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5 takeaways from the COP26 climate summit -2-

A push for carbon capture and storage, increasingly intended for use directly at the source of fossil-fuel burning, brings traditional energy companies to the fore, as might be expected. Morgan Stanley highlighted a few companies trying to advance the process, among others: ConocoPhillipsCOP, NextDecadeNEXT and Occidental PetroleumOXY.

Carbon markets

Another issue causing problems at the conference on Saturday has confounded negotiators for six years: setting up carbon-trading markets. The idea is to trade credits for reducing carbon like other commodities, tapping the power of markets, with poorer nations getting money, often from private companies, for measures that reduce carbon in the air.

But rich nations want to make sure that poor nations that sell their credits for making carbon reductions, which include carbon-absorbing forests, don't include the same settings as reductions in their national emissions, called double counting.

"The good news is we now have rules in place that would avoid double counting," said WRI's Mountford.

But Mountford expressed disappointment that the market rules would allow up to 4 gigatons of Kyoto-era credits to carry over into a new market mechanism.

"That is more than the annual emissions of Russia and Indonesia combined," she said. "So that is very risky" to the chances of carbon-market success to curbing global warming.

She also said an update on carry-over rules would be addressed next year and said current wording "encouraged, but did not require" some of the market proceeds to funnel to the adaptation fund that will help poorer countries prepare for rising seas, extreme weather and other risks to their economies and populations that's expected to come with even moderate global warming.

Trade and geopolitics

A final consideration for investors is trade and geopolitical strife.

The Biden administration has pushed for green energy and technology production to return to the U.S. and with it, "good union jobs," but the nearer-term reality is much green energy and clean technology production remains offshore, notably in China.

"'Climate Wars' could be one of the bottlenecks," the BofA team said. "The global race for cleantech is underway, by China, the U.S. and the EU, posing the risk of limited knowledge and fund sharing, and resources competition."

The U.S. position as a leader, and investment haven, in the fight to combat climate change may also hinge on how cooperative it is seen in shoring up emerging markets, who tend to consume the least energy but are front-liners when it comes to the impacts of global warming.

Last-minute negotiations focused on a potential loss-and-damage fund for poor nations hurt by climate change and forest credits in a carbon-trading market.

Divisions remained on the issue of financial support sought by poor countries for the disastrous impacts of climate change they will increasingly suffer in the future.

The U.S. and the EU, two of the world's biggest historic emitters of greenhouse gases, have had deep reservations about the so-called "loss and damage" provisions.

The Associated Press contributed.

-Rachel Koning Beals


(END) Dow Jones Newswires

11-15-21 0901ET

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