A U.S. delegation will join some 20,000 heads of state, diplomats, government officials and activists that are expected to converge on Glasgow starting this Sunday for roughly two weeks of climate-change meetings that have been called at times the most critical and ambitious of the United Nations’ summits.
The latest gathering of the Conference of Parties — in this case, COP26 — is aiming for more concrete commitments from the U.S. and its leading economic counterparts, including China, for emissions cuts and other actions. Such actions are meant to slow the average global temperature from rising more than 2 degrees and ideally, no more than 1.5 degrees Celsius compared with levels before the Industrial Revolution. Warming beyond that, scientists say, will only intensify what the planet is already experiencing: costly and deadly heat waves, flooding, shore erosion, and drought and crop failures in some parts of the world.
COP26 is also meant to secure $100 billion in aid from developed nations, after a missed 2020 starting point, to developing nations. The world’s largest economies are responsible for the bulk of greenhouse gas emissions, while developing nations, whose resources and production power the giants, are most vulnerable to the extreme climate and weather conditions that have intensified in recent decades.
The U.S. climate team, led by President Joe Biden and Climate Envoy John Kerry, is readying for its trip, first to the Group of 20 meetings and onto Scotland, with major domestic legislation still unresolved. That includes already pared climate-change initiatives, including a key effort called the Clean Electricity Performance Program (CEPP).
Lawmakers standing against the climate efforts, or at least their price tag, have said that the private sector is moving along with renewable-energy alternatives and offering up self-reporting on climate risk at an acceptable pace on its own. Some signals from Washington show continued progress in advancing the budget and infrastructure bills where some climate proposals remain, but the clock is ticking for Biden to reach Glasgow with major domestic legislation secure. The president has said he’ll take on climate with a “whole of government” approach that doesn’t rule out executive action and teaming with states and the private sector.
MarketWatch sat down with John Morton, the Treasury Department’s first ever Climate Counselor, leader of its Climate Hub, and a key figure on the issue for both Treasury Secretary Janet Yellen and the broader Biden climate effort. Morton will join the U.S. delegation to Glasgow. Previously, he logged more than 25 years of experience in emerging markets, investment finance and economic and environmental policy.
Some questions and answers have been edited for length and clarity.
MarketWatch: What’s your outlook for COP26? Your most optimistic viewpoint heading into the Glasgow meeting, and where you think some tough discussions are bound to take place?
Morton: We have been working very hard over the last many months really putting the climate front and center in terms of the president’s agenda and in terms of Treasury’s agenda as well. And so we are going into COP26 in a position of strength, which is, you know, a nice change from recent years. We have spent a lot of time bolstering our public commitments, with the president having made a recent commitment to further double, so a doubling on top of an earlier doubling, in finance pledges to developing countries.
[Editor’s note: The Trump administration in 2019 pulled the U.S. from the voluntary Paris climate pact and discontinued climate-related lending to smaller nations. The U.S. has now pledged $11.4 billion a year by 2024, Biden told the U.N. in September, a number that some environmental and finance groups said showed conviction ahead of Glasgow and that others, including the Overseas Development Institute, worried was still off the pace of giving that a previous Copenhagen conference had called for.]
As for Treasury, the department is focused on several events, large international climate-finance priorities, which include the issue of mobilizing more private capital toward climate-related investments in emerging markets. It’s an issue [Secretary Yellen] has been focused on… how do we get the multilateral development banks on whose board Treasury serves to focus more on this question of private capital mobilization for climate change. That includes a suite of offerings around energy transition for countries that are coal-intensive, high-carbon-intensive economies.
MarketWatch: It looks like the legislative piece isn’t as robust as the president would have wanted in the beginning, so domestically, how do you defend that status, when you’re on the ground in Glasgow?
Morton: I think we would obviously like to have legislation passed, at any time, and certainly before COP would be nice. We’re hopeful that in the next short period of time, we can see progress on both counts [infrastructure and budget]. I just think the question will be how much do we get. But we’re optimistic about where it will come out. It is really important to that the U.S. has multiple pathways to get to our emissions-reductions targets. But [legislation] is not essential to us hitting our targets. And it’s important to remember that during the Trump years, we saw continued decline in our funding the carbon intensity of our economy and in emissions because of strong state action and because of the economics of the energy system changing [in which renewables became more competitive with traditional energy sources]. So a long-winded way of saying, I think there are multiple pathways to us meeting the NDCs [Nationally Determined Contributions expected by the U.N. climate arm].
MarketWatch: Treasury and the Financial Stability Oversight Council (FSOC) has just released a comprehensive report calling for tougher reporting and just more realization from the SEC, banks, insurers, others, that climate change unchecked poses significant risk to the health of the financial system. What does that mean as part of the efforts for Glasgow?
Morton: I also think it’s important first to talk about the size of the investment required to achieve the president’s net-zero goals and global net-zero goals, and by the way, countries representing close to three-quarters of global GDP have signed net-zero commitments by mid-century, which I think in the room for the Paris accord five years ago, everyone would have thought reaching that size of participation would be crazy. Even the optimists in the room. But how you get there requires private capital. It’s not just public capital. It’s how the markets move and how public incentives work, and directions and signals from the regulators and policymakers that will help expedite that transition [to private markets]. So I think the FSOC report was incredibly important in that regard. European regulators have been very forward-leaning over the last few years. Many other countries have been moving forward as a signal to their markets as to where they’re heading with respect to climate-related financial risk and how to incorporate those risks into regulation. Private markets are what will ultimately make or break hitting our [emissions] targets.
MarketWatch: The president’s political opposition, and to a degree, industry, says, hey, the key to maintaining U.S. energy independence is keeping natural gas
in the mix, and nuclear — and I understand the president is not against nuclear energy — and critics might say China is getting away with adding more coal or just too much on emissions reporting, so what is your message to those who might say the U.S., as it heads to COP26, is conceding too much?
Morton: I think the data shows that last year new electricity capacity additions were 75% renewable and about 22% gas. Renewables
are beating gas in this country and in most countries on price. Not true in every country, but true in most countries. So the debate, should we be doing this one thing or this one, is an important one. But the economic transition has fundamentally altered this conversation. Wind and solar increase your national energy security because they’re on your turf and they don’t have the volatility related to global supply chains, or the price spikes of an energy shortage. The best and and cleanest, most efficient form of energy possible is predominantly renewables these days.