‘Challenging’ week as COP27 passes half-way mark

As we pass COP27’s midpoint, we would sum up proceedings so far as ‘challenging’.

According to the Global Carbon Project, if emissions remain at their current levels, the carbon budget for a 50% chance of keeping warming below 1.5°C, will run out in just nine years - in other words, COP26’s goal of keeping 1.5°C alive will have failed. By number of delegates, COP27 is likely to be the second-largest COP (approximately 40,000 people) on record.

The atmosphere during the World Leaders Summit saw limited evidence of countries, especially from the Global North, making meaningful progress on the pledges made at COP26. Trust between delegations from the Global North and South is strained by the continued failure of developed countries to deliver £100 billion of climate finance per year to developing countries. Recent estimates show the colossal climate finance gap for mitigation, adaptation ($160-340 billion by 2030) and loss & damage continues to grow with delayed action.

Barbados Prime Minister Mia Mottley’s Bridgetown Agenda for the Reform of the Global Financial Architecture is starting to gain traction with G7 nations, in particular from French President Emmanuel Macron. We expect further discussions to take place on this agenda at the upcoming IMF/WB Spring meetings in 2023.

Challenging new guidelines have been published as the UN’s High Level Expert Group on net zero commitments of non-state entities (HLEG) Integrity Matters report outlines five principles for net zero integrity and ten recommendations on the components that give a net zero target integrity. At the launch event, the Group’s Chair - former Canadian climate minister Catherine McKenna - stated “You cannot be a net zero leader while continuing to build or invest in fossil fuel supply”. Also setting an important precedent in reporting, President Biden announced his administration was proposing the Federal Supplier Climate Risks and Resilience Rule. This would “require major Federal contractors to publicly disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets.” As the world’s largest purchaser of goods and services, the impact of this could be significant.

For the first time in the 30 year history of the negotiations a specific agenda item on the loss & damage finance facility. A handful of nations, including Austria (€50 million over four years), Scotland (£5 million) and New Zealand ($12 million), pledged money for loss and damage. While more developed countries appear to be willing to have a discussion on finance for loss and damage, clear landing grounds have yet to be found on a solution that provides timely support in the face of rising extreme weather.

As we enter the second week of COP, technical negotiators will hand over to ministers from each country. They are tasked with agreeing and finalising the myriad of texts that have been discussed long into each night of the Conference so far. Attention will turn to what form a COP decision/cover text might take. This document is used to outline and summarise the key political priorities and targets originating from the Conference. The COP26 Glasgow Pact, for example, called on countries to accelerate efforts “towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies”.

There is limited information on the COP Presidency’s current vision for a decision/cover text. Alongside progress on loss & damage and enhanced support for the energy transition in developing countries, we hope that it will as a de minimis include no backsliding on prior commitments. Particularly crucial is reaffirming global commitment to limiting warming to 1.5°C, phasing out fossil fuel subsidies, and phasing down fossil fuel production and exploration. This will be easier said than done given the polycrises - food, energy, and cost of living, among others - countries are currently facing.

All eyes this week will be on leaders meeting on the other side of the world in Bali for the G20 Summit and specifically President Biden's bilateral with Xi Jinping. We expect one of the issues to be discussed will be reaffirmation of the 1.5°C Paris Agreement goal - this was referenced in the 2021 G20 communique, but there have been suggestions that China and India are seeking for it to be removed. By contrast, on 11 November, over 200 of the world’s largest businesses, civil society groups and prominent voices on climate signed an open letter urging leaders at the G20 to uphold their commitment to 1.5°C.

We also expect to have an update at the G20 on the Just Energy Transition Partnership (JETP) for Indonesia, with the US and Japan already putting forward $15 billion. This is akin to the JETP announced for South Africa at COP26 whereby Germany, France, the UK, USA, and EU agreed to support the country to phase-out coal and reduce possible negative impacts on workers, communities and the economy.

There have also been several moments of ‘good news’ from the Conference so far, including, among others:

• The start of the week saw the launch of The Green Shipping Challenge which aims to put the sector on a 1.5°C aligned pathway, as well as The Forests and Climate Leaders’ Partnership to accelerate implementation of the commitment made at COP26 by over 140 countries to halt and reverse forest loss and land degradation.
• The COP27 presidency released The Sharm El-Sheikh Adaptation Agenda which outlines a set of 2030 goals to enhance resilience for 4 billion people living in the most climate-vulnerable communities.

For example, over 85 insurers in Africa pledged to create the African Climate Risk Facility (ACRF) to provide $14 billion of cover to support the continent's most vulnerable communities with climate disasters.