2021 is a key year for climate change

Science will be highly visible as climate pledges trickle in throughout the year

12 January 2021 Wai-Shin Chan, Head of HSBC’s Climate Change Centre

Climate change is back in focus as major economies strive for climate leadership. The COP26 conference, postponed from 2020, will be held in November; the UN’s climate-science body will publish its sixth Assessment Report; and countries will update their 2030 climate pledges and announce plans to achieve carbon neutrality by mid-century.

The European Union will release more details on its net zero aims and China’s new five-year plan will pivot towards the same goal while the US embarks on an about-turn under its new president. Other large economies will feel growing pressure to join the ‘net-zero club’.

The assessment report from the Intergovernmental Panel on Climate Change will come in three parts starting from April and will cover the physical science, the impacts, and mitigation options. The reports will cement the role of science in influencing government policy, highlight the urgency of ambitious action, and should allow investors to assess how well industries and geographies are prepared for potential changes.

The last climate negotiations, COP25, held in December 2019, left several loose ends to be settled at COP26 including Article 6 of the Paris Agreement and the common timeframes of nationally determined contributions. COP26 is also supposed to agree a new collective finance goal. Parties have been asked not to bring targets, but to bring real climate actions that can be implemented towards achieving those targets.

There will be a focus on climate disclosures as more regulators and other relevant organisations incorporate recommendations of the taskforce on climate-related financial disclosures, known as TCFD, into their guidelines. We anticipate a harmonisation of standards and stronger investor involvement.

We also expect carbon pricing to play a growing role in enabling the transition to net-zero economies. China should relaunch its national emissions trading scheme as the UK plans to introduce pricing initiatives.

The EU will propose its ‘Fit for 55 package’ as part of the European Green Deal as well as a Carbon Border Adjustment Mechanism.

As companies make net-zero announcements throughout 2021, we expect carbon capture, usage and storage to feature as countries and businesses study all options to meet targets.

It is going to be an exciting year for climate change.

First published 5 January 2021.

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