Welcome back. Climate negotiations are nearing the endgame.
With the war in Ukraine dominiating the G20 leaders' discussion in Bali, hopes for a much-needed political boost to COP27 negotations were dashed. However, the G20 statement did provide a couple of key climate wins. It reiterated the aim to keep average global temperature rise to 1.5 degree Celsius and also backed reforming global financial institutions to unlock more funding for climate action, particularly in developing countries.
The presidency of the climate conference said it will wrap up tomorrow, but negotiations will likely need more time. Overnight on Wednesday the drafted “cover text” setting out COP27 broad economic, environmental and political ambitions ballooned to 20 pages. It is, in essence, a laundry list of ideas with lots of internal contradictions, making negotiations a formidable challenge.
Loss and Damage
Observers say the key issue to unlocking the COP27 negotiations is funding for so-called “loss and damage” in vulnerable countries. Insurer AON estimated that in the first nine months of this year there has been $227 billion of natural-disaster-related economic losses globally, in countries across the economic spectrum.
So far, about $250 million, not billion, has been pledged by developed nations to help with climate-related loss and damage. A paltry sum compared to the hundreds of billions of dollars rich countries have committed this year to their own energy security and transition. However, political and fiscal realities in most developed countries limit their ability to promise significant new sums of cash. Thus, we have seen a mosaic of creative financial solutions being proposed, including reforming international financial institutions.
Most developed nations acknowledge the need to do more but are only willing to commit to a process to create a new fund in the next year or two. Most developing nations want significant funding now. This developed-vs-developing divide makes a breakthrough less likely—most big COP compromises historically come when a group of countries across the economic spectrum come together to back an ambitious compromise.
Phasing Out Fossil Fuels
Given that the cover text includes nearly every option under the sun, is it also noteworthy what isn’t mentioned.
Missing is India’s proposal to expand the global phasing out of coal to cover all fossil fuels, despite growing support that includes the EU and Britain. Even the U.S. is open to backing a phase-down of unabated fossil fuels.
What the sprawling text does instead is weaken Glasgow’s commitments around phasing out coal and fossil fuel subsidies. It is disappointing, but not hugely surprising given the relative embrace of the oil and gas industry at COP27 and the host-nation’s fossil fuel sector. (More below on how it is adjusting to export more gas to Europe)
As the COP negotiations grind on, it can be tempting for some businesses to dismiss them as irrelevant, but they do establish a baseline and roadmap for the fast-evolving space of climate action. And just like a tax code, they can sometimes create small rules with big impact.
This week: Egypt dims the lights; U.S. solar panel factory
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