The United Nations Climate Change Conference better known as COP26 that’s underway in Glasgow might conclude with a big international agreement. But whatever tactical successes are achieved at COP26, the results are likely to mark a strategic setback for humanity—at least when compared to the hopes of climate activists.

The world is missing target after target. This should not be surprising: while a growing number of countries have set net-zero targets, for example, very few have credible plans to meet them. And even if we did meet existing targets, that would not be enough to achieve the 2015 Paris climate agreement’s main goal: limiting global warming to 1.5℃ above pre-industrial levels.

In fact, the Intergovernmental Panel on Climate Change’s latest report warns that the planet is likely to reach the 1.5℃ limit in the early 2030s. As long as multilateral engagement is defined by nationalism, power politics and emotion, rather than solidarity, law and science, our future will continue to grow bleaker.

At the height of the Cold War, the American television series The Outer Limits told the story of an idealistic group of scientists staging a fake alien invasion of earth, in the misguided hope that they could avert nuclear Armageddon by giving the world a common enemy against which to unite. When faced with the prospect of extinction, the logic went, the Soviet Union and the United States would turn their attention from competition to shared survival.

Today, nobody needs to contrive a common cause. Climate change poses as great a threat as any alien invasion. But, far from shocking national leaders out of their petty competition, it is being wielded as a weapon in a many-sided propaganda war. From Brazil and Australia to China and the US, countries are trying to game climate negotiations in order to shift the costs of adaptation onto others.

For example, the Brazilian government is trying to get the world to pay it to stop destroying the Amazon rainforest. Chinese President Xi Jinping will participate in COP26 only by written statement, and Russian President Vladimir Putin will not attend at all.

Meanwhile, the advanced economies—including those that proudly claim to be committed to climate action—have broken their promise to provide US$100 billion annually to support the climate transition in the global south. And even if they did deliver, it wouldn’t be enough.

Developed economies are finding increasingly coercive ways of shaping other countries’ behaviour. Commitments by most of the Western and multilateral development banks to stop financing coal (now joined by China) restrict options for grid expansion in developing countries where demand for power is growing rapidly.

Influential countries have also urged the International Monetary Fund to attach green conditions to debt relief for poor countries, as well as to its new allocation of special drawing rights (the IMF’s reserve asset). And the European Union’s Carbon Border Adjustment Mechanism—a non-trade barrier intended to force exporters to Europe to shift to green production—disproportionately hurts small emitters in Africa and Eastern Europe with a lot to lose.

This is not to disparage coal bans, green financing and carbon pricing. On the contrary, these tools have a crucial role to play in changing how the global economy works. But that doesn’t mean we can disregard the (very serious) consequences for developing economies. Instead, we need to create a new grand bargain focused on supporting adaptation in the developing world.

More broadly, we must ensure that any multilateral agreement for tackling climate change is governed by international law, rather than dependent on the will of individual countries. And decision-making should be driven by scientific truths, not political slogans.

The Paris climate agreement’s predecessor, the Kyoto Protocol, adopted in 1997, was broadly in line with this approach: it was a multilateral treaty, with legally binding international targets determined by the world’s best scientists. But the protocol also had many flaws and it didn’t end up going far.

The Paris accord took a very different tack. It was hailed as a triumph because hopes for any agreement were so low. But it entailed a major compromise: it was based on non-binding commitments known as nationally determined contributions. Countries could simply pursue the energy policies on which they had already decided, while pretending they were working together to tackle climate change. Not surprisingly, current NDCs are wholly inadequate to achieve the agreement’s stated goals.

To be sure, climate-change COPs have often made important—if often procedural, boring and technical—contributions to the climate fight. But showboating and power politics have stood in the way of real progress. And the media and civil-society circus that surrounds the conferences—intended to enforce accountability and transparency—has often impeded negotiators’ ability to get things done.

More fundamentally, COPs have failed to produce a model of global governance that can tame power politics, let alone forge a sense of shared destiny among countries. And there is little reason to believe this time will be different.

Of course, the problem extends beyond UN climate change conferences. While economic globalisation has lifted millions out of poverty, it has fuelled an increasing concentration of wealth. In this context, efforts to advance shared interests can become less appealing, because they produce asymmetrical rewards.

Add to that the psychology of envy unleashed by social media and it becomes all the more difficult to shift people’s focus from their relative position in the global pecking order to the common good. These trends have undermined faith in the power of government and fuelled pessimism about the possibility that any solution will emerge.

The result is what social scientists call a collective action problem. Leaders and citizens alike conclude that the most rational short-term strategy is to pay lip service to the cause and hope others will solve the crisis. Meanwhile, the planet burns.

