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US, EU launch net-zero pressure group, talk global carbon price

17 June 2021 Cristina Brooks

The US and the EU launched a formal group urging other countries to be "ambitious" with their emissions goals and to follow their lead in pledging climate neutrality by 2050.

Highlighting the rising attention on climate change, the creation of the US-EU High-Level Climate Action Group was one of many prominent announcements at a 15 June US-EU summit that tackled a range of trade and diplomatic flashpoints around the world.

Countries are expected to deepen emissions cuts through upcoming pledges, called Nationally Determined Contributions (NDCs), at the UN Climate Change Conference (COP26) in Glasgow this November. Several countries did so already at the US-sponsored Leaders' Summit on Climate in April.

The US and EU have only recently become net-zero flagbearers. The US added an interim goal of a 50-52% GHG reduction by 2030 to its 2020 net-zero-aligned NDC at the April summit and EU governing bodies approved a law that will allow the bloc to follow through on its net-zero-aligned NDC pledge.

In announcing the new group, the US and EU said they will promote low-GHG technology and markets and discourage the unabated coal sector both inside and outside their borders. After China, the US and EU produce the world's second- and third-most CO2 emissions.

They will also continue to work on an unfulfilled promise made by richer Paris Agreement countries to provide $100 billion per year of transparency-linked funding for meeting climate mitigation needs in developing countries by 2020.

The countries mobilized $78.9 billion in 2018 and continued to grow that figure in 2019, but did not reach the $100 billion by 2020, an independent expert group found in a UN-commissioned report released in December. This large figure still falls shy of the $4 trillion the World Bank and International Energy Agency estimates developing nations will need to mitigate climate change by 2030.

The partnership will work to "provide an effective platform for cooperation" and "lead by example" while engaging international partners to "keep a 1.5 degrees Celsius limit on global temperatures within reach" through COP26 targets.

"We aim to make climate neutrality the global benchmark ahead of COP26 in Glasgow," said European Commission President Ursula von der Leyen on Twitter.

Cost of carbon

In a speech, von der Leyen mentioned that the EU and US talked about a global carbon price at the 15 June summit. Low carbon prices in the EU have been faulted as ineffective for motivating intended low-carbon retrofits, observers have noted. "Last but not least, we were discussing the global pricing on CO2, that it is necessary overall to have over time a global price on CO2, be it through the Emissions Trading System or be it through taxation," said von der Leyen.

"And in this context, I explained the logic of our Carbon Border Adjustment Mechanism, and we discussed that, we will exchange on it, and that the [World Trade Organization (WTO)] might facilitate this," she added, referring to the EU's proposed carbon tariff on imports that could be levied on imports of steel and cement to prevent unfair competition with European companies. As soon as this summer, these companies will be under more pressure to decarbonize though the proposed European Green Deal.

Fight against unabated coal

In a joint statement on the day of the summit, the two powers also said they and other countries should stop investing in unabated coal.

The move aligns with recent calls by US, UK, and Japanese export credit agencies to halt state finance for international fossil fuel projects.

The US and EU aim to quickly move away from unabated coal capacity and decarbonize their power grids in the 2030s to reach their net-zero commitments, without naming funding sources for these goals.

"We resolve to take concrete steps towards an absolute end to new direct government support for unabated international thermal coal power generation in third countries by the end of 2021, including through official development assistance, export finance, investment, and financial and trade promotion support," they said. "We commit to reviewing our official trade, export, and development finance policies towards these objectives."

The US and EU will also promote technologies to reach their climate neutrality and just transition goals, such as:

  • low GHG technologies;
  • uptake of renewable energy;
  • energy efficiency;
  • methane emissions reduction;
  • sustainable food systems, including climate-smart agricultural systems, and;
  • sustainable and smart mobility.

Jointly commercializing these technologies will be critical to tackling to climate change, according to von der Leyen. "So, to make sure that on both sides we are aware of the latest development, we can discuss how we enable breakthrough technologies or amazing innovations to be competitive [in] the market and to work on their market entrance, because we will rapidly need these new technologies if we want to fight climate change," she said in her speech.

Alliances

The US and EU's climate partnership will use two separate alliances to reach its net-zero aims, one of which is new.

They will start a Transatlantic Green Technology Alliance that will foster cooperation on the development and deployment of green technologies, as well as promoting markets to scale such technologies.

They will also use Mission Innovation, a R&D coalition that includes the EU and 22 countries, and is affiliated with Bill Gates' cleantech investment vehicle Breakthrough Energy.

The US and EU promised other mutual climate measures such as preventing carbon leakage and providing "tools" to support sustainability in the finance sector

They will further encourage other countries to stop biodiversity loss, in part by helping to promote a post-2020 global biodiversity framework at the 15th UN Biodiversity Conference of the Parties (COP15) in October. They pledged to "conserve" at least 30% of global land and oceans, including at least 30% of EU and US land and waters, by 2030.

The US government is already putting this target into action through a proposal, called the " America the Beautiful Initiative," and legislation has been introduced in Congress to fund a "30 by 30" land protection program.

The series of measures came days after the US announced a $40 trillion infrastructure fund for developing countries, targeting climate, health, digitization, and equality concerns.

Earlier this week, the North Atlantic Treaty Organization (NATO), the military alliance of European and North American countries, also adopted a climate change adaptation plan.

At the 15 June summit, the US and EU tackled many high-profile issues, including what von der Leyen called longest trade dispute in the history of the WTO, a 17-year fight over their respective subsidies for aircraft manufacturers.

They also pledged unity in the face of international disputes involving states like China, Russia, Iran, Syria, Libya, Yemen, and Israel.

Climate and Sustainability News has been renamed Net-Zero Business Daily™ in order to better reflect our focus on the business and financial impacts of the global transition to a lower-carbon and, eventually, net-zero carbon global economy. Each day, IHS Markit will bring you accurate and detailed information on recent developments, as well as far-sighted analysis on the challenges that lie ahead.

Posted 17 June 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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