• Editor

COP26: a quick guide to common climate terms

From Nationally Determined Contributions to nature-based solutions, we explain some of the common climate terms likely to come up at COP26.

Global leaders from all walks of life have descended on Glasgow, Scotland for the 26th Conference of the Parties (Cop26), being held between 31 October and 12 November 2021.

Previous COPs have resulted in momentous climate commitments – like COP21, which was held in 2015 and saw nearly 200 countries signing up to the Paris Agreement.

The Paris Agreement commits countries to limiting global warming to between 1.5OC – 2OC above pre-industrial levels to maintain a livable climate. There’s some uncertainty when projecting the implications of unprecedented changes in the atmosphere, but with global temperatures already more than 1OC above that historical baseline and rising quickly, the need to set the global economy on a very different course is stark.

Simon Webber, a lead portfolio manager at Schroders, who has invested in climate change trends for the past 15 years says: “Some conferences can be a formality, but COP26 is arguably the most important climate conference in a decade.”

Global leaders are expected to report on their country’s progress against the goals set out in the Paris Agreement and there could be some new decisions made as to how to reduce carbon emissions.

While there are numerous unknowns ahead, such as how things will pan out between the US and China, one thing we know for sure is that there’ll be plenty of climate terms and acronyms bandied about (as usual).

To demystify things, we’ve put together this quick guide to some of the more common terms you should know.

Avoided emissions:

The emissions saved as a result of substituting a carbon-intensive process with one that emits less carbon.

Hannah Simons, Head of Sustainability Strategy at Schroders, explains: “Think about a coal-fired manufacturing plant. If it switches to using renewable energy sources instead, there’ll be a whole lot of carbon emissions that have been avoided as a result of the switch.”

Carbon market (including carbon offsets)

A trading system in which countries or companies can trade carbon credits or offsets in order to comply with national limits. Those markets can be either regulated (reflecting laws requiring companies to secure credits in proportion to their emissions) or voluntary (where buyers choose to acquire credits generated by carbon reducing activities).

Andy Howard, Head of Sustainable Investment at Schroders, says: “Airlines, for example, release a lot of carbon. In order to compensate for this, they might plant trees or pay a separate company to plant trees. This would be a type of carbon offset.”

Carbon neutrality (or net zero emissions)

When the amount of carbon emitted equals the amount of carbon being removing from the atmosphere (either through the purchase of carbon credits or carbon offsets). In this way the overall position is one of “net zero carbon emissions”.

More than 130 countries have committed to, or are considering committing to, net-zero emissions by 2050. Data suggests one-fifth of the world’s largest public companies have set net-zero targets (as at March 2021).

Saida Eggerstedt, Head of Sustainable Credit, European and Sustainable Credit at Schroders and a specialist in carbon neutral investing, says: “I would like much more actionable commitments by all governments towards carbon neutrality. To meet the science-based pathway of limiting global temperature rise they need to act in the shorter to medium term.”

Climate finance

Finance that is used to tackle climate change. It can either be used to reduce carbon emissions or promote ways in which to adapt, mitigate and build resilience to the effects of climate change.

In 2015, developed countries committed to coming up with $100 billion per year by 2020 to tackle climate change in developing countries.

Saida Eggerstedt says: “I would like to see allocation of financial resources and technical help to developing countries and endangered areas, immediately and urgently.</