(Bloomberg). COP26 required fourteen days and long nights of negotiations. It produced breakthrough pledges, a set of rules on carbon trading and some big aspirations that will have to be scrutinized against real action in the years ahead. Here’s what you need to know.

Coal Target (NYSE:)

The first time that a COP text addresses coal has been made, it goes beyond what the G-20 did before.  It was watered down at the last-minute to a pledge to “phase down” rather than “phase out” unabated coal power, but the inclusion is still a significant signal.  India and China’s resistance is a reminder it will take a long time to wean the world off coal.  

China-U.S. Deal

Glasgow’s biggest surprise was the agreement between two of the largest climate emitters to cooperate on issues related to climate. Although there was no concrete agreement, it is encouraging that the two largest emitters agreed to work together on climate issues amid the wider diplomatic impasse. China has been absent from these discussions since then. President Joe Biden meets Chinese President Xi Jinping virtually on Monday.

Rules on Carbon-Trading

It was hard-won, and it has been long-awaited. The rules on international carbon trading bring clarity to companies and standardization that should help reduce emissions, though some activists are worried they aren’t quite tight enough and more needs to be done to bolster scrutiny. The pressure to pin down rules was growing as the voluntary market for offsets grows in an unregulated sprawl. Some estimates put the market at $100 billion.

The Fossil Fuel Taboo

Inefficient fossil fuel subsidies must be ended, the Glasgow Pact stated. While that language has knocked around in G-20 communiques for years — to little effect — activists were encouraged by the symbolism of it finally making its way into a COP accord, which is signed off by almost 200 countries. G-20 nations spent $600 billion subsidizing fossil fuels last year, something U.S. climate envoy John Kerry labeled “insanity.” 

Methane pledge 

Over 100 countries have agreed to reduce methane emissions. There’s also a mention of methane in the overall agreement for the first-time. It’s not binding, but again, a powerful signal that it’s time to tackle emissions that are much more potent than CO2. Russia and China didn’t sign up.

Get your plans moving

All countries must come back with better climate plans next year. But there’s a get-out clause. As things stand, countries’ climate plans, known as nationally determined contributions, or NDCs, put the planet on track for 2.7 degrees of warming. And we’re still waiting for India to submit the one it was meant to hand in before COP. It will be interesting to see if countries start working on their new plans.

Examine 

New rules were agreed that will allow for greater scrutiny on emissions reporting. At last, climate targets should be comparable, allowing for everyone to assess what everyone else is doing. This is a significant step forward.

Pay for the damage

For the first time, there’s a recognition that countries struck by catastrophic climate events will get help. There’s an agreement to properly set up a mechanism — though the finer details and exact cash still need to be hashed out. That’s something for COP27, in Egypt next year. A failure by rich countries to pledge $100 billion for climate finance is a negative sign.

Banks

Mark Carney, a former Governor of the Bank of England, urged banks and investors to reduce their carbon footprint by requiring them to invest $130 trillion. Finance is a powerful tool in the fight against climate change but the list doesn’t include the world’s three biggest banks, all of which are Chinese and major providers of coal finance.  The key question is not whether the bank signs up but if they cease financing fossil fuels.

The End result is…

If all the pledges come to pass, and it’s a big if, it puts us on course for warming of 1.8 degrees Celsius, according to the International Energy Agency. That’s much better than where we were on the way into COP, but still way above what’s safe.

(Michael R. Bloomberg, the owner and founder of Bloomberg News parent Bloomberg LP, is co-chair of Glasgow Financial Alliance for Net Zero)

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