We’re “on a highway to climate hell with our foot on the accelerator”, according to UN secretary-general António Guterres.
We must “co-operate or perish” he says, on stage at COP 27 in Sharm el-Sheikh, Egypt.
More than 100 World Leaders have gathered for COP 27, and this year the focus is on ‘implementation’ of existing climate agreements.
Far Less Buzz Than COP 26
A question I’ve been asked a lot this week is; why is COP 27 receiving so much less attention than COP 26?
There’s a few reasons:
The first is that COP 26 was preceded by the release of the IPCC’s code-red for humanity report which painted a grim portrait of impending climate impacts if dramatic action is not taken.
COP 26 was the first meeting of global leaders since covid lock-downs had begun, attention was focussed, and there was a renewed sense of urgency to ‘build back better’.
At the end of 2022, the world is far less focussed. The world’s attention is instead on Ukraine and Russia’s increasingly aggressive attacks. The conflict has added to global economic instability as energy supplies are curtailed, which places further pressure on already overheated inflation.
Plus, the US midterm elections coincide with the start of COP 27. The attention of the world’s biggest economy is squarely on the results; President Biden may very well lose control of Congress, greatly denting his legislative powers.
With that said, the world’s stoic climate campaigners and patient public servants are still working diligently to find solutions.
And as goes tradition, a large politically driven event like COP 26 needs to be followed by an ‘implementation COP’, it’s a matter of getting things done.
Implementation
Implementation is the buzzword of COP 27.
The conference will focus on ‘implementing’ plans to achieve previously agreed-upon targets.
Climate finance is a central issue here, with less developed countries demanding support from wealthy countries to deal with climate impacts that are impacting them the most,
Details around a global set of rules for carbon trading were finalised at COP26. Article 6 is part of the Paris Agreement and has been problematic since its inception. With rules in place, the next step is implementation by national governments.
The Global Methane Pledge has been signed by 111 countries since its launch last year. It involves a commitment to collectively reduce methane emissions by at least 30% below 2020 levels by 2030. Australia is yet to sign up, and implementation is ongoing.
Money Talks: What Actually is Climate Finance?
In 2009 rich countries agreed to direct $US100 billion per year to support climate action in developing countries. The deadline was 2020, it was missed, but at COP 26 the deadline was extended to 2023, significant challenges remain.
“This is a moral imperative that cannot be ignored and COP 27 must be the place for action on loss and damage,” Antonio Guterrres said late last year, “This is the No 1 litmus test of how seriously governments take the growing climate toll on the most vulnerable countries.”
Progress is constrained by confusion about what the term even means.
Is it liability, compensation or a form of reparations? In some cases climate finance has been taken to mean foreign aid, or offering loans. But this is hardly additional, and saddling countries with more dead won’t help them rise out of poverty.
The task for climate finance is said to have three goals: cut emissions, drive adaptation, and paying for loss and damage.
This last point is emerging as a hot-button topic for this year’s meetings. Funding for Loss and Damage would be directed to countries impacted by climate disasters, recognising that they did little to contribute to the emissions build up that caused them.
The topic has been avoided and obfuscated for decades. Rich countries are allergic to anything that looks like admitting guilt in fear of legal liability and the likelihood of future lawsuits, while developing countries are at their wits end as floods and increasingly violent storms are well beyond the capacity of these countries to recover.
Pakistan is the starkest example as it baked under record high temperatures before floods ripped through densely populated cities.
The most ambitious hope for COP 27 is the establishment of a dedicated financial mechanism, likely a fund, being established. It would make funding available to those facing the most violent impacts from climate change.
With the history of governments dragging their feet on this topic, and with recent negative comments from US Climate Envoy John Kerry, it looks like this issue may see more ‘blah blah’ rather than concrete agreement this year.
GFANZ is a FIZR
The Glasgow Financial Alliance for Net Zero , aka GFANZ, was all the talk of last year’s meeting. It represented a ‘super alliance’ of global financial heavy-weights, all agreeing to “mobilize the trillions to build a global zero emissions economy and deliver the goals of the Paris Agreement.”
The cynical amongst us gritted our teeth and allowed a glimmer of hope to shine through, perhaps this was the beginning of a new age. Perhaps all that ESG and impact investing rhetoric had seeped through the ‘Gordon Gekko’ veneer, and maybe, just maybe this was the beginning of a new era for climate finance.
Alas, we were again reminded of the folly in thinking, ‘this time it’s different’.
The first cracks appeared when big name signatories like JP Morgan, Bank of America and Morgan Stanley threatened to leave.
Their protests fell mainly on the not-so-fine-print that required GFANZ members to comply with principles of the UN’s Race to Zero, which said financial institutions would be excluded if they didn’t comply with a directive to ‘restrict the development, financing and facilitation of new fossil fuel assets.’
While the language has since been watered down, so too has progress, and the hopes that banks could be a key driver of climate action.
Once again we see the gaping delta between the making of lofty commitments amid the glare of global press coverage, and the brass-tacks of actually considering climate-impacts when making capital allocation decisions.
As Bloomberg reports, banks have organized “almost $4 trillion of loans and bonds for the oil, gas, and coal sectors since the Paris Agreement.”