Countries would have to do more than setting up National Determined Commitments (NDCs) to keep global temperature below 1.5°C or even 2°C, according to analysts at U.S. bank Citigroup.
According to the report by Citi, a global leading bank, at current emission rates, we have just 14 years before global temperatures rise beyond 1.5°C with China responsible for 24 percent of total annual emissions flowed by the U.S. at 12 percent.
This implies that global climate reduction targets might fall short except more is done by countries to limit emissions than just NDCs.
In 2015, a legally binding international treaty on climate change was signed by 196 countries called the Paris Agreement. Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.
The NDCs is a document where countries communicate actions they will take to reduce their Greenhouse Gas emissions in order to reach the goals of the Paris Agreement.
Greenhouse gases have been a major driver of climate change. When certain gases are released into the atmosphere, they act like glass, trapping heat and stopping it from leaking back into space.
“If we add up all of the current NDCs, essentially each country’s individual plan to stay within a 1.5-degree Celsius world, the aggregate effect in 2030 would be for emissions of around 55 gigatonnes (Gt) of carbon dioxide equivalent (CO2e). This represents an emissions reduction of just 1 percent versus 2019 and a 9 percent increase since 2010,” the Citi authors said.
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“However, the International Panel on Climate Change (IPCC) tells us that in order to meet their 1.5-degree Celsius scenario, emissions by 2030 would need to fall by 45 percent versus 2010 levels. So current efforts are not even reducing emissions, let alone heading towards net zero,” the analysts said.
Global leaders will assemble in Glasgow on Oct. 31 for the COP26 U.N. climate summit, aiming to thrash out more ambitious plans to cap global warming and agree the funding needed to help accelerate the planet’s shift towards a lower-carbon economy.
However, the analysts say efforts must be made to implement carbon taxes and establish a new multilateral climate action development bank that will help get money to emerging markets more effectively.
“To have any chance of reaching net zero and to limit this temperature increase, we need to price carbon high enough to encourage polluters to change their ways, and provide incentives for consumers to switch to green products and services,” the Citi analysts said.
Citi said countries could do this by setting up a direct carbon tax, implement an emissions trading system or use carbon credits, also known as carbon offsets
A direct carbon tax can be implemented on CO2 emissions or directly on fossil fuels while Cap-and-trade systems, commonly referred to as emissions trading systems, are mechanisms that place a cap on the total quantity of CO2 that can be emitted by a participating entity.
A government or a central authority allocates or sells a limited number of permits allowing entities to discharge specific quantities of CO2 emissions. Firms are required to hold permits equal to their allowed CO2 emissions and are taxed if they produce CO2 emissions higher than their permits allow.
Citi also calls for a new global institution dedicated to financing lower carbon developments, funded by nations across the globe.
Under the Paris climate agreement, developed countries have promised at least $100 billion annually to help address the climate financing needs of developing countries, while the summit itself hopes to help mobilise trillions in private sector finance towards climate investments.
“We believe it would be far more efficient if capital were to be allocated with the assistance of an institution fully dedicated to achieving climate change objectives,” the Citi authors said.
Such a bank could work together with other development banks, such as the World Bank, the African Development Bank and the European Bank for Reconstruction and Development, to coordinate climate action facilities and other goals.
“We cannot realistically expect emerging markets to fund their own decarbonization programs, and slow their economic growth … The goal must fall at least in part on developed nations,” the authors said. “We need to find a mechanism whereby global efforts to decarbonize are funded efficiently and equitably.”
Citi is one of the world’s largest financial institutions, operating in all major established and emerging markets.
