The Inevitable Policy Response: Policy in 2021
● Following the US Presidential election and the Net Zero China 2060 target in particular the ‘inevitability’ of policy Response to climate change looks validated. Exactly what, when and how remains the issue. We have updated our core Forecasts and have considered potential accelerations.
● As net zero commitments accelerate across the globe, our new IPR 2021 Policy Forecasts outline the policies that are expected to be deployed by 2025 to begin meeting those targets. It offers markets the crucial next layer of detail on when, where and how these commitments will start to shift the macroeconomic context through forceful policy implementation across a range of key policy levers.
● The IPR policy maker toolbox is growing and policy makers will build on carbon pricing, coal phase outs and ICE bans and increasingly set ambition in policy to address hard to abate sectors such as industry and agriculture.
● Carbon Border Adjustment Mechanisms were core to our 2019 forecast and are now widely discussed and nearing implementation.
● Corporations themselves are creating their own “policy” or strategies around Net Zero and certain industries such as Autos are moving ahead of government policy.
● A substantial US infrastructure package favouring low carbon is likely this year.
● The run up to COP26 in Glasgow later this year will pressure countries to look for further ambition most notably the US which is expected to deliver in its NDC and China which is more uncertain but could still surprise.
● IPR has used the Paris Agreement Ratchet framework for milestones on policy announcements. COP26 is in effect the delayed 2020 Ratchet. Hence it is not expected to deliver the full IPR Forecast suite. The next significant event in the Paris process is the 2023 Global stocktake on the way to the 2025 Ratchet.