These are demanding times. Geopolitical tensions are rising, primarily—but not exclusively—between China and the United States. Yet, at the same time, there is a deep need for inclusive global cooperation to fight the pandemic and meet the threat of climate change. How the leading powers manage these competing demands will set the course of global development in the years and decades ahead.

Over the past few weeks, the US and China have attempted to establish some guardrails to prevent rising tensions from spiralling out of control. Following a recent meeting in Switzerland with his Chinese counterpart, Yang Jiechi, US National Security Advisor Jake Sullivan spoke about the need for ‘responsible competition’ between the two countries—a choice of words we haven’t heard before.

But as welcome as this rhetoric is, the reality is that the US and China are still locked in a deepening rivalry. The decision by the US and UK to supply Australia with nuclear submarines—the delivery of which will not come for many years—was intentionally framed to seem like a major strategic move to counter Chinese maritime expansion. Similarly, at a two-day meeting in Pittsburgh last month, EU and US officials outlined an agenda for new talks on trade and technology, placing special emphasis on the need for defensive measures against China. In Washington, speculation about a potential Chinese invasion of Taiwan is running rampant and driving numerous decisions.

An increasingly authoritarian and assertive China isn’t the only geopolitical concern. Russia, too, poses a revisionist threat, with President Vladimir Putin issuing pronouncements that openly challenge Ukrainian sovereignty and cast doubt on the utility of diplomacy in handling the war in Ukraine’s Donbas region or issues stemming from Russia’s annexation of Crimea. Just as many in the US see a drift towards war with China over Taiwan, many in Europe worry about a similar escalation with Russia over Ukraine.

But the need for cooperation to meet even larger challenges should be obvious. When world leaders gather in Rome later this month for the G20 summit, they will have to confront the fact that we have made it only halfway (at best) in our fight against the Covid-19 pandemic.

At a recent summit hosted by US President Joe Biden, representatives from more than 100 governments, international institutions, businesses and civil society organisations committed to vaccinating ‘70% of the population in every country and income category’ by next September. That target is still a long way off. At the moment, approximately 38% of the global population has been fully vaccinated, and there is a glaring and dangerous inequity between high- and low-income countries. Indeed, high-income countries have administered 32 times as many doses per inhabitant as low-income countries.

The truism that no one is safe until everyone is safe is as relevant as ever. There’s no guarantee that the Delta variant will be the last mutation to trigger new epidemic waves. It is humanity versus the virus. We urgently need to mobilise additional resources to distribute not only vaccines but also tests and treatments. In this context, China’s potential contributions cannot be ignored. It produces more vaccines than any other country, and it will play a key role in any new global structures that are created to prevent or fight future outbreaks (any one of which could be far more dangerous than Covid-19).

Likewise, when global leaders meet for the UN climate change summit (COP26) in Glasgow next month, they will have to make up for lost time. A recent report from the International Energy Agency paints an alarming picture of how much work there is to be done to decarbonise the economy. This year, we will see the second-highest increase in carbon-dioxide emissions in history, indicating no progress towards a 2050 net-zero emissions target. Worse, governments’ current pledges cover less than 20% of the reductions needed by 2030 to keep global warming within 1.5°C of the average pre-industrial temperature.

Everyone must do more, but few single actors are as important as China. If it doesn’t reduce its enormous dependence on coal, global targets will remain out of reach. China’s recent announcement that it will end its overseas financing of coal projects is potentially very significant: that alone could reduce emissions by as much as the EU reaching net zero by 2050. But even then, China and everyone else will have more to do.

As with the pandemic, climate change puts all of humanity on the same side against a threat that could all too easily spiral out of control. To be sure, today’s geopolitical tensions are real, and issues like Taiwan and Ukraine must not be neglected. Democracies have every reason to stand together against revisionist aggression. But the pandemic and climate change are problems that can be addressed effectively only if everyone is committed to working together. Achieving that outcome will require true global statesmanship, and progress towards it must be the standard against which diplomacy is judged.

Pick any sector of the European economy, and you will find a lot of companies cutting greenhouse-gas emissions. But, while sectors like construction, electricity production and agriculture now emit much less than they did in 1990, transport emissions have increased by 33%. Unless we put the brakes on transport pollution soon, the European Union will have a very hard time reaching its climate goals.

There is an important economic dimension to the challenge ahead. Europe’s highly competitive automotive and transport industry plays a key role in driving its economic growth and employment. If Europe falls behind in developing and adopting sustainable technologies within the next decade, it will pay a high price.

