COP27, the 27th U.N. negotiation of the Conference of the Parties in Sharm el-Sheikh, ended at 7 a.m. on Sunday, Nov. 20, with one of the worst results ever in terms of timing, second only to the failed Madrid conference. The timing is also an indication of the difficulties encountered in sealing the Sharm el-Sheikh Implementation Plan, the Parties' final decision document, reflecting the chaotic geopolitical scenario and the role of petrostates, but also the intention to move beyond the old North-South global balances, seeking new shores for multilateral cooperation and reform of the financial system of multilateral Banks and beyond.

The negotiations on the central issue of the meeting have failed, namely the implementation of decarbonization and adaptation plans, the responsibility for which lies with the Egyptian presidency. The goal of keeping average temperatures within 1.5°C remains, but the plans and strategies to achieve it are lacking, while unexpectedly a deal is struck to create a Loss&Damage fund to compensate the most vulnerable countries for losses and damages related to climate change disasters. Great satisfaction from civil society, which in a COP marked by a lack of freedom to demonstrate, marks an important point for climate justice, with a major assist from Europe, which comes across as united and ambitious. A glimmer of hope that shows how the grassroots role of activists and delegates from small countries, if joined and well orchestrated, can lead to concrete results. As usual, Renewable Matter, which followed the negotiations closely, brings you our analysis of the final text and the many decisions reached.

Loss&Damage, a breakthrough for the most vulnerable countries

The biggest achievement is the agreement on a loss and damage fund, the so-called Loss&Damage mechanism. Presented back in 1992 as an option by small island states, heavily affected by rising sea levels, few had bet that the Loss&Damage fund would be an outcome of the Egyptian negotiations. In Italy, associations such as Italian Climate Network, WWF and Legambiente had launched a communication campaign to lobby on the issue. But few expected the adoption of a fund by which the most vulnerable countries will be able to receive compensation for damages and losses caused by rapid and violent climate and land transformations.

The Loss and Damage Fund, a dream at COP26 last year, is on track to start functioning in 2023,” said Laurence Toubiana, the architect of the Paris Agreement and president of the Europen Climate Foundation. “There is still a lot of work to be done on the details, but the principle has been approved and this is a significant shift in thinking that reaffirms that we live in a world where climate impacts cause serious losses.” What is needed now is to bring this fund into operation so that resources can be disbursed as early as 2025. But there is no shortage of difficulties for negotiators during 2023. First, it will be necessary to define who are the recipients (“the most vulnerable countries”) and who will pay for the fund, and how it will be made operational. This task will fall to an ad-hoc committee that will have to report next year.

Meanwhile, island states (represented at the negotiations by the AOSIS group), African countries, and civil society are celebrating the success as “the revival of the North-South cooperation”, with some distinctions between those who accept the outcome and those who naively would have wanted the fund operational as early as the beginning of next year. For Mohamed Adow, of the think tank Power Shift Africa, “Loss&Damage at the start of the negotiations was not even on the agenda for the talks, and now we are making history. This shows that the UN process can achieve important victories.” Beware of one detail: this version of Loss&Damage excludes liability, that is, the responsibility of the countries that will finance the fund. No super lawsuits in sight.

However, decabonization strategies implementation slows down

The results on the decarbonization process were of the opposite sign. This COP weakened the demands to be made on countries to take on new and more ambitious commitments in their NDCs. The text fails to mention the phase-out of fossil fuels and makes little reference to science and the 1.5°C target, failing to include what could have been a major achievement for the negotiations, namely the inclusion of the 2025 emissions peak goal, considered key to the 1.5°C target. Gone is India's proposal to include a mention to oil and gas reduction (phase down), which was otherwise accepted by Europe and several Umbrella Group countries.

The Egyptian presidency has delivered a text that clearly protects the oil and gas petrostates and fossil fuel industries. This trend cannot continue in the United Arab Emirates next year,” Laurence Toubiana added in a press note. With funding of about $22 billion a year from Saudi Arabia and Eni as one of the major gas producers in the country (where it is working to greatly expand production), the Al-Sisi government has used all its political muscle to water down the outcome and protect the fossil fuel industry. “The final document lacks a commitment to a safe and socially sustainable exit from fossil fuels,” says Luca Bergamaschi, co-founder and Director of the think tank ECCO. The goal now is to get it done in 2023 at COP28, promise the European delegates, who are strongly dissatisfied with the final outcome.

