Globally, notable incidents of freak weather events giving rise to destruction and death have dominated the news. The increasing frequency of these erratic climate events has undoubtedly raised awareness of global warming and, on a political level, the need for states to move quicker towards green energy and the reduction of carbon emissions. Global warming is an inescapable issue that affects us all and which has forced governments to elevate this to the top of the agenda, filtering down to economic policies that will touch upon most industry sectors.
On 31 October 2021, representatives from over 200 countries are set to descend on the Scottish city of Glasgow for the United Nations climate change conference; the 26th Conference of the Parties (COP26). During this global climate summit, world leaders are expected to talk all things climate change. Commitments have already been made to aggressively tackle global warming and the reduction of carbon emissions. Energy is therefore likely to be high on the agenda.
COPs has been going for almost 30 years, with the most historic summit taking place in Paris in 2015 (COP21). There, and for the first time, 196 countries adopted a binding international treaty on climate known as the Paris Agreement. The primary purpose of the Paris Agreement was to limit global warming to 1.5 degrees Celsius to reduce the impacts of climate change. This reduction is to be achieved primarily through lowering greenhouse gas emissions with an aim of reaching net-zero by mid-century. The signatory states to the Paris Agreement “undertake and communicate ambitious efforts…with the view to achieving the purpose” of the Agreement. [Article 3]. It is therefore insufficient for signatory states to simply pay lip-service to the issue of climate change and greenhouse gas emissions. Each state must show positive and tangible action and its commitment to, and compliance with, the Paris Agreement will be measured against the same.
It is against that backdrop that COP26 is so important. Now is the time for the 5 year review. Signatory states will update their respective plans for reducing emissions and decisive plans will need to be laid out to achieve the reduction in global warming envisaged by the Paris Agreement.
We expect that those involved in the energy sector will be keeping a close eye on proceedings. A commitment to reducing greenhouse gas emissions will inevitably have a significant impact on the way that energy is produced and used in the future. In order to reach net-zero, COP26 has already identified that countries will need to accelerate the phase-out of coal and the switch to electric vehicles and encourage investment in renewables. There is not only an expectation on states to do more, but also a legally binding obligation.
When it comes to renewable energy projects, the developed nations are (as anticipated by the Paris Agreement) further ahead than emerging states but many commentators say that they are not far enough. Global consultancy firm, HKA, shared its 2020 CRUX data with us which includes an analysis on claims and disputes in the energy sector. Whilst the HKA research focuses on only those energy projects where there is a known claim or dispute, it does provide a useful indication of the lay of the land. For example, in the UK, 28% of energy projects in dispute concern renewables with that figure dropping to 20% for the USA. In the Caribbean and Latin America region, only 10.5% of energy projects in dispute concern renewables and in the Middle East that figure falls dramatically to 2%. So the message is clear. Countries across the world need to significantly reduce their greenhouse gas emissions and a shift to renewable energy sources is likely to become an even bigger priority. This will however require a change of mind-set for many and, crucially, significant funding streams to get new projects off the ground.
The green agenda will impact on almost all industry sectors. Infrastructure projects are coming under greater scrutiny as to their effects on carbon emission, particularly roads and airports. We have already seen legal challenges in the UK relation to road schemes, the HS2 high-speed rail project and expansion of Heathrow Airport. Residential schemes are also increasingly seeing conditions imposed by planners to achieve better energy efficient buildings. Combined heating (for multiple unit buildings), air heat source, ground heat source and solar panels with battery storage are increasingly common on new build schemes. Offsite fabrication may enjoy a resurgence given the greater energy efficiencies, and cost and construction savings. Materials used in the construction industry, how they are sourced, their carbon foot print and sustainability are all now relevant considerations. Smart buildings and sophisticated controls are being promoted as the way forward. Tenders and project bids will have an increasing requirement to show green credentials, particularly with state funded projects.
Given its role as president of COP26, the UK may well find itself under the spotlight with its plans to tackle energy efficiency and climate change subject to international scrutiny. The UK Department for Business, Energy & Industrial Strategy report encouraging statistics for Quarter 1 2021. Renewable energy generation was reported to “marginally” outpace fossil fuel generation. Unfortunately, in the UK, we must accept that we are largely in the hands of the unpredictable climate. There are also big plans in the pipeline, as set down in the Prime Minister’s “Ten Point Plan for a Green Industrial Revolution” in November 2020. As one would expect, there is a heavy focus on renewables with 3 of the 10 points concerned with renewable energy:
- Advancing offshore wind
- Driving the growth of low carbon hydrogen
- Delivering new and advanced nuclear power
Over the past decade, we have seen a sea-change in the energy sphere. Clean and renewable energy has gained international importance and countries across the world have committed to doing better. COP26 is likely to ramp up the pressure but the extent to which countries will put positive change into motion remains to be seen.