Climate Finance Momentum Builds in Lead-up to COP 26

COP Presidency Publishes Climate Finance Delivery Plan

The UK COP26 Presidency yesterday published the long-awaited Climate Finance Delivery Plan (the Delivery Plan) led by Canadian Environment Minister Jonathan Wilkinson and German State Secretary Jochen Flasbarth. The Delivery Plan seeks to provide clarity on the commitment by developed countries to provide $100 billion in climate finance per year. The Delivery Plan is informed by recent OECD analysis to 2025, which indicates that by 2023 the $100 billion per year goal will be met and the mobilization of funds for climate finance is likely to surpass $100 billion each year afterwards.

The Delivery Plan provides ten key actions that should be taken by developed countries to deliver on the $100 billion pledge, including:

1. Increasing the scale of climate finance;
2. Increasing finance for adaptation;
3. Prioritizing grant-based financing for the poorest and most vulnerable;
4. Addressing barriers in accessing climate finance;
5. Strengthening the financial mechanism of the UNFCCC and Paris Agreement;
6. Working with multilateral development banks to increase and improve climate finance;
7. Improving the effectiveness of private finance mobilized;
8. Reporting on collective progress transparently;
9. Assessing and building on lessons learned; and
10. Taking into account the broader financial transition needed to implement Article 2.1(c) of the Paris Agreement (making finance flows consistent with a pathway towards low GHG emissions and climate-resilient development).

In 2009, developed countries first pledged to mobilize $100 billion in climate finance annually by 2020. This goal was reaffirmed under the Paris Agreement in 2015. In June 2021, Canada pledged to double its international climate finance commitment to $5.3 billion. Germany has pledged to increase its climate finance to €6 billion per year by 2025.

RBC Releases Canada Net-Zero Transition Report

RBC recently released a report titled “The $2 Trillion Transition: Canada’s Road to Net Zero” (the Report), which analyzes the opportunities and pathways for Canada to reduce greenhouse gas (GHG) emissions towards net-zero by 2050. The Report coincides with a similar report by the Canadian Institute for Climate Choices released last week (read our earlier bulletin here). The Report indicates that reducing Canada’s emissions (730 MtCO₂e in 2020) to net-zero by 2050 will require investment of approximately $2 trillion over the next three decades.

The Report identifies six pathways for achieving net-zero GHG emissions in Canada including: (i) electricity; (ii) oil and gas; (iii) buildings; (iv) transportation; (v) heavy industry; (vi) agriculture:

• Electricity. The Report calls for a doubling of hydro, nuclear, wind and solar electricity supply and notes that decarbonizing the electricity grid would cost $5.4 billion per year and reduce emissions by 11 MtCO₂e through broader adoption of renewables, nuclear energy, and battery storage solutions. Natural gas electricity generation will likely still be required for the foreseeable future.
• Oil and gas. Canada could save up to 92 MtCO₂e at a cost of $13.7 billion per year from the oil and gas sector. The Report notes that Canada should continue to benefit from developing its oil and gas resources while investing in reducing emissions from the sector, with reduction in methane as a top priority. Importantly, the Report indicates that investment and adoption of carbon capture, utilization, and storage (CCUS) will be required to meet Net-zero commitments and could account for savings of 76 MtCO₂
• Buildings. Canada could save up to 65 MtCO₂e at a cost of $5.4 billion per year through building and retro-fitting more energy efficient buildings. The Report notes that 75% of emissions associated with buildings come from space heating where wider adoption of heat pumps, electrification, and home energy improvements could significantly assist in reducing emissions.
• Transportation. Canada could save up to 93 MtCO₂e at a cost of $25 billion per year, largely by electrifying transportation. Transportation is the largest source of GHG emission after the oil and gas sector. Electrifying transportation, widely adopting electric vehicles, and investing in biofuels are noted as key drivers.
• Heavy industry. Canada could save up to 35 MtCO₂e at a cost of $4.4 billion per year through changes in production and energy uses by heavy industries. Reducing emissions in heavy industries such as cement production, mining, and steel could be achieved by further electrification where possible and replacing fossil fuels with less carbon-intense alternatives, such as hydrogen or CCUS.
• Agriculture. Canada could save up to 31 MtCO₂e at a cost of $2.5 billion per year from changes to agricultural practices. Canada’s agriculture sector accounts for approximately 10% of total GHG emissions. Adopting less carbon intensive farming practices along, reducing fertilizer use, planting cover crops, and switching out fossil fuels will all need to be employed to reduce emissions.

The Report highlights eight policy actions that will be key to the success of the $2 trillion transition:

1. A national policy on electrification;
2. A national strategy for green skills;
3. Long-term commitment to carbon pricing;
4. Leveraging climate to enhance U.S. trade;
5. An industrial strategy for CCUS;
6. A national action plan on sustainable agriculture
7. Super-charging electric vehicles; and
8. Rapid retrofitting.

The Report also makes recommendations on how to inspire communities, businesses, and Canadians to support the pathways to net-zero, including: (i) informing consumers about how their choices impact emissions; (ii) mandatory labelling for emissions-intensive decisions; (iii) cheaper funding for greener options; (iv) making greener transit more enjoyable; and (v) re-jigging electricity pricing.

For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.