions by whereas the Ministry of the Industry had been arguing for thirty nine percent and they were expecting data. Anything beyond that would be to challenging, and it appears that the Prime Minister has basically gone with the average of the two

to keep both sides happy. Well, and then we've got one more country. So as we're listening here, you know, Ali is representing a pack as head of a research for APACK for US. But also you are a Canadian. So what is it that the Canadians committed to? Well, actually, maybe i'll first let Ricky explain that, and anology very

happy to comment on the Canadian target. Okay, let's see. Well, so Canada, yes, it wasn't a big surprise that it announced to hire target because it has historically aligned itself with the US. So we Biden having announced its fifty target on two thousand five levels. Trudeau announced that Canada was increasing its target from reduction on two thousand and five levels too. Now, in comparison with say Japan and the US, we would say that this was a less

ambitious move. We've recently published a report that compared the G twenty countries NDC targets based on four metrics. So it's it's really tricky to compare these targets because countries use different deadlines and different baselines. So we use four different metrics, say the reduction in absolute volumes, reduction in emissions per capita, and we also looked at emission intensity. And on this basis, the new Canada target is not

that bold. In particular, if we compare what emissions would be with the target and without the target, we actually found that Canada will be able to substantially increases emissions and still achieve its twenty thirty target. So on that basis it was slightly disappointing. But I understand that Ali

may have a different view. Well, this is how we measure emissions keeps coming up again and again because not only is it very much relevant to the targets that we're setting in whether or not we can compare Apple staffles across countries, but you see it across countries and how they're reporting previous podcast. But we've talked about the EU taxonomy and how they're trying to standardize this here. So this is definitely a challenging space and it does

depend on how you look at it. So Ali, how are you looking at the commitments that Canada made to be for all these countries are looking at greenhouse gas emissions as a whole. They try to do a very good job of accounting for different types of greenhouse gasses and the convergent factors that they use are fairly consistent. So from that perspective, when they're talking about these emission

reduction targets, they are talking about the same thing. Where I think it's important to recognize is what do they need to do? So what where is the emissions is coming from and what exactly how do they have to do to be able to reduce this. And where US is today is very different than where Canada is and where Japan is. In the case of Canada, a significant portion of the emissions is coming from its oil and

gas sector. So if you look at regionally, the province of Alberta alone accounts for over a third of Canada's emissions, and if you ignored Alberta, Canada's emissions are already actually declining at a rapid pace. So the challenge that Canada is going to have with reducing its emissions aggressively is how does it get under controlled emissions associated with oil and gas production. Unlike Japan and the US, Canada's power

sector is already fairly clean. Over eight percent of the electricities erated from zero emission sources, dominated by hydro, so that opportunity of reducing emissions in the power sector is no longer available to Canada because they've already mostly done it. In the case of Japan, actually most of the opportunity is still in the power sector, So the emission factor for the Japan's power generation is still relatively higher compared

to Europe, US and Canada. So there's a lot of work that they could do to be able to get emission reduction from there. A different way of looking at this is what's the cost of abatement and so how much does it cost you to be able to reduce that emissions? If you're talking about the power sector, the technologies are fairly known, and the cost of abatement and the power sector is actually fairly low. In some cases

it can be even positive. So if you're a country like Japan where you have a very high import dependence on energy, you can potentially by relying on domestic renewables we can actually end up having a positive conomic impact. But if you have to actually abate exists think economic activity such as oil and gas production, that can be very expensive, particularly given that today we still don't have a commercial, available, liable carbon capture and storage technology. So

Ali was impressed Vicky. So I would just say, I'm not disagreeing at all with what Ali says. It will be tough. We're tough for all three countries to to decarbonize, and for different reasons, but purely on the basis of level of ambition, I think the Canada's step up was slightly lower than say the US in Japan. So I mean, if we are looking at achievability, the US target is

going to be very very challenging to actually achieve. As you say, in theory, the power system will be decarbonized by five so Buying has announced a separate target for that. But then in terms of looking at how to decarbonize building heating is very challenge as its industry, and it really does lack the policy support both at federal and state level for that to happen. Let's talk about that

for a second. The US's role in this. So they're making much bigger commitments to climate during this administration as compared to the last administration. So the last administration saw the United States pull out of the Paris Climate Agreement, and now we have the US back in. How are the other countries making commitments or perhaps not making commitments, Viewing the US's role in the commitments are making now, given that they may very well be reversed in less

