In 2021, global emissions due to energy use shot up and exceeded 2019 levels. Subject to OPEC production quotas and price hikes, oil is the only fossil fuel whose emissions remained below 2019 levels. Gas, despite inflation, has seen higher demand in all sectors. Most importantly, coal covers half of the global increase in electricity demand. The exceptional growth of renewable energy during the pandemic has slowed slightly, but renewable capacity additions continued to grow in 2021. The war in Ukraine is not a trigger, but an accelerator of tensions in the gas market generated by the economic recovery following lockdowns. While the energy crisis represents an opportunity to accelerate the energy transition in the long term, it is also an obstacle in the short term because it pushes up prices and involves a comeback for coal.

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In 2020, the world was on hold. Although some transitions were accelerated (like the massive uptake of cycling in major cities round the world), the momentum in place before the pandemic lost steam. Despite a first quarter marked by lockdown measures that still affect emissions figures, 2021 confirms the transition trends that industrialized economies have embarked upon: coal was declining, gas increasingly in competition with booming renewables, and the decarbonization of transport was at last underway in some European countries, mostly thanks to electrification. The inflation of gas prices, triggered in the second quarter of 2021 by the global economic recovery, then accelerated by the war in Ukraine, is forcing States to implement new investment plans to achieve energy independence based on low-carbon energy sources.

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The upswing in sales of new vehicles observed in 2021 featured an accelerated penetration of electric vehicles (EVs). From rail to urban mobility, electric engines are gaining ground in every sector, with regional variations: motorized two-wheelers in India, buses in Latin America, and bikes in Europe. Greater public subsidies for electric purchases are driving a very efficient market, with faster installation of charging stations and a lever effect on private expenditure that is more than proportional. Nevertheless, the popularity of SUVs, the second biggest source of the growth in global emissions behind fossil-fired power generation, with both carmakers and consumers, tends to outweigh the gains in efficiency made by electric vehicles. Added to this, since the efficiency of vehicles is almost proportional to their weight, the move towards heavy EV models indicates the persistent attractiveness of power symbols, underlining one of the main contradictions of the transition at global level.

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2021 saw a slowdown of loss in tree cover and primary forests, but did not buck the trend. Among the drivers of deforestation, fires have increased their share of forest destruction, generating even more emissions. While the main economic industries with high forest risk (livestock, palm oil, leather, paper) are making greater but unequal commitments, the indicators available to measure progress in reaching international objectives have a long way to go. The attractiveness of financing projects with a dual impact on the climate and biodiversity is combined with more holistic types of action, like rights of nature, lifecycle approaches to measure corporate footprints, the socio-economic shift of production chains, and the certification of offset projects with co-benefits for biodiversity.

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In 2021-22, the global economic recovery, extreme climate events, and the war in Ukraine highlighted the vulnerability of value chains and the strategic interdependence of transition industries. The automobile industry, for example, faced with the concentration of strategic mineral resources (lithium, nickel, cobalt), seeks long-term supply contracts and vertically integrated value chains. From the opening of lithium mines to the production of renewable energy, reindustrialization hovers between cooperation and competition. In Europe, the USA and China, and in emerging countries with considerable primary resources, the State is taking control to relocate value chains, or even nationalize domestic champions (EDF, Uniper). At the same time, the inflation of energy prices is leading to a natural selection of market players, to the advantage of major capital-intensive companies, supported by their country of residence.

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The last seven years were the hottest ever recorded in the world. In 2021, the intensification of climate events led to massive human and agricultural losses and perturbed the operation of electric networks (nuclear, hydropower, transmission, etc.) and transport infrastructures (especially rail). At the same time, the need to adapt in the short term (air conditioning, refrigeration, irrigation, etc.) generates a rise in energy expenditure — mainly provided by fossil fuels — that undermines transition scenarios and outweighs the gains made by long-term action, such as the thermal renovation of buildings and agroecology, which are slow to take hold. On the other hand, the emergence of “State sufficiency” in the public debate in reaction to tensions in the energy market opens a new arena of action, the medium-term impacts of which are difficult to measure.

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As the extreme and structural impacts of climate change intensify, the need to invest and provide insurance to cover and anticipate risks is greater than ever. Although major bilateral and multilateral donors devote a rising share of their finances for climate to adaptation, the parity with mitigation funding targeted by the Paris Agreement is far from achieved. Through NDCs, communications on adaptation mentioned in the Paris Agreement, and the National Adaptation Plans under the Cancun Adaptation Framework, most states have begun implementing their adaptation plans. However, on the field, adaptation projects still lack measurement of their concrete impacts, as shown by the scarcity of quantitative or qualitative indicators of climate risk reduction in those academic publications that attempt to evaluate the situation.

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In 2021, the voluntary carbon market beat every record, driven by a wave of commitments by companies to reach “Net Zero emissions”. In particular, credits certifying nature-based solution projects (afforestation, reforestation, conservation, etc.) are booming and rank first in the market. Co-benefits for biodiversity and the socio-economic development of local communities are also highly sought after. However, carbon removal credits, which allow the long-term capture and sequestration of CO2, are still largely undeveloped. While this can be a way of channeling private financial resources into projects that help mitigate greenhouse gas emissions, the possibility for companies and other organizations to claim “carbon neutrality” in the absence of universal standards remains controversial.

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2021 did not see much change or acceleration in shareholder activism. Increasing numbers of environment-related proposals are made — in particularly climate-related ones — but only a small number are voted on, and very few are voted through. The practice of taking legal action against climate policies of States and companies, which was still marginal in the early 2000s and is particularly concentrated in the United States, has become a major trend in recent years. A small majority of the decisions rendered are favorable to climate action, but their long-term effects have been little studied. Nevertheless, this dual pressure directs carbon-intensive industries a little closer towards a transition whose pace they control: no major actor has abandoned its most carbon-intensive historic activities (oil, gas, coal, etc.) — which are also the most lucrative, and potential levers for investments in the transition.

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Local governments are on the front line for implementing climate policies adapted to the needs of citizens. In terms of mobility, major European cities are spurring more electric bus fleets and reorganizing the public space to promote walking and cycling, while limiting car traffic with low-emission and car-free zones. While most electric buses in circulation are in China, European and Latin American cities are also making the move to electric. Local governments are even going further than national targets by improving the energy efficiency of their buildings and infrastructures, introducing minimum energy performance requirements and adaptation standards in buildings codes, and adopting low-carbon heating policies. Local cooperatives are suffering from the energy crisis but are proving efficient at adaptation.

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