DESPITE the focus on emissions reductions and a lengthening list of countries that have made net zero targets, we expect that CO2 emissions from energy combustion will increase by 2.5% in 2022 to new record levels as some economies recover more fully while others push for growth. While leaders at COP26 pledged to strengthen 2030 emissions targets by the end of 2022 rather than waiting for the formal “stock taking” process, there are significant risks to domestic environmental policy agendas from elections in 2022.
During COP26, 100 countries committed to 30% reduction in methane emissions by 2030 (with some notable exception) which should further bolster interest in having fossil fuel market differentiated by their associated upstream carbon intensities. Record high carbon prices in the UK and Europe are at levels that are triggering market intervention reviews, though we expect that they will step back from recent highs.
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