We have lost speed and wasted a lot of time,” commented EU Vice-President Frans Timmermans. COP27 recognizes that in order to maintain the 1.5C degree target, a 43% emissions cut by 2030 compared to 2019 is needed. With current decarbonization commitments, however, the emissions cut would only be 0.3 percent in 2030 compared to 2019. That is why states that have not yet updated their decarbonization targets (NDCs) are urged to do so by 2023. The Americans, very weak during this negotiation, have seen their proposal to accelerate the control of fugitive methane emissions in the oil and gas sector through the Methane Pledge fail, on the one hand an attempt to defend the extractive sector, and on the other an important resolution to reduce emissions of CH4, a potent climate-altering gas, which if removed from the atmosphere can bring a rapid reduction in global warming.

Not everything is tragedy, however. Renewables gain a prominent place at the negotiations and in the Sharm el-Sheikh Implementation Plan. In addition to having been given far more prominence at the many events at this COP27 than fossil and nuclear, at last solar, wind and the others find ample space in the final text, which underlines the emphasis on “the urgent need for immediate reductions in global greenhouse gas emissions by Parties in all applicable sectors, including through increased renewable and low-emission energy, Just Energy Transition Partnerships (JET-Ps) and other cooperative actions”. There has been much interest in JET-Ps, the Just Energy Transition partnerships, multilateral collaborations for renewable energy projects with social impact, such as the 20 billion one signed in Jakarta for the next 3-5 years by EU and U.S. countries, either by guarantees with public funds or through private finance, facilitated by the Glasgow Financial Alliance for Net Zero (GFANZ) Working Group created last year.

The central role of climate finance at COP27

Although all media attention was focused on Loss&Damage, the financial issue played a central role. The most important topic, which received some key mentions, is the reform of Multilateral Development Banks (MDBs). World Bank, International Monetary Fund, regional banks such as Asian Development Bank and African Development Bank, today are not equipped with a clear mandate to provide concessional credit for climate change related projects. They have limitations to support less developed countries (because of high debt or default proceedings) or do not actively work in this direction, such as the World Bank led by David Malpasse. These MDBs can move hundreds of billions of dollars for renewables, circular economy and resilience, creating leverage of trillions from the private financial sector. In fact, if large MDBs invest, private international financial institutions are more likely to be interested because it reduces risk and offers greater certainty about the direction of investment.

Therefore, the Sharm el-Sheikh Implementation Plan “calls on the shareholders of multilateral development banks and international financial institutions to reform the practices and priorities of multilateral development banks, align and scale up funding, ensure streamlined access, and mobilize climate finance from various sources. Encourages multilateral development banks to establish a new vision and operating model, appropriate channels and instruments for the purpose of adequately addressing the global climate emergency, including the use of a full range of tools, from grants to guarantees and non-debt instruments, taking into account debt burden and to address risk appetite, in order to substantially increase climate finance.”

The ball therefore now shifts in the court of the bank board meetings in spring 2023, which are expected to be heated. But reform appears inevitable and with clear mandate from the 196 UN countries. “Next year's international financial meetings therefore become critical,” reads a press note from think tank ECCO. “Supporting and leveraging the Bridgetown initiative in the Barbados, now supported by France, which presents an ambitious agenda for reform [of international banking and finance] will be important. G7 and G20 countries are called to action. The Italian presidency of the G7 in 2024 will be crucial to implement these reforms.” Without this reform, there will be no real breakthrough in global decarbonization.

On the topic of climate finance the remaining issue is the $100 billion per year for the period 2020-2025. The text calls for closing the gap but does not call for covering the shortfall, i.e., the fact that about $70 billion less has been disbursed over the past three years (this year we are around $82 billion in commitments from rich countries). Nor is there any reference to the post-2025 economic support framework, meaning how much rich countries will have to disburse to support mitigation and adaptation in less industrialized countries.

