COP27 was, as probably expected, not as successful as hoped, with the usual last minute compromises and climb downs. Alok Sharma was once again, visibly upset… “Emissions peaking before 2025 as the science tells us is necessary? Not in this text,”… “Clear follow-through on the phase-down of coal? Not in this text. Clear commitment to phase out all fossil fuels? Not in this text. The energy text? Weakened in the final minutes.” ,The most successful outcome was that the issue of Loss and Damage payments is now firmly on the agenda.
This excerpt from CCI’s newsletter summarises what CCI feels has been gained at COP27. The main takeaway is that there is now recognition of the need for financial transformation to facilitate “the right to a clean, healthy and sustainable environment”……..
Addressing Loss & Damage
The COP27 achieved the major historic breakthrough most said would be necessary, and yet seemed unworkable: A consensus agreement to create a fund to address climate-related loss and damage, particularly for the most vulnerable and resource-stressed countries. The commitment to create a fund is a breakthrough, but so is the establishment of a Transitional Committee to inform the design of the funding facility and to coordinate the earmarking and mobilization of loss and damage response funding through existing institutions, over the coming year.
Advocates and stakeholders from across the world played a role in building consensus for a loss and damage fund, and the immediate work to begin discovering new flows of finance from existing sources.
The Sharm el-Sheikh Implementation Plan—the formal COP27 outcome agreement—also calls for comphrensive operational reform of multilateral development banks (MDBs) and international financial institutions (IFIs). The projected reforms are needed to better account for vulnerability and related spending needs, uneven climate risk, and the foundational value of mitigation, adaptation, and resilience measures. The text also calls for developing:
“a new vision and commensurate operational model, channels and instruments that are fit for the purpose of adequately addressing the global climate emergency, including deploying a full suite of instruments, from grants to guarantees and non-debt instruments, taking into account debt burdens, and to address risk appetite, with a view to substantially increasing climate finance;”
The COP27 is the first to agree to such institutional reforms to value vulnerability, a recognition of the need for climate-aligned debt relief. The text effectively recognizes the limits of debt-based climate finance, due to the systemic nature of “interlinked global crises [like] climate change and biodiversity loss” and their connection to “Stresses that the increasingly complex and challenging global geopolitical situation and its impact on the energy, food and economic situations”.
The systems lens
The system lens is referenced for food, energy, and finance, though in different ways. This is no small thing, as nations and communities across the world are faced right now, today, with urgent short-term decisions about how to secure basic supplies in a time of scarcity and soaring prices. The emerging systems transformation consensus—even if it lacks the urgently needed details about next steps—lays a foundation for future work towards successful climate resilient development.
The Preamble concludes with a detailed and specific admonition that efforts to meet short-term food, energy, and finance needs, or to achieve recovery from the coronavirus pandemic, “should not be used as a pretext for backtracking, backsliding or de-prioritizing climate action”.
The Preamble also highlights the need for “sustainable lifestyles”, including modes of consumption and production, as well as the need for “an approach to education that promotes a shift in lifestyles while fostering patterns of development and sustainability based on care, community and cooperation”. This is not, as has been feared in the past, a way of shifting responsibility to individuals; it is, instead, a signal that Parties are in agreement about the need to surround consumers with better choices.
Energy transition
The great disappointment for many is the language around mitigation, or decarbonization of energy systems. A diverse coalition of countries, including Tuvalu, the United States, and India, nearly achieved a de facto fossil fuel non-proliferation agreement, with language that called for the phase out of all fossil fuels, naming coal, oil, and gas explicitly. That language was replaced, however, with softer language (in paragraph 16, under section IV. Mitigation), which calls for:
“accelerating efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies.”
In the Energy section, above Mitigation, the text cites:
“the urgent need for immediate, deep, rapid and sustained reductions in global greenhouse gas emissions by Parties across all applicable sectors, including through increase in low-emission and renewable energy, just energy transition partnerships and other cooperative actions.”
Taken together, this language worries many, who see “low emissions” as code for natural gas, and note the word “increase” as a signal that countries intend to increase their reliance on natural gas. It is important to note that any natural gas system that leaks methane cannot be considered “unabated” or “low emissions”, and the Sharm el-Sheikh text—as noted above—warns against “backtracking, backsliding or de-prioritizing climate action”.
The cost to all of us of getting that wrong, and letting climate emergency run away unchecked, would be intolerable. Financial institutions and regulators will have little choice but to find ways to identify and prevent that kind of destructive activity.
Food systems received unprecedented attention at COP27, with four pavilions, and with major announcements like new targets from the Good Food Finance Network High Ambition Group, covering $113 billion in business activity.
In his remarks to the Closing Plenary, Simon Stiell, the new Executive Secretary of the U.N. Climate Change Secretariat, quoted Maya Angelou’s “On the Pulse of Morning”:
“The horizon leans forward, Offering you space to place new steps of change.”
The words are more than poetry; they describe the way the COP27 outcome could result in transformational forward progress over the coming years. The COP27 does open important spaces in which to place new steps of change:
- Though not detailed enough in reference to food systems transformation, the new four-year work plan for the Koronivia Joint Work on Agriculture is a clear space to undertake the “comprehensive and synergetic” innovations and actions called for in the Preamble of the Sharm el-Sheikh text.
- The detailed call for transformation of International Financial Institutions will be critical for most efficiently curating capital flows to address countries disparate and overlapping needs relating to mitigation, adaptation, loss and damage, and resilience-building.
- The COP27 outcome for the first time recognizes “the right to a clean, healthy and sustainable environment”; this is an invitation for national and international cooperative action to safeguard and advance that right.
- On international cooperative climate action, work has advanced under Article 6.8 of the Paris Agreement, with a diversification of the tools and instruments recognized as “non-market approaches”. Such “NMAs” were described by the U.S. as “not quid pro quo emissions trading” but rather cooperative direct interventions that enhance overall capability. NMAs can be suites of policies, incentives, and direct investments that improve conditions for the mainstreaming of climate-smart finance, trade, and practice, across whole economies.
Support from heads of state and international institutions for creative collaborative measures to scale up adaptation finance creates a new political environment for addressing needs of the vulnerable.
In parallel processes, we also saw important progress.
- Though not formally adopted as legal standards, new recommendations from the UN High-Level Expert Group on net zero integrity are rigorous and lucid. They note we will not be able to keep to 1.5°C if accounting manipulations are possible and emphasize real-world physical reductions in emissions, to reduce the geophysical impact of our industries. Offsetting should be used only to facilitate additional emissions reductions beyond those needed to align with 1.5°C and then only in limited verifiable cases.
- The Global Center on Adaptation and the African Development Bank announced new funding up to $25 billion to accelerate adaptation action in Africa, and adaptation-related finance and commerce gained unprecedented attention. Such activities can create value that supports economic progress across all of society, and they can be bolstered by financial innovations being sought across the international financial system.
- The High-Level Climate Champions have stewarded an impressive list of new climate action initiatives by non-state actors, and point to the emerging “all of society” approach to cooperative climate crisis response.
- Also external to the COP process, the Good Food Finance Network activated the work plan for creation of a Co-Investment Platform for Food Systems Transformation, to crowd in funding from public, private, multilateral, and philanthropic sources, to support the mainstreaming of healthy, sustainably produced food.