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

Egypt is racing to provide more natural gas to Europe by cutting back on its domestic energy consumption, part of an effort to bulk up state coffers amid an economic crisis, writes Chao Deng.

This summer the Egyptian government started to direct the scaling back of domestic electricity consumption, reducing lighting in some streets, squares and other public areas, as well as in shops and government buildings. The aim is to try to lower the amount of natural gas needed for generating electricity by 15% and ship that surplus to buyers in Europe, who are paying top dollar for liquefied natural gas.

For the Egyptian government, the opportunity to sell more gas to Europe could help it increase foreign-currency reserves. The country suffered more than $20 billion in capital outflows this year amid waning investor confidence in its domestic economy.

Egyptian Prime Minister Mostafa Madbouly estimated in August that a 15% saving in domestic electricity generation would bring in revenue of $450 million a month from extra gas exports.

Egypt exported 8.9 billion cubic meters of gas last year, about 1.3 billion cubic meters went to Europe, according to Oslo-based research firm Rystad Energy. So far this year, Egypt has sent 4 billion cubic meters of gas to Europe.

Egypt could struggle to sustain its export ramp-up, energy analysts say. Some of the country’s gas fields are petering out, and demand is on track to continue climbing. Egypt produced a record 70 billion cubic meters of gas last year, but consumed about 63 billion.

The U.S. is struggling to wean itself from Chinese solar power but to compete in a business dominated by its geopolitical rival, the U.S. needs to build a supply chain nearly from scratch, writes Phred Dvorak.

To make that happen, though, the U.S. needs to build a supply chain almost from scratch as it has little or no manufacturing for almost any component needed to produce solar energy. China, which can produce solar components less expensively, controls more than 80% of the supply chain, dominating the manufacture of solar panels and other vital equipment. 

In a bid to boost U.S. solar production, President Biden in August signed into law the bill dubbed the Inflation Reduction Act, which provides bonus tax credits to renewable-power projects that use American-made equipment, as well as incentives for manufacturing solar panels, wind turbine blades and other components in the U.S.

And the incentives seem to be having impact already. Italian energy giant Enel SpA is readying a massive solar-manufacturing push in the U.S., including plans for a factory that will make solar cells, a key part of the supply chain that currently doesn’t exist here.

Enel said it is planning a factory that can initially produce 3 gigawatts—and ultimately as much as 6 gigawatts—of solar panels. That is a scale that would make Enel’s factory one of the largest such ventures in the U.S., at a cost that could approach or top a billion dollars, according to Journal estimates.

The factory will also manufacture solar cells, the building blocks for solar panels and a component not currently produced in the U.S., after the last few manufacturers went out of business or were priced out of the market by cheaper imports in recent years.

“Economies of scale and learning curves are super important in this business,” said Giovanni Bertolino, U.S. head of Enel’s cell- and panel-making unit, 3Sun. Enel needs big production volumes if it is to compete with the Chinese manufacturers that dominate the industry now on price and quality, he said.

Enel’s plan is the latest in a rush of deals announced since the U.S. passed the Inflation Reduction Act in August. Many companies from solar-panel maker First Solar Inc. to battery maker LG Energy Solution Ltd. have unveiled billions of dollars of manufacturing plans, and industry experts say many more deals are coming.

The hidden emissions of cloud computing (Bloomberg)

The Inflation Reduction Act boosts battery manufacturing in the U.S. (FT)

Suffragette Emmeline Pankhurst’s great granddaughter explains why today’s climate protesters will be seen as heroes. (Guardian)

How climate models might help predict future disease outbreaks (Scientific American)

Who is at COP27 and how attendance has changed over time. (Carbon Brief)

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