Weekly News | 30th August to 5th September 2022

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week.

World | Non-binding and bold climate plans found to be more effective 

• According to researchers at the University of California, bold and non-binding national climate goals are more credible and result in greater change than less ambitious but binding pledges.  
• The authors interviewed 829 climate negotiators and scientists from over 150 countries, offering some of the first data to support the logic of the 2015 Paris Agreement. 
• The European Union’s climate strategy, which involves decreasing emissions by 55% from 1990 levels by 2030, was rated the most ambitious and effective by respondents both within and outside the region. China placed second, both in terms of ambition and compliance with its own goals. 
• Read more about this story: Bloomberg 

Comment from Codo: This study shines an interesting light on how national governments can approach the definition of their climate goals under the Paris Agreement. Japan for instance has long been reluctant to display a higher level of ambition in carbon emissions cuts, considering that targets should be set at a reasonable level of ambition, in other words, achievable without any bold plan. Would Japanese companies move faster on decarbonization if the national goal was more ambitious? 

The US | Insurers now refusing to cover oil and gas companies in climate lawsuit 

• Aloha Petroleum, a subsidiary of the US-based Sunoco, filed a claim against AIG’s National Union Fire Insurance Company, arguing it had failed to protect Aloha from the mounting costs of defending climate-related claims by local governments in Hawaii. 
• A previous case, filed in June by the insurance company Everest, asks a Massachusetts superior court to make a similar ruling about whether coverage can be denied to Gulf Oil. 
• These are some of the first legal battles for insurance coverage for climate change litigation. If they are successful, the fossil fuel companies might face millions of dollars in legal fees, in addition to any potential damages given in court. 

• Read more about this story: The Guardian, Reuters 

Comment from Codo: Worldwide, the number of lawsuits against firms deemed responsible for greenhouse gases emissions, such as oil and gas companies, is going up, along with their cost. So far, these companies were expecting their insurers to cover these costs, but this may end if these first cases are ruled in favor of insurance firms. In that case, major emitters would become directly exposed to financial claims from victims of climate change, without any insurance acting as a firewall.    

China | China needs $19 trillion to meet climate targets  

• According to China’s climate envoy, achieving the country’s climate goals will require over $19 trillion in investment. 
• According to BloombergNEF, the world needs to spend approximately $2 trillion per year until 2025 to avert the worst effects of climate change, which is more than three times last year’s investment. China, the world’s largest emitter, also faces extra hurdles as economic growth slows and geopolitical tensions rise. 

• China already has the largest solar and wind power fleets in the world, and it is adding vast amounts of new panels and turbines in isolated desert zones. However, the country is also relying massively on coal. 
• Read more about this story: Bloomberg 

Comment from Codo: China’s massive figures make the US recently announced public investment in climate look pale. While the American plan is to invest $374 billion over the next 10 years to support private initiatives, the total amount invested by China in 2021 alone is almost equivalent, at nearly $300 billion according to BloombergNEF. This combines both public and private investment but still indicates that scales are different. 

Nigeria | Nigeria proposes debt forgiveness for climate-change funds 

• Creditors should consider forgiving poor countries’ debts in exchange for a commitment to use pending payments on climate change mitigation measures, according to Nigerian Vice President Yemi Osinbajo. 
• A growing number of developing nations are facing debt distress as the economic effects of the war in Ukraine add to the impact of the coronavirus pandemic. 
• Africa will need a fourfold increase – $40 billion a year – in investment to achieve the energy mix needed to limit global warming to 1.5 degrees Celsius, added Osinbajo. He also advocated for reversing the trend in which high-income countries receive 40% of global energy investments despite having 15% of the world’s population. 
• Read more about this story: Bloomberg 

Comment from Codo: Climate finance will be a major topic of COP27 in Egypt this November, with a focus on climate adaptation and the needs of developing countries, as this COP is the first to be organized in Africa. Developed countries are expected to support decarbonization and adaptation efforts in less advanced countries.   

Japan | Fundraising still insufficient to support Japanese firms’ climate goals  

• JFE Steel announced plans to reduce its CO2 emissions by 30% from fiscal 2013 while Mitsubishi Chemical Group revealed upcoming 100 billion yen in decarbonization-related capital investments by 2030, as pressure mounts on Japanese companies to reduce their carbon footprint. 
• Steel accounted for 40% of the approximately 380 million tons of energy-related CO2 emitted by Japan’s industrial sector in fiscal 2019, with chemicals accounting for 15%.  
• Yet, Japanese companies still lag in fundraising with 285 billion yen issued in transition bonds in the January-July period, only a fraction of the roughly 150 trillion yen in investments needed over the next decade. 
• Read more about this story: Nikkei Asia 

Japan | Energy crisis makes Japan rely more on coal power 

• Even as Japan aims to shift to cleaner energy sources, it remains heavily reliant on old plants after the Fukushima disaster and amid the global energy crisis. 
• Plants far past retirement age such as Takasago Thermal Power Plant, which was built in 1986 and is owned by J-Power, are typically less efficient and more expensive to maintain than newer models, making their sustainability questionable.  
• Another reason for the ongoing coal dependency is the lag in adding cleaner fuel sources. Japan, the world’s third-biggest economy, ranked sixth in spending on the energy transition last year; only investing $26 billion in 2021 compared to spending of $266 billion in China and $114 billion in the US. 
• Read more about this story: Bloomberg, Time 

Comment from Codo: Japan’s reliance on coal, confirmed by the current crisis, is not new. Both Japanese public and private stakeholders involved in coal projects have been under fire from global NGOs for years. The UN Secretary-General also called Japan, among a few others, to reduce support to coal power. In the latest update of its coal transition progress tracker, climate think-tank E3G ranks Japan as the less advanced of all OECD countries, after Mexico, Australia, and Turkey.