Failure to meet global GHG emission reduction targets
The UNEP’s Emissions Gap Report 2022 shows how nations plans to reduce Green House Emissions (GHG) need to be more ambitious to get on track to limiting global warming to 1.5°C, as existing policies point to a 2.8°C increase. According to the report nations stepwise approach is no longer an option and it is necessary an urgent system-wide transformation to avoid climate disaster. To this end, the report provides recommendations in different sectors, including the financial system.
- Very limited progress in reducing GHG since COP 26 (Glasgow 2021). Policies currently in place with no additional action are projected to result in global warming of 2.8°C over the twenty-first century. In fact, Global GHG emissions could set a new record in 2021 after the pandemic short-lived reduction (Total global GHG emissions dropped 4.7%t from 2019 to 2020)
- More ambitious targets are needed: To get on track for limiting global warming to 1.5°C, global annual GHG emissions must be reduced by 45% in just eight years, and they must continue to decline rapidly after 2030. Apart to set more ambitious targets the report call for a wide-ranging, large-scale, rapid and systemic transformation of the economy. To this end, the report provides recommendations in different sectors such as electricity supply, industry, transport, construction, food and finance.
- Financial system will play a relevant role but will have to be transformed. Greening the economy will require investments of at least US$4–6 trillion a year, a relatively small (1.5–2 per cent) share of total financial assets managed, but significant (20–28 per cent) in terms of the additional annual resources to be allocated. The report makes recommendations to enable the sector to provide the necessary financial flows, for example:
- Making financial markets more efficient, through improved disclosure by introducing taxonomies and higher climate disclosures.
- Introducing carbon pricing, either through carbon taxes or emissions markets.
- Mobilize central banks: Central banks are increasingly addressing the climate crisis, but more concrete regulatory action is urgently needed.
- Create collaborative climate "clubs" between countries, with cross-border finance initiatives, credible financial commitments, and government support plans to finance the decarbonisation of the economy.