How global trade could be COP26’s unexpected solution to climate change

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Despite environmentalists accusing COP26 of ‘greenwashing’, widespread disappointment at the conference’s final declaration as being too little too late and an ambivalent global South, there is still hope for solutions to climate change. an unlikely place – world trade.

The goal of the Glasgow Financial Alliance for Net Zero (GFANZ), launched in April 2021, is to bring the financial sector together to accelerate the transition to a net zero economy.

As part of a $ 130 trillion pledge announced at COP26, business leaders including Mark Carney, the UN Special Envoy for Climate Change and former Director of the Bank of Canada and the Bank of England, announced a coalition of banks, insurers, pension funds, stock markets and others from across the financial spectrum aimed at tackling climate change.

GFANZ offers hope as it approaches climate change from a global perspective rather than a national one. GFANZ’s transnational approach recognizes that sustainability requires a strategy for the whole planet.

Southern countries hard hit

To date, efforts by nations to find solutions to climate change have failed, especially when it comes to interactions between North and South. The countries of the South continue to bear the brunt of the effects of climate change.

A solution to climate change resulting from countries acting independently or even multilaterally has not worked. The solutions we need are collective.

The whole world, the Global North and the Global South together, must act as one state in a coordinated movement to tackle climate change. But how can this be done when larger emitters move in and out of their international commitments as a revolving door (in particular, the United States and China), rely on moral arguments for less compliance (India ) or distract from their per capita emissions (Canada and Australia)?



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Trying to reach consensus and legislate solutions at the national level has been uneven at best.

Globally adopted standards

This is why GFANZ’s announcement is so timely. The relentless march of world trade shows that national governments are losing influence, as evidenced by the adoption of voluntary international standards on everything from the Basel accords on bank capital to ISO 9000 for quality management.

There is a transnational sphere beyond individual countries, made up of multinational corporations, think tanks, and non-governmental organizations that involve voluntary standards and practices. Global adoption of these standards is underway.

Such cooperation is independent of national governments, sometimes even leading to the adoption of transnational standards as national legislation. For example, voluntary banking standards such as the Basel Capital Accords established by central bankers in the Global North have become de facto global standards over time that are adopted in countries of the South as well.

Could a coalition of global companies provoke real climate action?
(Scott Webb / Pexels)

GFANZ is surprisingly similar to the adoption of Global North financial standards in the Global South. By offering advice on how to use huge sums of money in an environmentally sustainable way, global companies are poised to create a voluntary financial standard transnationally rather than wait for governments to act.

Four responses

Recent research has identified four distinct types of Global South responses to meeting Global North financial standards: reformist (very motivated), derogatory (don’t talk about action), cosmetic (pretend) or incentive (activists fighting for change from within).

Reformist behavior is about doing the right thing. When governments use carrot and stick approaches to enforce environmental standards, they prioritize global interests over short-term national agendas. If all the major carbon-emitting nations were reformist and set and enforced ambitious targets, COP26 would have been a resounding success. But it was not.

Derogatory behavior represents lower adoption of standards nationally. Here there may be a motivation to act, but this desire is denied for fear of regulatory or political retaliation from unfavorable national institutions.

Cosmetic behavior is the financial equivalent of environmental greenwashing – an attempt to trick consumers into believing that your business or government is doing more to protect the environment than it actually is.

It involves both government and business officials embracing the rhetoric of adopting standards and masking the absence of any substantive change. The uneven implementation of the Paris Agreement on climate change would be one example.

Protesters hold a large banner that reads COP25 Act Now
Climate activists take part in an anti-greenwashing protest near the COP26 climate summit in Glasgow in November 2021.
(AP Photo / Alastair Grant)

Instigator The behavior, exemplified by GFANZ, occurs when financial institutions that want real change jump on government inaction by acting transnationally. Change is brought about by officials reacting to transnational business giants. Local regulators and political elites then benefit from the advantages granted to national officials who coordinate with transnational partners, whether by choice or by necessity.

While reformist nations do their best and deserve to be supported for their tenacity, GFANZ offers a complementary transnational solution for those who want to bring about change regardless of government positions. The climate change strategy then becomes both top-down from the reformist national government and bottom-up from the instigating financial institutions acting transnationally.

The next step: GFANZ must ensure that the positive results are not overshadowed by unintentional colonial behavior, as the wealth of the Global North is invested in the Global South. But with both reformist and pushing actions, the transition to a net zero economy could be one more step.

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