COP27: outcome and outlook

Yesterday marked the end of the 27th?Conference of the Parties of the UNFCCC (COP 27) which took place in Sharm El Sheikh, Egypt and started on 6 November.

“An important step towards justice”?is how UN Secretary General Guterres welcomed the key achievement of #COP27, the agreement to establish a loss and damage fund and operationalize it in the year ahead. But he also warned that the world is still?“in the?emergency room” and “needs a giant leap on climate ambition”. After a fraught last 24 hours, in which the Conference seemed at times on the edge of collapse, how should we assess the overall outcome?

The first week’s discussions in Sharm-el-Sheikh had highlighted the importance Parties attached to?five key points:

1)??????Continuing?commitment to the 1.5 degree target, underpinned by clear and agreed mitigation strategies and convincing national pathways,

2)??????Good progress toward renewed?commitments to action on adaptation,

3)??????A refreshed obligation on the part of developed countries to provide?$100 billion of annual assistance?to developing countries,

4)??????An agreement on?reform of international financial institutions?to better shape them to the support of climate objectives,

5)??????And above all, a?bankable commitment on loss and damage. Progress on this last would be critical to unlocking agreement to an overall package.

G20 and Presidency cover note

The Egyptian Presidency produced a first draft cover note over the weekend, but it was clear that much depended on a?strong political signal from the #G20, meeting in Bali. As it turned out, the Bali communique contained language on most of the key issues which, if not satisfying the most ambitious expectations, nonetheless went further than some had feared.?It included:

o???A reference to the Glasgow Climate Pact calls to?keep 1.5 in reach?and a request to countries to?keep updating their NDCs?“where required”,

o???A call for progress on?loss and damage, including innovative financing mechanisms,

o???Good language on?energy resilience and a just transition,

o???A reinforcement of the Glasgow message on?phasing down?unabated coal power and inefficient fuel subsidies,

o???A and a call for?financial system reform.

The formal Bali message was underpinned by a constructive meeting between Presidents?Biden and Xi, which put the possibility of US - China co-operation, including over climate, back on to the rails.?This enabled constructive exchanges between the respective climate representatives, Kerry and Xie in Sharm.

Key features of the COP27 dialogues

The second half of the week in Sharm focussed on?intensive dialogue, bilaterally between the Presidency and delegations or groups of them, and multilaterally between Parties. The key features of this were:

o???Which of three possibilities on Loss and Damage could command consensus-?An agreement on a UN-based fund or facility, now, an agreement in principle, but with the modalities to be settled in due course or no explicit commitment to a fund, but agreement to pursue a “mosaic” of options.

-? The?G77 developing countries?(in fact 134 countries, including China) maintained an?impressive solidarity?in favour of the?first option.?Developed countries?tended to favour the?third.

-? The?key move?was EU Executive Vice President?Timmermans’?offer, late on Thursday, to consider a fund but, with two crucial conditions: first, that it should be?part of a package?including strengthened efforts on keeping warming to?1.5 degrees?and accelerating the?phase down of coal; and second, that the?donor base should be widened. This move opened the way to extensive negotiation between Parties, culminating in a package on which all could agree.

-?However, like all compromises, this fell slightly short of giving anyone precisely what they wanted, but (i)?makes real the promise to provide support on loss and damage?to developing countries, including - but not restricted to - the most vulnerable (ii) opens up a?potential debate on the donor pool, which carries wider implications.

-?This initiative will now be taken forward by a special?transitional committee, which is invited to come up with a firm package of proposals by COP 28 in Dubai next year;

o???Continued efforts to ensure that, in other respects, the outcome did not slip back from Glasgow-?Retention in the final cover text of references to?1.5?as the key target of the Paris agreement, repetition of the?commitments to “phasing down” unabated coal and?“phasing out” inefficient fossil fuel subsidies, and a renewed call on countries to review and where necessary?improve their NDCs?go in this direction.

-?? Reference is also made to the need for richer countries still to make good on the?$100 billion?promise, and to the important role of?private finance.

- ?Language in a separate paper on?mitigation?lacks timelines and targets , and the reference to “significantly scale up”?adaptation?finance in the cover text also retreats a little from?Glasgow’s call for doubling.

-? A welcome reference to?renewable energy?is leavened by one to?low emission?sources. But new references to action on?methane, and to?financial institution reform?ensure that overall the process continues to move forward.

o???Discussions also took forward the agreement at Glasgow to establish rules for carbon trading, under Article 6 of the Paris agreement- This highly technical dialogue covered issues including the trade of non-authorised credits between countries and businesses, and around confidentiality of trade between countries.

-? Outside the conference hall, announcements on?initiatives?continued, including on agriculture, water, vehicle emissions, steel and shipping.

-? Two other important developments were the agreement on a?Just Energy Transition Partnership (JETP) for Indonesia, in effect proving the concept of the first of these partnerships with South Africa, and paving the way for expected further ones with Vietnam, India and Senegal, and the German-led?Global Shield Initiative, a quasi-insurance scheme for climate risk.

?Next steps

Action will now proceed in the usual way, in a range of fora. As a whole, the?Sharm El-Sheikh Implementation Plan,?as it will now be known, has fallen short of the hopes of some. It does not, of itself assure achievement of the various climate objectives nor avoidance of, for example, critical tipping points.

The?failure to agree new climate targets?has disappointed many. And the last-minute insertion of a positive reference to “low emission” energy raises concerns over the door being left open for gas.?Hence the Secretary General’s continuing call to arms.?But it?has kept the show on the road?– an outcome which was at times by no means certain.

The?new agreement on Loss and damage is a major step forward, and the remainder of the package sets the scene for further work. Helpfully, it has now been confirmed explicitly that the?US-China dialogue?established at Glasgow but suspended after Speaker Pelosi’s visit to Taiwan is re-established. While dialogue in the period ahead will focus on making concrete the agreements in principle, unresolved issues will also remain very much on the table as work progresses.

Two of these are how to extend?the “phase?down” commitment beyond coal to other fossil fuels,?pushed for unsuccessfully by a large?number of countries in Sharm, but blocked by the main oil and gas producers; and the question of who pays into the loss and damage fund, a proxy for wider debate on whether the 30-year-old UN classification of developed and developing countries should continue to be?the main?basis for determining obligations to contribute finance, or whether newly more prosperous emitters, such as China and Saudi Arabia, should be expected to contribute. Either of these issues has the potential to create significant difficulties, neither seems avoidable if agreed objectives are to be met. The road to Dubai will be no less bumpy than that to Sharm.