Global climate change conference ends with a glimmer of progress
This year’s COP27 took place in a context of multiple crises: energy insecurity, international inflation, and geopolitical tensions. However, the need to act on yet another crisis – the climate crisis – has never been clearer. While progress was made in specific sectors, many questions are still left to be answered.
COP 27 put a spotlight on financial aspects related to responding to climate change: against a backdrop of natural disasters – such as unprecedented floods in Pakistan and Nigeria, severe droughts in Ethiopia, Kenya, and Somalia, and raging wildfires all over the world – COP delegates from around 200 nations were able to reach a preliminary agreement on a financial compensation mechanism that is officially called the Loss and Damage Fund. This mechanism, which is expected to be funded by industrialized nations, is meant to support less developed countries, where vulnerability to extreme weather events have become common occurrences in the wake of climate change. While the general agreement on the framework of this mechanism was generally regarded as a break-through, the conference did not meet expectations regarding generating tangible mitigation results in an effort to hold the line on the generally accepted 1.5-degree Celsius limit.
Establishment of Loss and Damage Fund
After three decades of wrangling, the mere inclusion of the proposed fund on the agenda was already a remarkable achievement, especially for climate-vulnerable and developing countries. Finally, in the last few hours of already-extended negotiations, signatory parties agreed on the establishment of a monetary mechanism to respond to destruction associated with the adverse effects of climate change. While this is a significant development, and a major step forward, fundamental uncertainty remains about the establishing of binding terms to clarify which developing nations should ante up, which ones will be the beneficiaries, and the proposed amount of the future budget. And although it was not determined how the fund would be financed, it was suggested that capital could be raised from levies applied to aviation, cargo shipping or the use of fossil fuels.
National representatives also agreed to establish a ‘transitional committee’ for the Loss and Damage Fund to defer making official recommendations on how to operationalize both the new funding arrangements and the fund until the next COP. The first meeting of the transitional committee is expected to take place before the end of March 2023. Further details about the fund’s rules and the transitional committee are expected sometime next year.
General Climate Finance and the Global Goal on Adaptation
Regarding the general climate finance goals discussed at the last COP: the parties could not reach a decision on a budget, but they agreed to revise the deadline for decision-making until 2024 and planned to determine needs-based targets to mobilize investments and transfer financial resources to the developing countries which need them. Still open are the questions regarding the volume of the expected financing. Also, it is unclear which additional countries would contribute beyond the industrialized countries already planned. Although the decisions at COP27 were mostly procedural, the issue of climate finance was addressed and will be revisited next year. As such, the international climate goal is another operational issue tabled until the next COP, but still under consideration.
Lastly, while the Loss and Damage Fund is directed at compensation for the effects of climate change, a second financial mechanism was set up with the intention to invest in adaptation measures. After its establishment at COP26, the GlaSS (Glasgow-Sharm-El-Sheik) work program committee was given the charge to secure a minimum of twice the amount of the 2021 provision. This amount was initially earmarked for less developed countries to adapt to extreme weather events which are happening more frequently all over the world and especially in the Global South. At COP27, new pledges totaling more than 230 million euros were made. While some nations were vocal about their intentions to roll back commitments they made just 12 months ago, the overall commitment has been successfully reaffirmed. A framework for the Global Goal will be developed and presented at COP28 outlining a guide for funds delivery as well as a mechanism for tracking progress using science-based indicators, metrics and targets.
Increased participation in the Global Methane Pledge
Regarding the mitigation sector, a glimmer of hope comes from the over 150 countries which signed a pact to reduce methane emissions worldwide. In the year since the pledge initiative was launched at the last COP, an additional 50 countries agreed to cut their emissions by 30% and stay in line with science based targets to avoid the worst case scenarios of climate change. Led by the EU and the US, the methane reduction activity is focused on emissions stemming from the oil, gas, agriculture and waste sectors. Some experts seem to be giving the side-eye to China, India and Russia as heavy methane emission nations which did not join the pledge. Otherwise, there were very few additional decisions made regarding emission reductions initiatives.
A word from First Climate
"COP27 was billed as one focused on collaborative implementation, but in many areas, it failed to deliver on that claim – decisions were postponed and overall, the conference did not deliver significant progress toward the 1.5 degree-target. However, COP remains important as an international forum for discussion and brings focus to global climate action, but admittedly, the window for deliberation is closing fast and there is no time to wait. The world must find ways to act more quickly, and private sector engagement is an important and proven variable that can drive effective climate benefits on a global scale now. First Climate will strive to continue to enable this engagement and develop fresh solutions for climate action for example in the carbon removal sector to name but one."
-- Mike Hatert, COO of First Climate Markets AG.