than four years time, it's a fair point. The OS was in some ways successful in rebuilding some of its credibility with this summit and with the announcements it made, but that target hasn't been passed through into legislation paths through Congress, and really it won't be able to kind of solidify its credibility fully until it's put in place the concrete policy measure to achieve those targets and actually

taken steps towards meeting that target. So I mean one of the reasons why it was so simple for Trump to exits the paras groute was because it hadn't been enshrined in legislation. So it would be interesting to see if and what a steps Biden takes to to change that. One other area that's notable is the amount of money that was committed or maybe not committed to tackling climate change in countries outside of the US and specifically some

developing countries. Can we talk a little bit about how much was raised and whether or not that was impressive or not impressive. The final amounts is not super clear. So so the US did make a pledge to to increase more than five billion, but if you want to tell you up all the announcements during the summing, it's a little bit unclear. There were a couple of bilateral new partnerships also announced, for example between US and India and US in Japan and the U S and Japan.

Was interesting because they also said that they would focus the on the Indo Pacific region. So it wasn't completely clear. If you go back to climate change negotiations, developed economies had already made the pledge that by twenty twenty they would increase climate finance support to developing economies two hundred

billion dollars. It doesn't appear that they have met that target unless you start counting private investment as well, which is something that's was not supposed to be countered towards and so this is supposed to be coming from governments and multilateral entities. The other issues that there's a bit of a mismatch between countries who have been recipients of this funding whereas the ones that have asked for the funding.

So places like India and some parts of Southeast Asia have done relatively well, but on the hotter hand, a lot of the lower developing economies, for example parts of Africa I have not done as much in attracting the financing that they had requested. The summit it may have been a positive, small step towards that issue, but it

didn't see into bridge the gap. We did have several countries during the summit, starting with the biggest one, China, pointing out the fundamental principle of common but differentiated responsibilities in climate change negotiation. So this is the whole idea that if you look at the challenge of emissions, we have to look at who has emitted since the Industrial Revolution and since European countries as well as North America and Japan, so basically mostly oly City members, they have

been more responsible for emissions. Historically, they bear the responsibility of helping a non annex one countries reduce their emissions and they have to sort of carry the load at the beginning. This is a tricky one because while yes, if you look at commulative emissions, it's through that those countries very responsibilities, but if you look at who's emitting more these days and who's on a growing trajectory, and a lot of these non annex one countries are becoming

an issue. And this has been a debate for some time as to how we go about figuring out who needs to do what and when and back and forth. Yet so it's this is a bit a bit retro in terms of the emissions discussion, but it's back again and they are making strides. So actually, well, China didn't create a new target that they committed to during this summit.

What was it that they did outline and make a little more transparent positive announcement from Prisoner was omitting to achieve coal peak consumption within the fifteen five year planned period that refers to. Previously China have talked about that the peak would be what he has now alluded to is that they will be achieving that earlier than that. And we saw an immediate reaction where a lot of the coal companies, those that were publicly listed, actually there

was a real negative reaction to their prices. And there's now a lot more talk by state owned entities in China around how they can achieve peak coal earlier and I try to reduce him aasitions for um whole generator. So that was definitely a positive step. We're going to take a quick break. Stay with us. Let's talk about some of the other interesting things that came from some of the statements that were made by other countries that have a particularly big role to play in the climate discussion,

so namely Brazil and Russia. What were their statements at this summit. One of the interesting ones was came from

a Bosnar from Brazil. So he reiterated that the country would be willing to reach the next zero emissions and he actually brought forward the deadline for that from which has been previously mentioned to, but he made it clear that that would rest on substantial support from other countries, specifically developed countries UM, so where my about half of that reaching next zero would be achieved through reducing emissions itself, that the other half would be through some kind of

forestry offset um to make use of its natural resources. And this is one of the first times that a major economy has announcement at zero target but put it up conditional on support from from elsewhere, and as yet there have not been any kind of concrete responses from developed countries that they would be willing to do that.

The other one may be interesting was Russia. We're President Putting actually talked about getting methane emissions under control, which was rather surprising given Russia's significant oil and gas operations and and unlikely challenges with with controlling methane emissions. Methane is a bit tricky because it's actually it's impact on warming is much more significant than CEO two, although it doesn't last as long as you two in the atmosphere.

