Breakthrough on climate compensation and 7 more takeaways from COP27

(Bloomberg) — They finally got there. After dawn on Sunday morning in Egypt, cloudy-eyed ministers adopted a final agreement for COP27 and completed more than two weeks of UN climate negotiations in the Sinai Peninsula.

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The agreement included a historic provision to create a fund to help the poorest countries cope with the damage caused by climate change, and this result was rightly celebrated by nations on the front lines of a world that heats. “A mission of 30 years of preparation has been accomplished,” said Molwyn Joseph, Minister of Antigua and Barbuda and Chairman of the AOSIS Group of Small Island Nations.

But beyond loss and damage – the COP-world term for paying for climate disasters – the final deal was a distinct disappointment for those who wanted to raise the ambitions of last year’s Glasgow accord. The statement did not include a commitment to expand the pledge to phase out coal emissions to cover all fossil fuels, and there was no reference to peaking global greenhouse gas emissions by 2025.

The endgame was clearly tough for the European Commission’s climate chief, Frans Timmermans, who had taken center stage at the summit, offering a big deal on loss and damage in return for greater ambition in on emissions, then threatening a belated walkout by the European Union.

In the end, the EU and its allies had to make do with a few technical changes to the so-called mitigation work programme. Now that the books are closed on COP27, here’s a look at eight key takeaways from two weeks of climate talks involving nearly 200 countries.

1. A new fund for loss and damage

Climate change creates inequalities and exacerbates them. Rich countries have derived their wealth from fossil fuels, leaving poor countries that have not benefited from these emissions with huge bills due to the resulting climate impacts. After decades of calls to compensate climate victims in developing countries, COP27 finally resulted in an agreement to create a fund that would address loss and damage.

But this breakthrough comes with huge question marks. No money was actually committed in Sharm el-Sheikh, and the rules for the operation of the fund were to be decided at next year’s COP28 in the United Arab Emirates. Henry Kokofu, Ghanaian politician and head of the Climate Vulnerable Forum, warned that without further concrete action there is a risk of simply creating “an empty bank account”.

2. Possible changes for multilateral lenders

For the first time, a COP meeting included a call to reform the global financial architecture so that it is better aligned with climate goals. The idea is to adjust the mandates of multilateral development banks such as the World Bank and international financial institutions, such as the International Monetary Fund, to ensure a greater flow of funding for energy transition projects and efforts. adaptation to global warming.

“The time has come,” said Laurence Tubiana, chief executive of the European Climate Foundation. “Climate impacts are beginning to be understood as a macroeconomic risk.”

3. The struggle for serious things

The issue that delayed the negotiations and made COP27 the second longest running UN climate summit was the “mitigation work programme”. The idea is to ensure that countries set clear targets, plans and actions to reduce emissions at the rate needed to meet climate goals. Commitments so far have not followed the same standard, with countries using different benchmarks and baselines for their targets. Without a common system, these promises may not turn into real emissions reductions.

Climate-lead countries wanted to run the program until 2030. But opposition from laggards led to a compromise to run it until 2026, with a chance to extend it. If the program succeeds, it could have stronger implications than countries simply agreeing to political declarations of phasing out all fossil fuels.

4. Weak rules for carbon markets

Countries agreed at COP26 to create the rules that would allow nations to trade carbon credits. This means that Norway, for example, could pay to preserve Indonesian forests and, in return, eliminate emissions from the Norwegian carbon registry. At COP27, negotiators presented a more detailed framework on how such a carbon market would work, including allowing companies to buy credits from governments.

But experts have warned that the rules are still not strict enough. “The spirit of Glasgow’s carbon market has turned into the compensatory ghost of Sharm el-Sheikh, which is likely to haunt effective climate action for years to come,” said Sam Van den plas, director of policy at Carbon. Market Watch.

5. The 1.5°C target remains under serious threat

Despite attempts by major powers such as the United States, India and the European Union, the Sharm el-Sheikh accord failed to meet emissions reduction ambitions. This could mean the world misses the 1.5 degree Celsius warming target enshrined in the 2015 Paris Agreement. Calls for phasing out all fossil fuels (not just coal) and peaking Global emissions by 2025 (which is likely to happen anyway, according to the International Energy Agency) have been rejected by many oil-exporting countries.

While phasing out all fossil fuels didn’t make it to final text, momentum built around an idea that wasn’t even on the cards before the summit. As many as 80 countries now support it, Timmermans said, with the EU and others expected to press the issue over the coming year.

As the world grapples with an energy crisis and high fossil fuel prices fill the coffers of major producers, the political clout of the carbon powerhouses was on full display at COP27. Annalena Baerbock, Germany’s foreign minister, expressed frustration at having “been blocked by a number of big emitters and oil producers”. This fight is likely to get tougher as COP28 heads to the United Arab Emirates, an oil and gas giant.

6. Unfreeze US-China relations

The United States and China resumed working together on climate at COP27. US climate envoy John Kerry and his counterpart Xie Zhenhua said on Saturday they had resumed their formal cooperation, which was suspended after House Speaker Nancy Pelosi’s visit to Taiwan earlier this year.

7. Methane dynamics continue

More countries have signed up to the methane pledge launched in Glasgow last year. There are now 150 nations that have pledged to cut emissions of the super-powerful greenhouse gas by 30% by the end of the decade. Even China said it had drafted a plan to reduce methane emissions, although it did not join the global pledge.

8. Show some money

A consistent theme in these discussions has been “show me the money” – or climate finance – for developing countries, and there has been real progress in recent weeks on financing cleaner energy transitions. At COP27, two new funding agreements from the Partnership for a Just Energy Transition were announced, moving Vietnam and Indonesia away from coal power. South Africa has also won final donor approval on its own $8.5 billion JETP plan and Indonesia is set to strike an even bigger $20 billion deal to secure itself. away from coal.

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