President of COP21: Building a green economy is an emergency to build a sustainable future
Date：2022-11-15
Keynote address by Laurent Fabius at the Second Dialogue of the China-Europe-America Net-Zero Transition Platform
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Ladies and gentlemen, dear friends and colleagues, I am honored to participate to the Second Dialogue of the China-Europe-America Net-Zero Transition Platform. As COP27 begins, we are at a crucial moment for climate actions. There will be no successful action against climate change without profound transformation in different fields: finance, industries, agriculture, urban planning... Building a green economy is an emergency to build a sustainable future.
Seven years after the Paris Agreement I had the honor to chair, the situation is worrying. Climate catastrophes are multiplying. This summer, catastrophic fires, intense heatwaves and droughts, record rainfalls have hit many regions of the world. These tragedies are all signs of climate disruption. The most vulnerable populations and territories are the first affected. This is a situation that we are all facing, not in 10 or 30 years but right now.
The last IPCC report showed that, unless we act now and more strongly, we are on a pathway to double the 1.5℃ limit set in Paris COP21. This warming is more severe than often anticipated and may lead to unprecedented chain reactions. Many other environmental issues are linked with climate change, like biodiversity, deforestation, pollution, which are worsening too.
While global cooperation is a necessity, unfortunately, international relations have deteriorated. Developing countries’ trust has been altered by their debt and by rich countries’ failure to keep their promises in terms of financing. With the new pressures on resources and energy created particularly by the Russian attack against Ukraine, many countries are turning toward an increased use of coal, sustaining what some call a “fossil fuel addiction”.
Is it too late to act? The IPCC’s answer is no, but we have to act fast and strongly. As the UN Secretary General Antonio Guterres rightly said in October, “We are in a life-or-death struggle for our own safety today and our survival tomorrow.”
Finance is obviously a crucial issue. From the very beginning of COP21, we have decided to involve financial actors, both public and private. Finance is key, both because climate change is massively impacted by financial activities and because the reverse is equally true.
Since 2015, many initiatives from public and private actors have arisen, international financial institutions are increasingly conscious of climate change. In its last World Economic Outlook report, the IMF has outlined that, in our search towards a low-carbon economy, there is “overwhelming evidence” that “any short-term costs will be dwarfed by the long-term benefits of arresting climate change”.
In the private sector, many banks and investment funds have made strong commitments. Ahead of Glasgow COP26, important financial institutions gathered to form what we’ve called the Glasgow Financial Alliance for Net Zero (Gfanz). Environmental, social and governance (ESG) ratings are being developed and are increasingly taken into account.
Among other countries, the European Union has taken important steps, particularly with the 2021 Sustainable Finance Disclosure Regulation and its recent Taxonomy for sustainable economic activities. The ambitious US Inflation Reduction Act has been adopted last summer, and it is good news. President Xi Jinping said at the opening of the 20th Congress of the Communist Party that China will give priority to environmental protection and promote a green lifestyle.
Despite these efforts, activities detrimental to the climate situation are still massively funded: Since the Paris Agreement was signed, the world’s biggest 60 banks have provided an estimate of more than $4 trillion of financing for fossil fuel companies. According to a joint analysis by the OECD and the International Energy Agency led in more than 50 major economies, government support for fossil fuel almost doubled from 2020 to 2021. It is crystal clear that we need urgent action to disinvest from polluting industries and invest more in sustainable activities.
When discussing green finance, carbon pricing is an essential tool for our economies’ transition. At present, limiting emissions is often more expensive than emitting greenhouse gases. Putting a price on carbon is a must in order to take into account the “negative externalities” which come with carbon emissions. For it to be efficient, a joint effort is essential, especially from the main emitters. The idea of one or several carbon price floors throughout the world and of sectorial agreements is fruitful. Such policies should be paired with powerful social justice measures, transparent information about the use of money and massive funding of technological innovations, because climate issues are also social, regional and technological issues.
Now, more progress must be made with COP27. The reinsurance company Swiss Re found that investments to decarbonize our economy had increased by 5% per year since 2016. On this path, Swiss Re estimates that Paris Agreement goals will only be reached by 2069, which means twenty years, too late. In order to limit global warming to 2℃, more than $270 trillion, public and private, are needed by 2050. Transport is the sector where most investments are needed, followed by energy, buildings, and industry.
Trillions will therefore need to be redirected to close investment gaps, increase support to enhanced climate action in developing countries, and to ensure leveraging of climate finance at scale. To achieve this, additional mobilization of public and private finance is urgently needed. Multilateral Development Banks, including the World Bank, must recognize that their climate finance portfolios are far from sufficient, and they should take steps towards bolder climate leadership. As Alok Sharma, the President of Glasgow COP26 said, “Climate must be at the very heart of what the World Bank and other development banks do, and they must do more on this agenda. The world cannot afford for such institutions to be cautious in how their considerable climate resources are deployed. This is a matter of social justice as well as environmental security.”
COP27 is therefore a political opportunity to show that we are financially moving in the right direction. I will insist on 4 points.
1. Delivery on the promised $100 billion a year promised in Copenhagen in 2009 is the key. Clarity and transparency on how the goal will be met, and when, are necessary for a successful COP27. Climate finance outcomes should also include deliberations over the new collective and quantified goal on finance, discussions of finance issue in the Global Stocktake, and the Green Climate Fund.
2. Mitigation and ambition. All those who have not already done so must submit enhanced NDCs. Countries must demonstrate how they will deliver on the promise of accelerated climate action made at COP26.
3. Adaptation. COP27, most advanced discussions on the Global Goal for Adaptation and deliver a roadmap on how finance for adaptation will be doubled, and made more accessible. COP27 should also be a moment for governments, business, and investors to come together to confront the adaptation finance challenge and provide scaled-up and predictable needs-based financial and technology support for implementing adaptation plans and priorities of developing countries, as elaborated in adaptation plans and strategies.
4. Loss and damage, the recent floods in Pakistan and growing climate impacts around the world, particularly in Africa and Asia, further stress the urgency of finding solutions to provide financial support to the countries and communities, facing losses and damages. These questions must be discussed during COP27.
With climate change, not only our forests are burning but also some our past way of thinking. If we want to deliver genuine green financing, this change in our past way of thinking and acting is especially necessary in the financial domain. Thank you.
About the speaker
Laurent Fabius, former French Prime Minister, President of COP21, President of the French Constitutional Council
