The latest round of UN climate talks opened with familiar warnings as several major reports released in the run-up painted a bleak picture of worsening climate impacts and a significant lack of progress on cutting emissions. UN secretary-general António Guterres concluded that the world was “on a highway to climate hell with our foot on the accelerator.”
These warnings exacerbated the distrust between developing and developed countries that has plagued the UN climate process for years. In the end, developing countries achieved a major breakthrough on one of their biggest asks, but the talks were left wanting on stronger emissions reductions and fossil fuel phase-out.
The talks made several trends clear.
1. The need for funding for loss and damage was finally acknowledged by richer nations
The issue of loss and damage – or impacts of climate change that cannot be adapted to, such as sea-level rise and ecosystem collapse – has been pushed by developing countries for decades. They argue that they are suffering the most from climate impacts, while having contributed the least to the problem, and want richer nations to support them financially in reparation.
Developed countries have long sought to avoid direct talks on financing loss and damage. COP27 saw a major coup, when the issue was officially admitted to the agenda for the first time. Poorer countries pushed for the creation of a multilateral funding mechanism by the end of COP27. Developed countries tried to delay a final decision to 2024, or create new types of insurance to cover it.
However, events such as the recent Pakistan floods have made it harder for richer nations to ignore loss and damage. COP27 not only saw the issue firmly established at the heart of climate negotiations, but achieved agreement on the establishment of a fund, an outcome few had thought likely ahead of the talks. Although details need to be thrashed out at future COPs – including the crucial matter of who pays and who receives – the agreement is a major breakthrough for poorer nations.
About €340m in new pledges for loss and damage were made, including from the EU, New Zealand and Canada.
“COP’s progress on Loss & Damage was unprecedented particularly when considered alongside discussions on adaptation. The connecting issue is finance, including funding mechanisms, deployment vehicles, and finance mechanisms to support and accelerate private sector engagement. It’s no surprise that calls for reform of the multilateral development banks are getting louder, to increase finance flows to developing nations. While not easy, it could unlock cold capital and take on project and currency risk that currently holds back private and national level finance due to their risk requirements.”
Steve Varley, EY Global Vice Chair, Sustainability
2. Fossil fuel interests are not going down without a fight
There were 636 lobbyists from the oil and gas industries registered at COP27, higher than the 503 at COP26, which already outnumbered the delegation of any single country. These figures show the growing influence of oil and gas interests at the climate talks.
The International Energy Agency has said that no new fossil fuel projects can go ahead from 2022 if the world is to achieve emissions reductions goals. Although investment in clean energy accounts for almost all new investment in electricity generation, a report released by campaigners at COP27 warned that oil and gas companies are planning production expansion that would result in 115bn tonnes of CO2 being pumped out, equivalent to more than 24 years of US emissions.
Some fossil fuel companies and Western governments have been visiting African countries in an attempt to persuade them to exploit remaining fossil fuel reserves and export the energy to them. This has led governments of some African countries to push for an agreement that oil and coal will continue to play a crucial role in the continent’s energy mix in the short and medium term, and that fossil gas will feature in the long term.
The Sharm El-Sheikh Implementation Plan agreed by countries at the COP reflected the influence of fossil fuel lobbyists. New language referring to “low-emissions” energy was included alongside renewables as the energy sources of the future. Many believe this undefined term to be a significant loophole, as it could be used to justify new fossil fuel development.
“Energy transition is an important debate with no one answer to the multiple tensions related to cost, policy, social and economic impact, and the scale and acceleration of finance needed. Despite record investment in the energy transition last year, $2.1 trillion is required annually between 2022 and 2025, and double that annually to 2030 to stay on the Net Zero pathway. Outside of the COP process, the Just Energy Transition Partnership (JET-P) model incentivises emerging economies to leave fossil fuels in the ground and switch to cleaner energy. As a vehicle for Global North-to-Global South finance, JET-Ps have potential to bridge the financing gap for energy transition for emerging economies, and a new deal $20 billion deal with Indonesia combining public and private investment was announced at the G20 summit.”
Steve Varley, EY Global Vice Chair, Sustainability
3. Greenwashing will not be tolerated
More than 12,000 businesses have now set net-zero climate targets, with the number constantly growing. However, concerns that such targets have “varying levels of rigour and loopholes wide enough to drive a diesel truck through” persuaded the UN secretary-general to set up a task group to recommend the criteria that companies would need to meet in order to claim credibility.
The group, chaired by Canadian former environment minister Catherine McKenna, presented its recommendations to COP27. The ten standards and criteria proposed building on existing initiatives, such as the UN’s Race to Zero and the Science Based Targets Initiative, under which many companies have set their net-zero targets.
The recommendations include that targets should lead to an overall reduction in all emissions, including from the supply chain, and should cover the short, medium and long term. Detailed transition plans should demonstrate how capital spending will be aligned with the targets, while progress should be reported in a way that allows comparison with peers.
