Shift in US Climate Policy Would Not Stall Global Efforts to Reduce Carbon Emissions
» Institutional and private sector forces will underpin global decarbonisation efforts despite potential changes in US climate policy. Climate policy in the US (Aaa stable) is likely to become less ambitious under President Donald Trump, which would pose a potential challenge to the Paris Agreement's objectives should other countries back away from their current commitments. Nevertheless, robust institutional and private sector momentum will continue to drive sustainable and climate agendas forward. As such, the effects of carbon transition will continue to have material credit implications for rated entities in a number of industrial sectors globally.
» Most countries have reaffirmed their Paris Agreement commitments since the US elections. While US leadership in global climate negotiations has been important, it may become increasingly marginalised on climate issues should it temper its Paris Agreement commitments. The other three largest emitters—China (Aa3 negative), the EU (Aaa stable) and India (Baa3 positive)—have reaffirmed their commitments.
» Sub-national green initiatives will be important in moving national policies forward, including in the US. Initiatives such as the Under2 Coalition, which covers more than one third of global GDP, demonstrate increasing sub-national commitment to climate action. More than two dozen US states have programmes to reduce emissions, providing a countervailing influence to any federal climate policy changes.
» Institutional focus on environmental risks and green finance will remain strong. Global climate policy is not limited to the Paris Agreement. For example, the G20 study group on green finance and the Financial Stability Board (FSB) taskforce on climaterelated financial disclosures suggest that policy momentum will be sustained.
» The number of private sector companies pursuing climate change strategies will continue to rise. Corporate leadership and institutional investor focus on carbon emissions reduction and broader sustainability issues is increasing. These trends, together with shifting consumer preferences and technological change, will drive more large companies to disclose climate-related financial risks and set emission reduction targets.
» Prevailing market and technological trends support investment in less carbonintensive initiatives. Non-policy drivers—the ongoing shift from coal to gas, the declining cost and increasing efficiency of renewable energy and technological advancements in areas such as electricity storage and alternative fuel vehicles—will support decarbonisation trends.
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