The EU cannot afford to follow Asia and North America’s lead on sustainable technology. Nor can it keep taking baby steps. Instead, policymakers must act boldly to accelerate the transition to sustainable transportation by supporting innovation and dismantling barriers to green investment in the sector.

Innovation does not mean only inventing new technologies. More fundamentally, it means devising new ways of doing things. And when it comes to transport, plenty of technologies that are already available can drive rapid progress on sustainability.

For example, electric vehicles and battery technology are becoming more advanced, accessible and affordable by the day. Battery costs have declined by more than 80% since 2010, and sales of electric cars increased globally by 73% in 2018 alone. Meanwhile, big data, artificial intelligence and digitisation are enabling further innovations, from ride-sharing platforms to self-driving cars. Given that cars, trucks and other road vehicles account for more than 70% of all transport emissions, the potential for progress is huge.

Yet cutting-edge technologies are not the only way to achieve more sustainable transport systems. During the Covid-19 pandemic, cities across Europe created temporary bicycle lanes, leading to a surge in cycling. Some heavily trafficked roads, such as Paris’s Rue de Rivoli, were also transformed into pedestrian zones.

These initiatives not only promoted zero-emissions transport and helped local businesses survive the pandemic, they also proved that significant progress can be made with measures already at hand.

Still, overcoming many transport challenges will demand much more research and development. Slashing emissions from ships and planes is one clear example. More broadly, large and timely investments are needed to cut technology costs, increase efficiencies, support first-movers and create new markets.

But investing in new green technologies is risky. We often don’t know what the big breakthroughs will look like or which technologies will prevail. It’s hard to commit large amounts of capital to charging networks or hydrogen gas if it is not clear which fuels people’s vehicles will be using.

Faced with a high degree of uncertainty, firms and public institutions often adopt a wait-and-see attitude and delay investment. With banks wary of taking the plunge, many companies in Europe cannot find the investment they need to support innovation. In the meantime, investors might continue to finance old, ‘dirty’ technologies, in order to meet short-term needs.

Changing investors’ calculations requires creating financial tools that spread risk among many parties, along with policies and regulations that make it easier to develop new infrastructure and technology.

Public banks such as the European Investment Bank have a vital role to play here. By taking advantage of loan guarantees, venture capital and public-private partnerships, we can take more chances on innovative start-ups, research projects, demonstration plants, and the commercial deployment of new technologies.

Already, the EIB has backed an early demonstration plant by Northvolt in Sweden to develop some of the world’s most modern batteries and has committed financing to the Dutch company Allego to deploy ultra-fast vehicle charging stations in many European cities. We are also assisting in the rollout of 5G mobile networks across Europe. This will enable superior communication between connected vehicles, making driving much safer and improving the chances that technologies like self-driving cars will succeed. The EIB is also a key supporter of electric trains and trams across Europe, the goal being to reduce the number of cars and trucks on the road.

We constantly review new financing plans for European start-ups developing electric bicycles, vision sensors for autonomous vehicles and charging systems. And our advisory services help cities across Europe achieve objectives like finding new financing for electric buses or designing towns that encourage cycling and walking.

Yet the climate crisis demands global solutions. That’s why the EIB is also supporting green transport far beyond Europe’s borders. For example, we backed the construction of metro systems in the Indian cities of Bangalore, Lucknow and Pune. And, together with the World Bank and the governments of Luxembourg and Germany, we established the City Climate Finance Gap Fund, which focuses on launching green investments in the Global South, including in the transport sector.

But the fact remains that there is not enough public money in the world to finance the transition to a low-carbon future. Ultimately, the private sector must take the lead. Major industrial players, entrepreneurs and grassroots organisations must adopt a more agile, daring and even revolutionary approach. The EIB will be there every step of the way, offering guidance and sharing the risk.

Record-breaking temperatures and extreme weather across Europe and North America in recent months should leave little doubt that we have entered a make-or-break decade on climate. To create a sustainable future, we must embrace creativity and openness, ensuring that Europe’s brightest minds and boldest initiatives receive the support they deserve.

India’s commitments under the 2015 Paris climate agreement, which aims to limit global warming to well below 2°C relative to pre-industrial levels, include three quantifiable objectives. By 2030, the country aims to reduce the emissions intensity of its GDP by 33–35%, ensure that renewable energy sources account for about 40% of its installed power capacity and, through afforestation, create an additional carbon sink of 2.5–3 billion tons of carbon dioxide equivalent.

International observers like Climate Action Tracker and Climate Transparency regard India as one of the few G20 countries to be ‘2°C compatible’ and on track to fulfil its so-called nationally determined contributions (NDCs) under the Paris accord. But even if India achieves its NDC targets and adopts measures to help keep global warming to 1.5°C, on current trends its CO2 emissions in 2030 could be about 90% higher than in 2015.

India must therefore decarbonise more, and fast. But India also needs to invest in manufacturing and infrastructure to improve its competitiveness, create enough jobs to lift a third of its 1.3 billion people out of poverty and increase its chances of meeting the United Nations Sustainable Development Goals. Achieving these objectives without drastically increasing carbon dioxide emissions will require India to pursue a radically different green growth strategy.

This will not be easy. True, with renewable energy sources currently accounting for 140 gigawatts, or 37%, of India’s 380 gigawatts of installed power capacity, the country looks set to achieve its 40% target by 2030. But only 15.5% of the electricity consumed in India is clean, while the remainder is sourced through fossil fuels. That is primarily because large additions of renewable-energy capacity do not translate into lower CO2 emissions in linear fashion. The effect instead depends on the capacity utilisation of renewable sources, the grid’s capability to absorb variable power and the flexibility of power systems to ramp up during peak loads.

While India is the third-largest emitter of greenhouse gases, its per capita electricity consumption is among the world’s lowest, at about one-third of the global average. But it is imperative that the country’s electricity consumption increases as the economy continues to develop.

The energy sector alone accounts for 78% of India’s greenhouse gas emissions, while industry is responsible for 7%, and agriculture and land use 10%. Within the energy sector, industry is the biggest consumer of electricity, using 42% of India’s output. As the country’s low per capita resource consumption rises towards the global average, and with demand for carbon-intensive commodities such as steel, cement and chemicals expected to grow, electricity consumption is likely to increase at least threefold between 2014 and 2030.

Structurally transforming the Indian economy will entail a shift in the share of GDP from agriculture to industry and services, accompanied by a reduction in energy poverty and improved access to reliable electricity. This would be the required development trajectory for achieving the sustainable development goals, but it would result in India increasing its CO2 emissions.

So, how, and to what extent, can India decarbonise? The solution lies in deploying clean technology on a large scale, reducing the cost of finance, and pricing and paying for emissions mitigation.

To promote both decarbonisation and economic development through a green investment and growth strategy, policymakers should consider adopting a sequenced approach. They could start by investing in large-scale renewable-energy projects, before electrifying transportation and then expanding and integrating distributed green energy for cleaner electricity access.

The next step would be to create additional rural non-farm livelihoods in agricultural processing (milling, grinding, crushing and packaging), storage and warehousing. After that, policymakers should aim to increase energy efficiency in heating, cooling, lighting and electric motors. India also will need to adopt clean technologies such as carbon capture and storage, hydrogen as a fuel and reducing agent for steel, and green cement manufacturing. And it must expand its forestry-based carbon sinks on a massive scale.

Speeding up decarbonisation in line with India’s NDC calls for massive investments totalling some US$2.5 trillion by 2030. Most emissions-mitigation technologies require large upfront capital investments relative to subsequent operating costs, which is why India’s relatively high cost of finance is an important factor. And increased risk perceptions of the country—including climate-related financial risks—make it difficult to reduce borrowing costs for climate investments. Large-scale green investments in India therefore may not provide adequate risk-adjusted returns.

That means India requires interventions from government and intergovernmental institutions to enable finance to flow toward decarbonisation investments. These measures could include creating pooled or specific risk-mitigation mechanisms to ‘de-risk’ finance; shifting investments from banks to financial markets; reducing reliance on credit ratings for lending and investment; measuring, registering and pricing carbon mitigated incrementally beyond NDC targets; and compensation for additional perceived risks borne by banks and institutional investors.

The risks are indeed high. A long coastline, widely varying seasonal monsoons and significant dependence on agriculture make India highly vulnerable to the effects of climate change. This is evident from increasingly frequent cyclones, droughts and erratic temperatures across the country.

India therefore requires climate-adaptation investments that would preserve ecosystems and reduce coastal erosion while protecting livelihoods. Because the private sector usually perceives core adaptation investments as economically unviable, the public sector must lead by making suitable investments and developing public–private partnership business models to attract private investors.

Indian policymakers should thus regard meeting national climate targets under the Paris agreement as only a first step. The far bigger challenge is to foster sustainable green growth that provides a better future for India’s people while also helping to protect the planet.

In the lead-up to the 100th anniversary of the Chinese Communist Party last month, hundreds of Chinese coal mines were ordered to shut down to ensure the celebrations weren’t marred by any fatal accidents.

There had been a spate of coal- and gas-related tragedies, but the enforced closures led to shortages, contributing to rising prices for coal both for power stations and steel mills.

According to the South China Morning Post, 130 mines with a combined capacity of 186 million tonnes a year were closed in Shanxi, the biggest coal-producing province, while similar measures were implemented in other provinces.

The shutdown pushed prices to new peaks. Domestic Chinese thermal coal prices reached the equivalent of US$150 a tonne, and the metallurgical coal needed by steel mills rose above US$300 a tonne. Those prices are more than double the levels earlier this year.

The China Coal Transport and Distribution Association called on state-owned coal miners to restart their shuttered operations, and the National Development and Reform Commission authorised the release of 10 million tonnes of coal from the government’s strategic stockpile.

The coal market highlights the irreconcilable pressures confronting the Chinese government.

It wants to lower carbon emissions in line with Xi Jinping’s promise to the United Nations last year of a peak in China’s emissions by 2030 and net-zero emissions by 2060. China’s embrace of ambitious climate targets was designed to get ahead of America on the eve of last year’s US presidential election.

The Chinese authorities also want to reduce the dependence of economic growth on real estate and infrastructure, which are pushing debts to unsustainable levels. There’s also concern that the unbridled growth of the steel industry as it responds to demand from these sectors is contributing to inflation by dragging commodity prices ever higher.

In pursuit of these goals, the government has ordered steel production this year not to exceed the 1.05 billion tonnes produced in 2020. It has also handed out some economic punishment to Australia by banning purchases of Australian coal, on which it had spent $14 billion in 2018–19.

On the other hand, the authorities are concerned that China’s growth would have slowed last year without the benefit of the government’s stimulus spending on real estate and infrastructure and they fear more of the same will be required over the year ahead. They worry that slow growth will raise unemployment and undermine popular support for the government.

For the moment, the concern about slowing growth appears to be winning. Steel prices have fallen in the wake of a politburo statement last Friday that ordered local governments to rein in their ‘campaign-style’ carbon-reduction plans, saying work to meet emissions targets should be ‘orderly and unified’.

Although the politburo’s comments are Delphic, the Financial Times cited the interpretation of Morgan Stanley that ‘With the politburo’s comment, we expect steel production controls will be more gradual paced going forward.’

Beijing believed that local authorities were taking the order to cut emissions and steel production too literally, particularly after steel production had surged 11% in the first six months of the year. Harsh cutbacks to steel production were pushing up the price of steel as construction and industrial firms tried to secure supplies. If the steel mills couldn’t respond to the demands of the infrastructure and property-development industries, China would struggle to reach its growth targets.

University of Peking finance professor Michael Pettis says it’s important to distinguish between what Beijing refers to as ‘high-quality growth’ driven by industrial output and household consumption and ‘residual growth’, which is the infrastructure and real estate spending unleashed whenever the central government’s growth targets look like being missed.

In a newsletter, he says there has been a fierce debate over whether Beijing should be more concerned by rising debts or slowing growth. He argues that the ‘residual growth’ costs more to the economy than it delivers and brings no gain to living standards. But he says the central government is likely to force local governments to increase their support for property and infrastructure developments over coming months, pushing GDP growth towards 8% this year and raising debt levels to new heights.

Reducing carbon emissions will become a lower priority, and China’s steel mills and power stations will continue to struggle with shortages of their key commodities, coal and iron ore.

It may be reading too much into Friday’s politburo statement, but it’s striking that at the meeting of G20 climate and energy ministers in Italy last month, China joined India and Russia in opposing a resolution to mandate the shutdown of coal-fired power and to ban international finance of coal mining.

The stance taken by the trio has cast a shadow over hopes for a radical strengthening of global climate action at the Glasgow climate conference in three months. China’s burst of good intentions last year on curbing emissions may be confronting economic reality.

The decision to ban Australian coal, which has been enforced since last October, has been problematic for both China’s steel mills and its power stations. Although the steel mills have been able to replace Australian coal with Mongolian coal, the latter is lower quality and industry analysts say its use without blending with the high-quality coal that Australia is known for will result in damage to the coke ovens at the major mills and ultimately the loss of steel-making capacity.

China’s biggest source of thermal coal imports, in Australia’s absence, has been Indonesia, but its production has been hampered by heavy rainfall, and supplies from Russia and South Africa have also been interrupted.

A drought in southern China cut the availability of hydro power. Although China has been rolling out wind and solar power, their intermittent supply means the country has been relying more heavily on coal to meet the surge in demand for power over the summer.

For both metallurgical and thermal coal, the ban on Australian imports has resulted in a two-tier market, with Chinese buyers having to pay more for coal than the rest of the world. Australia is having to settle for lower prices, but has largely succeeded in replacing China as a customer.