Let us look at the COP26 outcomes, the winners, the losers, and how their trust has changed.

According to my rather straightforward approach1 the sum of new voluntary targets has increased. The targets that governments have made to curb fossil-fuel emissions and deforestation between now and 2030 would put the world on pace to warm by roughly 2.40C this century, according to Climate Action Tracker, a research group. This is considerably above the 1.50C goal and thus the first objective has not been met.

Countries still don’t seem to understand that we’re in an emergency situation and we need to cut emissions much faster this decade, or else any hope of staying at 1.5 degrees will be lost.

(Niklas Höhne)

Niklas Höhne, a German climatologist and founding partner of New Climate Institute, which created the Climate Action Tracker.2 We may surmise that ecologists, activists and scientists are not satisfied with this situation. Their trust in the system to change for the better has been diminished. To add insult to injury, at the last minute India moved to change the language for the use of coal from phase “out” to phase “down,” allowing the continuation of its use.

Furthermore, a decade ago, the rich economies vowed to activate $100 billion dollars per year in climate finance for poorer countries by 2020. They have not met their obligations by tens of billions of dollars annually. The COP26 agreement leaves many developing countries without the funds they need to build cleaner energy and cope with increasingly extreme weather disasters. The agreement uses a rather weak language urging wealthy countries to increase the amount of money they give. It also “requests” that developed countries consider moves to “significantly increase” the amount of money they give to help vulnerable countries adapt to climate change.3 Developing countries do not have much trust that developed nations will help them address this imbalance.

No progress was made on curbing the free-rider of climate treaties, nor were increases in carbon prices approached as a policy at the global level. All the treaties are voluntary, there is no penalty for non-compliance.

The summit offered some impetus for additional climate action. On the sidelines, talks by groups of countries announced initiatives they were undertaking on their own. More than 100 countries vowed to reduce emissions of methane by 30 percent in 2030. An additional 130 nations agreed to halt deforestation in the next decade, committing billions of dollars. Again, these treaties are voluntary. At the last minute, a surprise agreement was announced between China and the USA. Given that they are the largest greenhouse gas emitters and the superpowers, the agreement was favorably welcomed by the others, although the contents are rather generic.

A positive aspect of the new agreement in Glasgow is that it asks countries to come back by the end of next year with stronger pledges to cut emissions by 2030. All nations will need to slash their carbon dioxide emissions nearly in half, this decade, to hold warming below 1.50 C. This will also allow participants to readdress other issues such as aid to developing nations.

The trust of the young activists that the UN could help has diminished due to COP26. Many are very disappointed. The activists are planning for Egypt, but they are skeptical. We are witnessing a generation of activists that have little trust in the political system to make desired changes. This is not healthy but may be seen as a realistic reaction to the current situation. One indirect improvement may be greater transparency. Greta’s “we are watching you” is making it harder to hide unfavorable climate actions. Transparency is necessary for accountability, but time is running out. What happens when the trust of our youth activists in the system to improve goes much lower? Will they be drawn to eco-terrorism?

The fossil fuel industry triumphed at COP26 with no limitations on oil and gas. Even coal is to be gradually phased “down” instead of “out.” But what is the level of trust, for example, of the financial industry with regard to the fossil fuel industry? Is it one of betrayal for creating the crisis, or one of containment? The banks formally have begun to step back and disinvest in fossil fuels. But Ball has reported that fifty-two percent of new power generation financed in emerging and developing countries from 2018 through 2020 is on track to be inconsistent with the global goal of 1.50C. The largest were foreign financiers but significant funds have also been coming from banks, utilities, and other companies in the countries themselves.4 The financial industry is heterogeneous and also acts in presumed national interests.

However, as a whole, the financial industry is rational, believing in climate change, and is seeking to optimize climate risk and opportunity. This does not seem compatible with the plans of continued expansion and investment by the fossil fuel industry. The financial industry knows that a lack of trust in the financial system by investors would be disastrous for them, so they must monitor and keep this trust high. Has this trust changed? Maybe it is a notch lower, going into a climate-threatening world that at times appears out of control. Perhaps, in the back of our minds, we do think the world financial system will come to the rescue.

“At the global climate summit here, a coalition of banks, investors, and insurers that collectively control $130 trillion dollars in assets said it would commit to reaching net-zero emissions across its investments by 2050. It was essentially a pledge to make climate change a central focus of major financial decisions for decades to come. ““We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,”” said Mark Carney, the former head of the Bank of England who is leading the coalition, along with the billionaire and former New York mayor Michael Bloomberg.”5 I contend that they have not played all their cards yet. However, they were certainly asleep, when they let the fossil fuel industry get away with the great exacerbation of the climate crisis during the last decades.

Who do the workers trust? This is a very complex issue given globalization and the ability to re-allocate workers on the part of enterprises and governments. Trust of these institutions is undoubtedly low and the talk of climate and energy transitions is probably perceived as threatening. The silver lining may be in the workers’ pension funds. The private and public pension fund assets have grown enormously and could be used to help in a smoother energy transition. Pension funds must be allowed to consider climate risks and opportunities. This is the unwritten chapter of the working man and woman, particularly in the US.

As workers, we are also consumers and must have trust in the producers and products we purchase. Much of the necessary information for climate-responsible purchases is the same as that required by the investor. We need to know the climate impact of the product/service we wish to purchase. This must be reliable and reproducible information, helping us to avoid greenwashing. The evolution of consumption as a continuation of more and more goods or a transformation into a relations-rich society with the more modest need for goods is yet to play out.

As an investor, I certainly did not sign up for a second-rate world. I want accountability. I want to know the amount of carbon emissions on my various investments. I desire to know what the climate risks are and how they are being managed. I want to have new proposals for investment and improve the carbon footprint of my portfolio. I need to know what my bank or my broker is doing to promote climate improvement. To whom are they making loans in the energy sector? I must be able to trust my financial advisor, broker, and banker. If not, I will change.

As an economist, I am still embarrassed by the low carbon prices. Somebody has to stand up. We must try higher prices while compensating the less resilient consumers. We should try to work in the direction of discouraging the free rider. Maybe we need to trust our economic training, trust ourselves. We need not get in the way of voluntary programs like COP26, but as economists, we should push for more effective solutions, above all using the correct carbon prices.

Does our economic elite in the US benefit from the situation of diminished trust? In the short term, a slower approach might be more appealing. No dramatic changes are required. Most of the damage occurs elsewhere. High net worth individuals have their independent energy and transportation systems. However, many may be concerned about their markets and all the associated problems they may eventually be called upon to resolve (i.e. climate migration, increased damages). The rationale for accepting a second-rate world may begin to ring hollow. Enlighted and more inclusive capitalists may step up.


1 Mebane, W., (2021), Climate change conference of the parties 26, November 11, Wall Street International Magazine.
2 Plumer, B., and Friedman L., (2021), Negotiators Strike a Climate Deal, but World Remains Far From Limiting Warming. November 13. The New York Times.
3 Friedman L., (2021), Leaders vowed over a decade ago to give poor countries $100 billion a year. It still hasn’t happened, November 13. The New York Times.
4 Ball, J., (2021), The Climate Fight Isn’t About Morality. It’s About Cold, Hard Cash, November 9, The New York Times.
5 Plumer, B., Friedman L., Nelson, E., (2021), Climate Summit Turns Its Focus to a Contentious Question: Who Pays?, updated November 9, The New York Times.