So there's been a lot of discussions around getting better control around methane leaks, and it was quite positive to actually see President Putting bring that up and talk about in a positive manner around how there should be international cooperation on getting that under control. So there's a sense here that there is some momentum in these discussions and that maybe we will see some really very interesting things take place at cop later in this year as we

look ahead to that. I think one of the things that really has stood out to me over the course of this past year, with Project light Speed and with the advancements that we've made in vaccine technology, is that sciences, when they really put their mind and quite a bit of money behind advancing something, we make incredible strides. Now in the climate space, there is money being committed, there are targets and years and momentum, And my question is,

you know, what does this all mean? What do you anticipate in particular for the spaces that then EF covers very closely. So let's say, for example, clean energy and transportation, you know, what do we expect might happen in the

nearer term in these areas. As a result of some of the announcements at the summit last week, one of the kind of less covered results from last week's summit was the fact not these kind of emission reduction targets made by likes of US and Japan, but the announcements made by other countries of these more concrete projects, all the kind of partnerships or initiatives for example between US

and India with regard to clean energy. What I would anticipate coming out of the copy is more progress made on say these concrete initiatives around for the energy transition, moving towards clean power and clean road transport. Those are two of the priorities for the UK government which is hosting COP and we could see more announcements come out centering around initiatives that already exists, for example the powering Past whole alliance or the electric vehicle alliances. That is

one of my kind of expectations from the COPS. But the other one is also finance. So while that was saying somewhat disappointing outcome of the summit last week, the UK government is committed to discussing there's a hundred billion a year target when it comes to the Glasgow events and maybe making more commitments from developed countries for five So we would anticipate more progress being made on that side. And Ali, what would you say that perspective is regarding

the Asia Pacific region specifically EPOCH side. If you look at power sector the carbonization, it's still relative to North America and Europe, the region is relatively behind, even though of course a park which China, it is the largest market for deployment of renewables as well as they're manufacturing. But still in terms of the emission intensity of power generation,

the region needs to accelerate. And I think all in all of what we heard at the summit, even though some of it was not new, it was a good sign that this has happened in so hopefully way before twenty third we're gonna see emissions from the power sector in the region to reach its peak, which would be a positive development. When we go beyond these sectors though, this is where your vaccine analogy becomes really important. So there are areas um such as carbon capture and storage

or hydrogen in general. When we talk about industry de carbonization, these are areas that significant more R and D needs to happen, but also significant more regulation needs to come into place to signal to investors and companies that at some point these sectors will be covered by significant restrictions. We are seeing those signals primarily in Europe today, we're

starting to see those signals elsewhere. So Canada, for example, does now have a fairly strange and carbon price in mechanism in place, but many other economies, particularly when you look at US, China in DA, those signals are still not there and this is where it will be interesting to see whether the US will follow through with with

some type of a current pricing mechanisms. China has started this older, so they have a carbon trading mechanism operational starting from this year, but the prices are not allowed right now. There's too much free allowances. Essentially, enterprices are not rising, so it will be interesting to see whether we see more policy direction that Yeah by twenty thirty, for example, we're looking at covering emissions from petrochemicals steal

and aviation as an example. These are what we need to see happened within this decade so that there's enough investment going in uh these new new areas for technology development as well as gender deployment in the twenty thirties. Okay, so let's play the acronym game, since it seems like there are a lot of them. We actually wrote a research note I believe at one point that was called making Sense of the Sustainability alphabet soup or something along

those lines. So, Vicky, what is an NDC so NDCU if you don't know, because if nothing else, the climate talks really like acronyms. So NDC is one to remember. It means nationally determined contribution. So it's essentially a party's plan for how it intends to reduce emissions or promote climate adaptation over the next tent fifteen years. There's also a longer term version which is called a long term strategy, and that goes out to stay and is where some

countries have put in place net szero emission goals. So Ali in relation to Asia Pacific, were there any other statements that were made that you found particularly interesting? A few other interesting comments from our leaders are the summit or one of those where from Indonesia's President of Kobe. For the most part, he took a positive tone, but but towards the and he did comments that countries should not be throwing trade barriers and negatively commenting on other

countries policies. And this was an indirect reference to EU regulations on restrictions of palm oil exports or palm oil imports from Sciency Stag into the Europe because there are concerns that the palm plantations are essentially causing additional emissions because they're usually done by clearing virgin forest um and planting in his place palm trees. The other one that

