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What is COP26 and Why Does it Matter for Markets?
Against the backdrop of rising energy prices leading to economic fallout for economies in Asia, Europe, and North America, COP26, a two-week event, is set to begin on October 31 in Glasgow, Scotland. The United Nations’ Conference of Parties (COP) was first held in 1995, and COP26 gets its name for this year’s meeting being the 26th iteration of such an event.
History of global temperature change and causes of recent warming (Chart 1)
Source: Climate Change 2021: The Physical Science Basis - Summary for Policymakers (IPCC)[1]
COP26, later this month and in early-November, will be an attempt to get countries on the path to fulfilling the goals laid out in the 2015 Paris Climate Agreement. The Paris accord outlined the goal of keeping the planet from warming by 2 degrees Celsius by the year 2100, and if possible, to stop warming at 1.5 degrees Celsius (relative to pre-industrial era readings).
Per a report released this summer[2] from the UN’s Intergovernmental Panel on Climate Change (IPCC), the planet has roughly ten years left to make significant cuts to emissions before the 1.5-degree Celsius threshold is reached, with the planet already having warmed by 1-1.2 degrees Celsius relative to the end of the 19th century.
Assessed contributions to observed warming in 2010–2019 relative to 1850–1900 (Chart 2)
Source: Climate Change 2021: The Physical Science Basis - Summary for Policymakers (IPCC)[3]
A sense of urgency underscores COP26, but the October/November summit – whose aim is effectively to curb use of fossil fuels like coal and oil[4] – is arriving at the worst possible time thanks to a budding energy supply crisis gripping most of the globe’s major economies.
