What is the High Ambition Coalition?
The High Ambition Coalition (HAC) is an informal alliance of countries within the UN Framework Convention on Climate Change (UNFCCC), set up to promote strong climate action. Established by The Republic of the Marshall Islands in the lead-up to COP21 — the summit that produced the Paris Agreement — the HAC has since acted as a progressive caucus at subsequent COPs, committed to a 1.5°C temperature goal and net-zero emissions by 2050.
What is in its latest statement?
At COP26, the HAC has attracted early attention and an expanded membership — including major greenhouse gas emitters Germany and the US — to support a high-reaching statement on climate action. Its latest statement, released Tuesday in Glasgow, reiterates the importance of halving global emissions by 2030 and calls on all Parties to the UNFCCC to submit “ambitious NDCs [Nationally Determined Contributions, meaning country-level emissions plans] in line with a 1.5°C trajectory as soon as possible, and well ahead of COP27”, which is scheduled for November 2022. The statement also urges the publication of net-zero emissions goals, and the strategies needed to implement them in sync with a 1.5°C pathway, no later than 2023.
Beyond national targets, the statement singles out certain industries for increased climate action. It calls on Parties to phase out unabated coal-fired power plants, end “inefficient” fossil fuel subsidies as soon as possible, cut methane emissions by at least 30% by 2030 on 2020 levels, and support decarbonization of the transport sector, including aviation and shipping. Significantly, the statement also calls for the “finalization of negotiations” on “outstanding elements of the Paris Agreement rulebook”. This would include so-called ‘Article 6 rules’ on “voluntary cooperation mechanisms” — a shorthand for cross-border emissions trading markets.
A marker for governments
By laying down stretch goals, at least 27 countries that signed on to the latest HAC statement are pushing for COP26 to retain a laser focus on ambitious climate policies, a counterpoint in part to less aggressive timelines from major emitters like India, which committed to a net-zero-by-2070 target on Monday, and China, which has not yet moved from its existing pledge to achieve net-zero by 2060. The reentry of the US to the HAC and the diplomatic heft behind the statement’s signatories, which includes major European countries, may encourage other states to align with the HAC.
Big signals for business
A publicly stated ambition to halve global emissions by 2030 and to have credible mid-century net-zero plans by HAC signatories should have seismic implications for businesses in HAC countries and others throughout the world.
Significantly, the HAC statement does not just set ambitious interim targets — it also urges countries to develop and publish strategies for achieving them as soon as possible. This means that businesses will face pressure from HAC countries to get their own 1.5°C, net-zero-by-2050 plans in place within the next two years. Those businesses that have established climate policies that do not reach this level of ambition may have to go back to the drawing board and reconfigure their strategies, while those that have yet to plot their route to a low-emissions future now face a ticking clock.
Another spotlight on oil, gas and transportation
Companies operating within, or adjacent to, the oil and gas sector may be especially challenged by the HAC targets. The emissions goals laid out in the statement can only be achieved if countries reorient their energy mix towards renewables and away from fossil fuels. The HAC statement’s emphasis on decarbonizing transportation could also precede accelerated efforts to reduce marine, air, and road fleets’ reliance on petroleum-based fuels, cutting off a vital source of demand for oil companies’ products. If fossil fuel subsidies are cut too, in line with the statement, then another financial pillar supporting these companies will be knocked away.
A push on super-pollutants, impacting agriculture, among others
The HAC statement calls for a commitment to reduce global methane emissions by at least 30 percent from 2020 levels by 2030, and to take aggressive action to reduce emissions of all super-pollutants (including hydrofluorocarbons and black carbon). That move is consistent with the latest report from the Intergovernmental Panel on Climate Change (IPCC) which, in August, recorded — among other things — the impact of methane on climate change.
The focus on methane and other super-pollutants impacts coal, oil and gas operations, but it also extends beyond that into agriculture. Ruminant emissions, meaning those produced by cattle, are a significant source of methane. Countries may introduce, or expand, efforts to curb the methane that livestock herds produce — for example, by incentivizing the use of special types of feed to reduce ruminant emissions. These initiatives may introduce new costs and ways of working to small and large agribusinesses alike.
A commitment to the Paris Agreement rulebook
Then there’s the HAC commitment to finalizing the Paris Agreement rulebook. As previously argued, countries need to reach an agreement on ‘Article 6’ measures for cross-border markets in emissions and carbon offsets to flourish. It may be that COP26 marks a step-change in these negotiations, in which case companies will have to quickly get to grips with the ramifications of these new markets. These could unlock all sorts of opportunities, just as they could throw up new challenges. Those working in this space in the 2000s will recall the flurry of activity around carbon credits after rules were developed for the Kyoto Protocol (a forerunner to the Paris Agreement under the UNFCCC umbrella). A similar (or greater) commotion is likely if COP26 generates movement on carbon trading rules as companies seek to monetize avoided, abated, or sequestered emissions.
Opportunities for adaptation
Adaptation efforts have played second fiddle to emissions reductions in the past, but the HAC statement acknowledges the opportunities that come with adapting to the impact of climate change. The signatories explicitly call out the “adaptation finance gap” and say countries should double current spending on this subset of climate finance. This means funding could flow towards those projects and activities intended to harden countries to climate risks — such as resilient infrastructure and reforestation. Businesses with expertise in these areas could flourish as a result.
A commitment to private finance
The HAC statement also recommits countries “to make finance flows consistent with a pathway towards low greenhouse gas emissions” and encourages “the development of new financial instruments, taking into account the need for more consistent and reliable financing streams”. This, and the express reference in an inter-governmental statement around the scaling up of private sector finance, should act as a big signal to financial institutions to get innovating and to prepare a menu of options for public and private actors with different risk appetites and project structures.
The Glasgow statement represents new territory for The HAC. Its endorsement by major developed world emitters makes it far more than a wishlist with scant real-world implications.
In some respects, the HAC statement can serve as a benchmark against which the final outputs of COP26 can be judged. If all Parties agree to policies substantially aligned with those in the statement, then net-zero-by-2050 will be a slogan no longer — but a real target, with effective, binding interim targets to underpin it.
That said, even if COP26 underperforms relative to the HAC scorecard, businesses should nevertheless consider the policies and calls for action in the HAC statement to be indicative of how HAC signatories plan to move forward from COP26, whether or not the HAC policies and calls for action are recorded in official UNFCCC output. The HAC signals are clear and strong. If you want to read the HAC statement, see here.