Especially monitored on climate finance are the United States. While U.S. diplomats have agreed to a fund on Loss&Damage and reiterated to close the gap on climate finance, the problem is that the money must be appropriated by Congress. Last year, the Biden administration requested $2.5 billion in climate finance but secured only $1 billion when Democrats still controlled both chambers. With Republicans, who largely oppose climate aid, poised to take control of the House in January, the prospects of Congress increasing support for climate finance are slim.

"The Biden administration should focus on reducing domestic spending, not sending money to the United Nations for new climate agreements. Innovation, not repairs, is the key to fighting climate change," Republican Senator John Brarasso told the NYT. Besides Europe, who will put the most money into the climate finance pot?

COP27 opens to new climate geopolitical balances

The issue of who will finance the operational 2023 Loss&Damage fund has created a geopolitical earthquake. At one point, Europe demanded, in exchange for approval of the Loss&Damage fund, that some newly industrialized nations, namely China, join the list of funding countries. Big whoop. Historically, China has been part of the developing countries on the principle that, yes, they emit a lot, but they have only recently started doing so. Now, however, that all may change.

For years now there has been speculation about when it will be time for the Dragon to join the ranks of developed nations. The re-election of Xi Jinping, who aspires to confirm China as a super-power, and the great pressure generated in Sharm el-Sheikh has opened a debate that can hardly be ignored: China must sit alongside the EU and the US, sharing burdens and honors. That in the climate context of the Paris Agreement, means paying to help the poorest and most vulnerable countries.

For this to happen, pressure will also be needed from Asian and African countries that receive support from Beijing, especially if they want to see enhanced climate finance and aid through the Loss&Damage Fund. At the G20 in Bali, China and the U.S. returned to talk to each other and cooperate on climate, but it was Europe that played the lion's share in Egypt, putting the two superpowers to the wall, who prevailed only because of the Egyptians' backroom work with Saudi Arabia and petrostates, offering a weak agreement, but one that does not open the Pandora's box. Now the real enemy to the progress of the negotiations is the OPEC organization, which will continue to do everything it can to have no mention of fossil fuels in the Paris Agreement. Italy could have been vocal with Egypt, but gas interests and the recent reopening of diplomatic relations have silenced everything.

Biodiversity, a searing defeat

No mention in the final statement to the Convention on Biodiversity (CBD) to be held in December in Montreal, that is expected to deliver a landmark agreement on the issue that will guide action by nations up to 2030.
Although for the first time in a COP agreement, agriculture is mentioned (paragraph XV of the document) by launching a four-year implementation plan to reduce greenhouse gas emissions and increase food security, it avoids mentioning the role the biodiversity agreement will play in preserving forests, soils and the ocean (another major debut in a COP text) and help in CO2 absorption and stocks. COP27's media platform would have helped increase its visibility. Bringing attention back to the CBD is the closing speech by UN Secretary General Guterres, who reiterates the need for an ambitious biodiversity agreement that will help in the global climate challenge. At the moment, however, no heads of state are expected at the conference, a sign that political attention on the issue is low. Mention should be made of paragraph XIII “Ocean”, particularly the decision to include the one singular ocean protection action in the NDCs, the national emission reduction targets.

Climate, a challenge of biblical proportions

Tired and frustrated, delegates and journalists go home with red eyes and a lack of sleep. From November 30 to December 12, 2023, COP28 will be held in Dubai. There is plenty of work to do and the effort to implement the decarbonization process is going to be immense. Next year will see the first Global Stocktake, a general assessment of the Paris Agreement that will offer insight into where the world is in the climate challenge and where it is going. Ambition, climate finance reform, acceleration on adaptation, confirmation of climate science, and removal of political obstacles will be some of the key elements. It will be a heavy COP, which could confirm or deny the effectiveness of the Paris Architecture. The world is inevitably accelerating, given the hundreds of initiatives and side events, reports and analyses, but still too slowly.

In the Sinai desert in the dawn of time the Tables of the Law were delivered; today comes a single commandment: to achieve more and more quickly, overcoming the obstacles of those countries that favor tactics and politics with short-term vision. No Savior will come, but the climate challenge is of biblical proportions. Each of us is Samson, and the fossil Goliath can and must be defeated.

Image: COP27 official