So what does COP26 mean for the energy industry? Four days in and the answer is quite a lot as COP26 has delivered tangible steps forward on coal and methane, as well as greater international cooperation on electricity generation.
What is missing, however, is a clear, actionable and proven roadmap for countries to decarbonise their energy system. This is no surprise; the energy transition is an unprecedented challenge.
However, that’s not to say that COP 26 hasn’t been instructive.
UK Prime Minister Boris Johnson latched onto action on coal like a moth to a flame as one of his four objectives for the summit: “coal, cars, cash, trees.” It has paid off on paper, with commitments now in place from coal-reliant countries including India and a pledge from 190 countries to phase out the fuel. It is clear that the debate about coal has now progressed to how, rather than whether, to transition away from it as quickly as possible.
Promisingly, COP26 has delivered concrete commitments on that front despite some pessimism going into the summit. The G20 agreed to end the funding of coal-fired power stations in developing countries. Some went a step further in financially supporting South Africa to transition away from coal power, offering a potential future blueprint to enable developing countries reliant on coal to move to cleaner forms of energy. And the practical action has kept coming, with over 80 countries signing up to the Green Grids Initiative, which aims to improve renewable energy sharing between international electricity grids.
Importantly, a US-led coalition also announced it will reduce global methane emissions by 30% by 2030. It’s a quick climate win: rapidly reducing methane in the atmosphere would be a huge step towards achieving the goals of the Paris Agreement as it traps 100 times as much heat as CO2 and is cycled out of the atmosphere in 10 years. It buys the world time to address CO2 emissions, which stay in the atmosphere much longer. The oil and gas industry should take note – action on methane will need to come sooner rather than later.
However, one issue conspicuous by its absence in the debate at COP 26 is natural gas. Governments and the energy sector alike have responded to the criticism of coal and methane from environmentalists – but the debate on natural gas is more muted.
It is cleaner than other fossil fuels, emitting just over half of the CO2 produced by burning coal according to the US Energy Information Agency. For this reason, natural gas is touted as the ‘transition fuel’ by the oil and gas industry with clear benefits around intermittency. Demand is increasing in China and other developing economies and producers – including the US, Russia, Australia and Qatar – are stepping up to meet it.
Enquiringly Renewables are growing as a share in global electricity generation, providing 29% of global energy needs in 2020 compared to 27% in 2019 according to the Institute for Economic Affairs. This represents clear progress but to meet the objectives of the Paris Agreement, the Intergovernmental Panel on Climate Change argues that natural gas consumption needs to fall by 40% by 2030.
Although not pressing enough to knock coal and methane off the COP26 agenda, criticism of natural gas is likely to grow progressively more vocal as 2030 approaches and the focus turns to decarbonising other fossil fuels. Some countries are ahead of the curve, with the US, Canada, Italy, Costa Rica, Ethiopia, Gambia and New Zealand among others signed up to stop public financing for fossil fuel projects abroad by 2023.
Back to today and we are seeing clear action around the energy transition. Governments have chosen to focus on securing commitments around coal and methane this time – and with good reason – but that is all they are at present: commitments.
What we need to see coming out of COP26 is countries turning these commitments into clear roadmaps that the public and private sector can get behind – and deliver on.