Where Biden’s climate summit succeeded and fell short

Good morning from New York, where it has been a busy week keeping up with all of the developments happening at Joe Biden’s climate summit. Read on for Gillian Tett’s take on what has been accomplished and what still needs to be done.

But Washington is not the only place where important sustainability news is being made. We also have a dispatch from our colleague Mehreen Khan in Brussels, where the EU is planning a major green bond issuance but struggling to get its long-awaited green taxonomy in order.

And please join us later today (7pm BST/2pm EDT) on the Clubhouse app, where Gillian and I will be joined by Anthony Scaramucci and researchers from Energy Web, a think-tank founded by the Rocky Mountain Institute, to discuss whether cryptocurrency can ever be green.
— Billy Nauman

Catching up on Biden’s climate summit

Is the (green) glass half-full — or half-empty? That is a question many activists might have asked as the Biden climate summit swept across Washington this week.

On the positive side, there was much to celebrate: getting the Chinese and Russian premiers to turn up was an achievement in itself; there were a string of promises from countries about cutting emissions faster than expected; there were numerous private sector pledges to back net-zero policies; China vaguely promised to “power down” its use of coal and South Korea pledged to stop funding overseas coal-fired plants.

Also, the Biden administration declared plans to “double, by 2024, our annual public climate financing to developing countries relative to what we were providing during the second half of the Obama-Biden Administration” and “triple our adaptation finance by 2024”.

But, on the negative side of the ledger, neither America nor China has so far adopted the (entirely sensible and badly needed) proposal from the IMF that countries all need to set a minimum carbon price; nor did the multilateral funds unveil any new blended finance initiatives to back the clean energy transition; and the aid offered by America to low income countries is still a drop in the bucket of what is needed.

However, optimists insist that ledger of summit positives and negatives misses the point: what this stage-managed ritual has done is pave the way for intensive discussions in the coming months that could turn rhetoric into action. Hopefully so.

As I write in the FT, one avenue for action that the Biden administration could, and should, explore is whether they might team up with China to reduce the use of coal in the emerging markets, and promote renewable energy instead.

There will undoubtedly be more discussions about that carbon price. Activity around green accounting standards is accelerating. Yes, these are still baby steps compared with the scale of the problem. However, the message to investors is clear: you ignore climate considerations at your peril now, wherever you sit in the world. (Gillian Tett)

Taxonomy drama in Brussels

The EU is gearing up to issue €800bn of supranational debt over the next few years to fund the continent’s post-pandemic recovery, making Brussels a powerhouse in the global sovereign debt market. 

A chunk of that debt, about €250bn, will be issued in the form of EU green bonds. 

The green recovery bonds have been designed to fund investments from EU countries that have pledged to spend at least 36 per cent of Brussels’ borrowing on green friendly spending. 

But despite the expectations from environmental, social and governance (ESG) investors, the bonds won’t be based on Brussels’ long-awaited taxonomy for sustainable finance after that project has been beset by delays. 

A senior EU official confirmed last week that the commission has decided to base its green recovery bonds on a “best-in-class reporting standard” instead. “There is no practical way to base the bonds on a taxonomy which is not yet ready,” said the official. Brussels is readying its first batch of green bonds by the end of the year. 

The decision is another blow for taxonomy fans in a week where the EU’s classification system has been bashed by swaths of the scientific and environmental community. 

After two years of working on the draft classification system, NGOs and consumer groups involved in the project staged a co-ordinated walk out on Wednesday in protest at the latest draft. Here’s the FT’s take on criticism of the decision to exclude gas and nuclear and provide the green label to controversial activities like forestry. 

The walkout is an embarrassing blow for Brussels, which is under fire to defend the credibility of an exercise that was designed as a science-led system to help guide investors and stamp out greenwashing. The accusations of greenwashing are now being directed at the EU. (Mehreen Khan)

A net-zero mea culpa

Admitting you are wrong when evidence doesn’t support your assumptions is an important pillar of good science (or journalism for that matter), but that doesn’t mean it is easy to do.

Yet, if the world is going to avoid a climate catastrophe, a lot more people will need to start behaving like good scientists and following the example set by professors James Dyke, Robert Watson and Wolfgang Knorr.

In an extensive mea culpa published this week in The Conversation, the trio of climate scientists explain why they have changed their view on “net-zero” schemes and have come to reject the idea that emissions can continue to grow as long as they are offset by carbon removal and storage.

“The premise of net-zero is deceptively simple — and we admit that it deceived us,” they write.

The group still believes net-zero “is a great idea, in principle” but they have not seen evidence that it works.

“We have arrived at the painful realisation that the idea of net-zero has licensed a recklessly cavalier ‘burn now, pay later’ approach which has seen carbon emissions continue to soar,” they write. “It has also hastened the destruction of the natural world by increasing deforestation today, and greatly increases the risk of further devastation in the future.”

The problem, however, is that it is not just a matter of companies admitting they were wrong. Some, in so-called “hard to abate” sectors have no other option but to rely on offsets, until new technology emerges.

But even for companies that can cut emissions and keep operating, it seems unlikely that many will spend the money to do so, as long as regulators don’t step in and investors and customers keep buying into the net-zero narrative.

“Current net-zero policies will not keep warming to within 1.5C because they were never intended to,” Dyke, Watson and Knorr write. “They were and still are driven by a need to protect business as usual, not the climate.”

This message comes at a critical time and should be a wake-up call for the business executives taking part in Joe Biden’s climate summit (especially those signing up to new net-zero alliances).

Activist groups such as Friends of the Earth International have been arguing against net-zero for a long time. And just yesterday, Greta Thunberg implored people to “call out their bullshit” when they see companies and governments “making vague distant targets”.

While companies may have thought they were doing enough by pledging to go net-zero and adhere to ESG principles, it is time to do more. (Billy Nauman)

Chart of the day

What’s the best way to reduce your carbon footprint? Flying less? Getting rid of a car? Ditching your dryer? A recent survey showed most people don’t have a clue. (FT)

Smart Reads

• Derek Chauvin’s conviction for murdering George Floyd unleashed another volley of CEO statements expressing resolve to do more to advance racial justice in their companies and in society more broadly. But how far does CEO activism on civil rights go? As Andrew Edgecliffe-Johnson explains, very few companies are throwing their weight behind federal legislation on policing reform or voting rights.

• JPMorgan chief Jamie Dimon might have spent a lot of time in recent years talking about the importance of stakeholder interests. But when it came time to back the new European Super League (that’s soccer for all you Americans), he forgot about the ultimate stakeholders: the fans.

Further Reading

• US aims to lead by example as countries pledge climate action (FT)

• ETFs present ‘recipe for climate chaos’, study claims (FT)

• Central banks need to take action now on climate change (FT)

• The destructive green fantasy of the bitcoin fanatics (FT Alphaville)

• EU ESG ruleset to bring ‘draconian’ distribution overhaul (Ignites Europe)