The recommendations also stipulate what corporates should not do, including claiming to be net zero while continuing to expand fossil fuel supply, or engaging in deforestation. Offsets are discouraged unless a corporate is already meeting targets, and unless they provide high-quality credits, while corporate lobbying must not undermine government climate policies either directly, or indirectly through membership of trade associations.
In addition, the International Organisation for Standardisation (ISO) published a net-zero “guidelines paper” intended to be a “single core reference text” for any organisation wishing to create meaningful targets.
With new analysis showing that only half of companies setting net-zero targets have published robust plans, and with a similar proportion not saying whether or how they will use offsets to reach their targets, this development leaves corporates with plenty of work to do after COP27.
“While greenwashing stole headlines, green-wishing and green-hushing are becoming more potent. Green-wishing sees organisations align to an agenda like net zero, and allude to progress when there isn’t any, or there are a lack of effective plans to deliver it. The flip side is green-hushing where, with mounting politicization of an anti-woke ESG narrative, companies act quietly behind the scenes with little visibility of what they are actually doing. We need to halve carbon emissions in just seven years, so there are justified expectations of credible plans and reporting. But the concern for organisations is that the perception of progress and commitments lies with the public, and without a coherent standard for judging plans and progress, any company can be accused of greenwashing.”
Dr Matthew Bell, EY Global Climate Change and Sustainability Leader
4. Food systems and agriculture have finally come under scrutiny
Food and farming have previously been absent from official inclusion in UN talks, despite global food chains from production to consumption contributing around one-third of greenhouse gas emissions.
However, there have been increasing calls to support farmers to adapt, particularly as the impacts of extreme weather have hit food supplies. This year, drought caused yield losses in the US, Europe, China and India, while the flooding in Pakistan saw rice harvests plummet by about 31%.
At COP27, organisations representing 350m small-scale farmers globally wrote an open letter to leaders, calling on them to work with them to build a stronger, more sustainable and fairer food system. For a start, they have asked for more cash to help them to adapt to climate change. Despite producing as much as 80% of the food consumed in regions such as Asia and Sub-Saharan Africa, they received only 1.7% of climate finance in 2018 – just US$10bn, compared with the estimated US$240bn a year they need.
In response, the COP27 presidency launched the Food and Agriculture for Sustainable Transformation (FAST) initiative, to improve the quantity and quality of climate finance contributions aimed at transforming agriculture by 2030, to be led by the UN Food and Agriculture Organisation.
However, although the COP27 implementation plan mentioned food for the first time, it omitted mention of food systems and the need for dietary changes, which many campaigners had been hoping for.
“With rising food prices and extreme weather impacts, food has been the sleeping giant of the climate adaptation and mitigation agenda. The Breakthrough Agenda for Agriculture is a significant implementation win, with 13 countries endorsing a move to climate resilient, smart agriculture by 2030. It will drive improved resilience and security through food production and supply chains and integrate a deeper understanding of water, soil quality, water and waste issues. The upcoming biodiversity summit in December, and the wider emergence of the TNFD standard for nature related risk and opportunity reporting, will keep attention on action to protect natural capital’s capacity to create value for the planet, society and business.”
Dr Matthew Bell, EY Global Climate Change and Sustainability Leader
5. The “implementation COP” did not live up to its name but momentum is building elsewhere
Last year’s UN talks in Glasgow at COP26 saw the end of discussions on how climate action should take place under the “rulebook” on the 2015 Paris Agreement. At COP27, the Egyptian presidency aimed to shift the focus to action on the ground.
Multiple initiatives to boost resilience of populations and infrastructure were launched at COP27, emphasising rising awareness of the impacts that climate change is already having on poorer people, and the increasingly urgent need to adapt.
These include asking governments to embed water management in national climate adaptation efforts; and also a new UN action plan, which aims to ensure that all populations are covered by early warning systems in the next five years. The plan will require investment of US$3.1bn by governments, but this is equivalent to just 50 US cents per person, per year.
However, by the end of COP27, developed countries still had not delivered the US$100bn a year they had promised in 2009. In addition, some agenda items on future finance arrangements also had not been delivered, despite an agreement at the G20 to “urgently scale up mitigation and adaptation ambition”.
“UNEP’s analysis that there is ‘no credible pathway to 1.5C in place’ brought high expectations to COP27 implementation agenda. There is rightly frustration with the slow pace of progress on climate finance and emissions reductions targets and progress. But what’s clear is that business and society isn’t waiting for COP alone to implement action A prime example was the US announcement of a new federal government requirement for major suppliers to publicly disclose GHG and climate related risk. It will have a ripple effect on companies of all sizes in the extended supply chain, nationally and internationally who will feed into larger companies’ footprints. This could be a model other governments follow, and has echoes of the Net Zero commitment requirements for UK government suppliers.”
(Republished From Economist Impact)