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As delegates to the 27th Conference of the Parties (COP27) of the U.N. Framework Convention on Climate Change (UNFCCC) debated how to implement decisions taken at the COP26, U.N. Secretary General (UNSG) António Guterres stated the self-evident — “cooperate or perish." The statement drew attention to a plan by the World Meteorological Organization and others for building “early warning systems” against imminent catastrophes in the most vulnerable countries. Currently only half of the governments negotiating at COP27 have such early warning systems. 

However, the UNSG is more than a publicist for the work of specialized U.N. agencies or U.N. affiliated agencies. The UNSG’s High Level Expert Group (HLEG) report on revised criteria to belong to the Race to Zero campaign is independent of the work of any single U.N. agency. “Race to Zero” refers to Article 4.1 of the UNFCCC Paris Agreement, according to which human caused emissions should be “balanced” by emissions removals by 2050. According to the report Annex, over seven months, the HLEG held 40 consultations, met with 500 organizations and received 300 written comments to produce the report on how members should assess their net-zero emissions commitments. As of September 2022, the campaign numbered “11,309 non-State actors including 8,307 companies, 595 financial institutions, 1,136 cities, 52 states and regions, 1,125 educational institutions and 65 healthcare institutions.” All the members are committed, but not bound, to the Race to Zero criteria to meet the objectives of the UNFCCC Paris Agreement. The Race to Zero, like the UNFCCC itself, depends on voluntary cooperation to achieve common objectives. 

As the state of the global climate has deteriorated, the criteria have become more specific and exacting. The HLEG report, released on November 8 at COP27, may result in fewer Race to Zero members. For example, and a big example, some of the members of the Global Financial Alliance for Net Zero (GFANZ), spearheaded by the UNSG’s Special Envoy for Climate Finance, Mark Carney, are alleging antitrust regulatory concerns as a reason why they cannot commit to the new criteria to restrict financing fossil fuel emissions. Beau Sullivan, of the Sunrise Project, stated to the Financial Times, “Banks at Glasgow saw the alliance as a kind of ethereal thing on climate change without ever mentioning the F-word: fossil fuels. . . It is only when the ambition was lifted that the antitrust concern was raised.” Given the cartelistic character of the fossil fuel industry, alleging antitrust concerns as a reason not to cooperate on ending the financing of new fossil fuel development, adds disingenuously to the risk of perishing from effective cooperation. 

What was in the new HLEG report that made GFANZ members doubt their Race to Zero commitments? 

In August, IATP submitted brief comments on the draft HLEG “starting line criteria” and “leadership practices.” In the initial draft, the HLEG proposed that an Expert Peer Review Group review applications to join the Race to Zero campaign that include plans to achieve “starting line criteria,” such as  

Set an interim target to achieve in the next decade, which reflects maximum effort toward or beyond a fair share of the 50% global reduction in CO2 by 2030. Targets must cover all material greenhouse gas emissions: 1. Including scopes 1, 2 and 3 for businesses and other organisations; 2. Including all territorial emissions for cities and regions; 3. For financial entities, including all portfolio/financed/facilitated/insured emissions; 4. Including land-based emissions.] (p. 3) 

(These draft criteria remain intact in Recommendation 2 of the final report.) In our comments, we objected only to the use of the term “material,” which applies to financial reporting to regulators and investors that describes events or circumstances that may affect a firm’s short and longer-term viability. The Expert Peer Review Group is not a regulatory body, nor an investor group, and so cannot interpret which emissions impact a firm financially.  

However, IATP agrees with the fair share analysis of the “starting line criteria,” including setting emissions reduction targets in line with the IPCC conclusion that a 50% reduction in emissions is required by 2030 to keep global warming from exceeding 1.5⁰C by 2050. The reporting and reduction of scope 3 (supply chain) emissions is particularly relevant to agribusinesses, in which scope 3 emissions are up to 90% of a firm’s total emissions. Regrettably, the HLEG recommendation regarding methane reductions applies only to the fossil fuel sector. (p. 24) IATP’s co-authored report with the Changing Markets Foundation for COP27 targeted methane emissions generated by multinational meat and dairy processing firms

The title of the 42-page report is “Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions.” Accounting, environmental and social integrity of net-zero claims and the means to achieve those claims are a common thread through the report’s 10 recommendations. Catherine McKenna, the HLEG Chair, writes in the preface, “To prevent dishonest climate accounting and other actions designed to circumvent the need for deep decarbonization, we emphasize that non-state actors must report publicly on their progress with verified information that can be compared with peers.” Public reporting with verified information on actions to achieve the net-zero targets that can be compared among companies and industry groups is a high ambition standard that some Race to Zero members have committed to in terms of the Science Based Targets Initiative (SBTi) Corporate Net Zero Standard and sectoral standards, such as those for the Food Land and Agriculture Group of companies.  

