Europe’s leaders back green finance at climate summit

Several European leaders saw an opportunity to emphasize the importance of green finance at the US-convened Leaders Summit on Climate on 22 April.

They echoed the undertones of a speech by UN Secretary-General António Guterres, who said finance is needed for states to adapt to climate challenges. To date, only 18-24% of state recovery funding for pandemic-related economic downturns has gone to green projects, he said.

Guterres said key moves towards net-zero emissions would be made by an "alliance of alliances" uniting asset managers, asset owners, and 43 banks responsible for $70 trillion in assets, the Glasgow Financial Alliance for Net-Zero.

On the eve of the summit, the United Nations Framework Convention on Climate Change unveiled the grouping, formed with the help of US officials. It will be chaired by former Bank of England governor Mark Carney, according to a related statement.

While EU countries focused on global financial greening efforts, Russian president Vladimir Putin and the UK's Prime Minister Boris Johnson described how they struck out alone on domestic efforts to develop hydrogen and wind technology.

Germany guides green EU outlay

German Chancellor Angela Merkel, in her speech to the summit, pointed out that a share of Europe's post-pandemic economic stimulus funds was set to be green.

Germany worked to help seal the deal for the funds within the broader EU budget. In 2020, it held the EU's six-month rotating presidency and helped negotiate a €1.8 trillion ($2.16 trillion) bloc-wide budget package that will partly go towards a greener financial recovery.

The EU's governing bodies have pledged to issue €250 billion ($300 billion) in green bonds to ensure that 30% of the EU's €800 billion ($967 billion) Recovery and Resilience Facility finances green projects, according to attorneys at Mason Hayes & Curran.

Merkel saw green investment driving economies in Europe. "Climate action is also a massive opportunity for our economies, it creates new markets, it mobilizes investment in new and transforming industries, and it unleashes innovation for a healthier and more prosperous future," Merkel said in the speech. "The fight against climate change will be the engine for our global recovery."

UK pledges overseas climate finance

UK Prime Minister Boris Johnson spoke of the UK's status as the "Saudi Arabia" of installed offshore wind power capacity, its ambitious 78% 2035 emissions reduction target announced this week, and elaborated on billions earmarked for climate finance.

He shared a vision of green economic opportunity, which he said contrasted with the perception of climate action as "bunny hugging."

Earlier on 22 April, Johnson's office published a statement in which he said the UK had committed £11.6 billion ($16 billion) to support "climate finance" in developing countries over the next five years.

The level of finance that those countries need now exceeds the amount promised by rich countries at COP15 in 2009, when they pledged to provide $100 billion each year through 2020. The wealthy nations fell far short of that pledge, providing only $70 billion in total, a study showed.

Rich countries and private companies should provide more expertise and support, Johnson said. "And we want to see more examples of governments and private industry working hand-in-hand, as with the newly launched LEAF Coalition to reduce deforestation and the multi-trillion-dollar Glasgow Financial Alliance for Net Zero," he explained.

"We're ending support for fossil fuels overseas and doubling our international climate finance," added Johnson.

France banks on change

French President Emmanuel Macron also made finance the main topic of his speech.

He recounted how France's public investment bank, BpiFrance, had joined the One Planet Initiative in 2020. "The One Planet Initiative has brought together sovereign funds, asset managers, and private equity so that everyone can use the same methodology. These initiatives have become models for the future and are changing global finance. France will shoulder all of its responsibilities in the coming months in order to go even further on the issue of finance for the climate," said Macron.

Macron congratulated the US Federal Reserve on recently joining a coalition of central banks seeking to tackle climate risk in the banking sector, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), which was started in Paris in 2017.

The French leader also touted the importance of carbon pricing as a driver of green investment as well as trade mechanisms, perhaps hinting at a proposed carbon-based tariff for non-EU countries, the Carbon Border Adjustment Mechanism.

Macron also said France participated in the recent summit that saw China agree on reducing ozone-depleting, climate-change-causing chemicals, under the 2019 Kigali Amendment of the Montreal Protocol.

Russia promises regional climate neutrality

Beyond "significantly reducing the net accumulated emissions in [the] country by 2050," Russia's climate ambitions largely center on a regional net-zero pilot involving hydrogen on Sakhalin Island. "This project will allow this Russian region to become carbon neutral as soon as 2025," said President Vladimir Putin.

He said the country is building carbon capture and storage infrastructure to enable production of hydrogen, both as a fuel and an energy source.

IHS Markit data shows that the Sakhalin I oil and gas project produces natural gas, which can be used in blue hydrogen production. It is one of two major offshore drilling projects near the Sakhalin-2 LNG liquefaction plant, operated by Gazprom, Shell, Mitsui, and Mitsubishi.

Putin also signaled support for an international coalition to unveil the sources of 20% of emissions that were not accounted for by governments, as well as unidentified sources of methane.

Methane which is not accounted for contributes to 40-45% of global atmospheric methane levels, according to a study published in the journal Nature in 2020.

Posted 22 April 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability