US-based credit rating agency Fitch Solutions has stated that the Glasgow Climate Pact, signed at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) will accelerate the shift of both energy supply and consumption patterns to be more sustainable, which will be largely around diversifying away from coal generation, and moving towards the deployment of renewable energy. The rating agency said it believes that the agreement marks a strong step forward towards decarbonization.
Under the Glasgow Climate Pact, all markets have agreed to revisit and strengthen their current emissions targets to 2030 by the end of 2022. However, Fitch said that the Asia region remains a laggard regarding the establishment of carbon policies, with most markets only just starting to explore the option. Although stronger policies towards net-zero emissions and carbon pricing will come into effect over the coming years in Asia, the impact of this will remain limited over the near-to-medium term.
According to the statement, coal power in Asia will continue to grow over most of the coming years before peaking at the end of this decade and declining over the longer term. Despite significant downside risks to coal power following the agreement, Asia will still remain highly dependent on coal for power generation, given the large capacity of coal projects that have come online in recent years and are still under construction.