But according to an October 25 letter from eight climate scientists to SBTi, the lack of third-party verification of company self-reported data is a “critical flaw” in the design and implementation of the SBTi standard. The authors make six recommendations on how the standard and its verification can be improved prior to COP28. For example, rather than developing the SBTi standard based on computer modeled emissions pathways, the scientists recommend basing the standard on the corporate fair share of the remaining carbon emissions budget corresponding to the Overall Mitigation of Global Emissions required to stay within the 1.5⁰C target. 

The HLEG report is frank about the current state of voluntary carbon markets (VCMs): “too many non-state actors are currently engaging in a voluntary market where low prices and a lack of clear guidelines risk delaying the urgent near-term emission reductions needed to avoid the worst impacts of climate change.” (p. 17) There is a huge risk that the trading of emissions offset contracts will be used to delay non-state actors’ absolute emissions reductions. But the report’s authors are optimistic that the SBTi, the Voluntary Carbon Markets Initiative (VCMI) and the Integrity Council for Voluntary Carbon Markets (ICVCM) will produce the “high quality” offset credits that “should be used for beyond value chain mitigation but cannot be counted toward a non-state actor’s interim emissions reductions required by its net zero pathway.” (p. 19)  

For companies that had planned to buy offset credits to realize their net-zero targets, this recommendation will not be welcomed. If buying offset credits is not allowed for the purpose of setting and achieving interim net-zero targets, i.e., the 2030 targets, why would companies invest beyond their value chains, e.g., to reduce emissions in the communities where their facilities and the communities of their suppliers are located? Since ICVCM, VCMI and SBTi are all voluntary standards, this may seem like a recommendation that could be easily circumvented by creative emissions accounting and reporting. Why be concerned about a recommendation on voluntary standards that carries only reputational risk for failure to comply? 

However, this and other recommendations on transparent and comparable reporting of emissions and offset use by companies and sub-federal governments are HLEG steppingstones towards government regulation of net-zero target setting, transition planning and reporting: 

There is a need for a Task Force on net zero Regulation to convene a community of international regulators covering all industries to work together towards net zero. Using the TCFD [Task Force on Climate Related Financial Disclosures] process as a useful precedent, this community would be broader, and could include members from all regions and bodies such as the FSB [Financial Stability Board], IOSCO [International Organization of Securities Commissions], ISSB [International Sustainability Board] and other experts. . . . we believe that an international Task Force on net zero Regulation could explore how our recommendations could be turned into regulatory requirements and the steps required in the different jurisdictions to have them adopted. (p. 37) 

Even the suggestion that net-zero-related recommendations could become subject to mandatory rules might cause some Race to Zero members to flee the campaign. COP27 negotiations are coming to a close with a question “WTF?” (Where’s the Finance?), now worn as a badge, unresolved both in terms of agreed policy and new money for climate action adequate to meet the need in the most vulnerable countries. In this context, the UNSG call for net-zero regulation is a tool to lobby for cooperation. 

For critics of the report, who nevertheless find much to praise in it, the authors’ assumption that offset projects result in emissions reductions and substantial climate finance for developing countries is unwarranted: “there is little to no evidence that carbon credits have produced meaningful emissions reductions, and the distribution of financial benefits has been highly inequitable.” IATP agrees with this criticism.  

However, consider the clarity of the report about what must be done in the context of the stalemates of COP27 negotiations as they approach the scheduled end of the meetings on November 17. According to reporting by Third World Network, governments are not close to agreed decision texts on most issues, including “areas of mitigation, adaptation, loss and damage, agriculture, gender, response measures.” A criticism about any one HLEG recommendation misses the overall impact of the report.   

We fervently support the following recommendation in the HLEG report: “Financial institutions should have a policy of not investing or financing businesses linked to deforestation and should eliminate agricultural commodity-driven deforestation from their investment and credit portfolios by 2025, as part of their net zero plans.” (p. 26) The HLEG cannot force financial institutions to comply with this recommendation by 2025, or even later. However, the recommendation and its rationale convey the urgency of doing so. Notwithstanding the “midcentury” deadline for achieving net-zero emissions in Article 4 of the 2015 Paris Agreement, the overall import of the HLEG report to its Race to Zero members is to demand that they act with what the Rev. Dr. Martin Luther King, Jr. called “the fierce urgency of now.” 

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