was interesting was Australia. Probably for me personally it was the most entertaining speech, but in terms of substantive commitment towards the climate change, it was also probably the one

that was lacking any substance. Prime Minister Morrison had a couple of good lines, saying through technology not taxation, and also he finished with the line that I'm probably gonna mangle here saying that the future gener rations will judge us not by our plans but by our actual actions, and he was essentially trying to say that there is an Australia is not announcing any additional more ambitious goals is because it feels like it would be empty boards

and it's rather focused on fulfilling its existing goals, which by the way, right now they're not on the trajector to fulfill and they haven't passed any policy framework to actually make sure that they would meet those twenty thirty goals. Vicky in regard to North America and Europe. What did you find that was some stand out? But other than for the countries that we have already discussed well in some ways, in terms of Europe that it was the

least interesting. And that's principally because they have already made the kind of their big headline grabbing climate announcements. So one thing they could say was that on the day before the summit began, the European Commission, Parliament and Council, so those are the three big EU institutions, had reached an informal agreement on its climate law. And then this climate law it includes its emission reduction target, which is reduction on levels and the net zero goal. For now,

how about companies. I my understanding was that there were several large, important companies that were also invited to join these talks. What was their role to play there? Isn't Those companies were there were primarily as a supportive signal for the domestic U S audience. So one thing I would give them really high marksis that they designed this summit very carefully with two audiences in mind. Who won

the international audience and the other one the domestic audience. Particularly, how do they emphasize the jobs as well as the security and the national security angle of climate change, so that they can overcome Republican position that even if they don't get enough Republican support, they can still go ahead and read what they want to do and the public would be on their side. And I think they generally

did a good job of trying to do this. So there were three new announcements at this summit, and then some other interesting things that we've already discussed on the show today. My final question to both of you, so we're maybe we're going to a betting shop and we're going to put our money where our mouth is. You know, who are you betting on? And which of the three countries so US, Japan, Canada do you think are going

to meet the targets that they've outlined. I am going to say Canada, and that is because it's not as ambitious as the other targe the other targets. Yes, it's already got a fairly decarbonized power system, but the federal government and some of the provincial governments are showing intention of actually reducing emissions and putting in place policy measures to actually realize the mission targets and that's the most

important thing that governments now need to do. It's all very well coming out with these big announcements of goals which kind of indicate the direction of travel, but the next and equally important step is to actually implement policy measures to spur this change in in real life. I actually would think both Canada and Japan will meet their targets.

For Canada, yeah, yeah, I still disagree with Rickie, that's easy, but I agree that they've done more in terms of introducing a policy framework, particularly on carbon pricing, which recently the federal government one at the Supreme Court as well, so it's fairly secure legislation now in place. So I think they have a good opportunity to meet their target

because that policy framework is already in place. And in the case of Japan, compared to both Canada and US, the central government of Japan is much more powerful, so unlike US and Canada, the local governments in Japan don't have as much power. Now this could be a good thing or a bad thing in this case. Particular challenge that both US and Canada have encountered, particularly in the case of Canada, where a lot of energy policies at

the provincial level. If federal government has a specific national plan, it can run into challenges of constitutional jurisdiction around whether it can implement it or not. In the case of Japan, the central government has all that power, and also because Japan still has these areas such as the power sector where if they really wanted to technology already exists, it's more of a motivation too for implementation, they could actually

do it. In the case of the US, I think the challenge is that if you look at where the emissions have trended now, transportation is the largest sector. The carbonizing that for road vehicles will require introducing new field economy standards, as well as potentially ramp revamping and expanding the the California ZEV mandate Nationally, these are topics that are definitely Republican states will oppose and will try to

fight the federal government. On the power sector, the challenge for the US is that you have to go beyond just reliance on natural gas. While renewables have accelerated, If the Biden regition really wants to meet its net zero power goal, then we're talking about phasing out or limiting the role of natural gas in the power sector. Which

is going to be politically very challenging. UM. That's why I think the US target is actually the most challenging politically to be met compared to Canada's and the Japanese one. Vicky and Ali, thank you very much for joining. I think it would be great to have you back in the run up and maybe the post cup to see where we got to in this next year. Today's episode Switched On was edited by Rex Warner The Gray Stoak Media. Bloomberginni app is a service provided by Bloomberg Finance LP

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