The 27th United Nations Climate Change Conference, known as COP27, concluded with a historic decision to establish and operationalize a type of climate finance known as the loss and damage fund. The 27th COP was held from the 6th to the 20th of November 2022 in Sharm El-Sheikh, Egypt. More than 100 heads of state and thousands of delegates and 35, 000 people, took part in high-level events and key negotiations and events showcasing climate action around the world. Here is a brief history of climate finance and a summary of the achievements and shortcomings of COP27.
There have been three decades of UN-sponsored climate conferences known as conferences of the parties (COP). Matt McDonald, Associate Professor of International Relations, The University of Queensland describes the COP process as being about the “fair allocation of responsibility for addressing climate change”. The focus of these meetings is reducing greenhouse gas (GHG) emissions and creating pathways to transition to clean energy. Climate finance is another key tenet of UN climate conferences, this includes compensation for climate impacts and the transfer of resources from wealthy countries to poorer countries. The COP process also shares research and draws international attention to the climate crisis.
The COP process and climate finance
The United Nations climate change conferences, formally known as the United Nations Framework Convention on Climate Change (UNFCCC) Conferences of the Parties (COP) began with the Rio Earth Summit in 1992, it is a science-based framework for negotiating international climate treatise called protocols.
One of the United Nations climate finance mechanisms is known as the Green Climate Fund (GCF). It aims to expand collective human climate action, GCF is designed to assist the developing world by mobilizing funding for mitigation and adaptation. Climate adaptation funding was addressed in 2001 at COP 7, in Marrakech, Morocco, in 2003 at COP 9, in Milan, Italy, in 2006 at COP 12 in Nairobi, Kenya, and in 2008 at COP 14 in Poznań, Poland. In 2009, COP 15 in Copenhagen, Denmark, was widely deemed to have been a failure, however, the UN Secretary General’s High-Level Advisory Group on Climate Financing made some progress.
In 2010, the Cancun Agreement that resulted from COP16 contained provisions for the establishment of the Climate Fund including a market-based finance mechanism. The 2011 Durban Agreement that emerged out of COP17 included provisions for the GCF and formal recognition of the $100 billion annual funding goal. The Doha Agreement that came out of COP18 in 2012 discussed approaches to scaling climate finance and increasing technology transfer to developing countries. Prior to the start of COP 19 in 2013, there were calls called for progress on the GCF and the meeting concluded with the Warsaw Agreement that included progress on the loss and damage mechanism.
Progress on climate finance was one of the major achievements to emerge out of the 2014 Lima Agreement at COP20. This included definitions of vulnerable developing nations and wealthy countries. The draft agreement called for an “ambitious agreement” in 2015 that reflects the “differentiated responsibilities and respective capabilities” of each nation. The Paris Agreement that came out of COP21 in 2015 was widely heralded as an unprecedented turning point. Buoyed by President Obama’s $3 billion pledge, GFC was prominent during the COP22 climate discussions in 2016.
Donald Trump’s presidential win in the United States cast a shadow over the COP process and caused climate finance to languish during the tumultuous years he was president. This includes COP23 in 2017, COP24 in 2018, and COP25 in 2019. The 2020 edition of COP was postponed due to the Covid pandemic and although there was little progress on climate finance at COP26 in 2021, it did lay the foundation for major progress on Loss and Damage at COP27.
Before the start of COP27, Guterres laid out his expectations saying “we will be doomed” if rich countries fail to bridge the gulf with poor countries and agree on a “historic pact”. Although progress on Loss and Damage financing was late in coming, many were relieved to see movement in the right direction by the end of 2022.
An advanced unedited draft of the Sharm el-Sheikh Implementation Plan calls for “comprehensive and synergetic” action on the “interlinked global crises of climate change and biodiversity loss in the broader context of achieving the Sustainable Development Goals” (SDGs). The plan highlights the global transition to low emissions, economic development, poverty eradication, technology transfer, and capacity-building that bridges gaps in developing countries,
Climate Finance at COP27
The draft Sharm el-Sheikh Implementation Plan notes the growing gap between the needs of developing countries and the relatively small amount of resources being made available to them (around 32 percent of the required amount). The plan highlights the importance of developed countries living up to their GCF pledge to provide US$100 billion per year and urges developed nations to “urgently and significantly scale up their provision of climate finance, technology transfer and capacity-building” (as much as US$6 trillion per year will be needed until 2030 to be able to reach net zero emissions by 2050). To deliver adequate funding financial system, structures and processes must be transformed necessitating the involvement of governments, central banks, commercial banks, institutional investors, and other financial actors.
The plan also calls on the shareholders of multilateral development banks and international financial institutions to reform align and scale up funding, ensure simplified access, and mobilize climate finance from various sources. The plan encourages multilateral development banks to improve their capacities to deliver funding, significantly increase their climate ambition and replenish the GCF.
Loss and damage at COP27
Progress on loss and damage has been identified as the most important outcome at COP27. The agreement calls for “full operationalization” of funding to avert and minimize climate impacts. This is the first time we have seen an agreement on such funding arrangements. Loss and damage refers to a compensation fund for the destruction caused by climate change. This includes destruction from rising sea levels, prolonged heatwaves, desertification, ocean acidification, and extreme events, such as wildfires, species extinction, and crop failures. This fund also seeks to address non-economic losses, including forced displacement and impacts on cultural heritage, human mobility, and the lives and livelihoods of local communities.
The logic driving the loss and damage fund relates to the fact that G20 nations are responsible for three-quarters of global GHG emissions, so it follows that these countries should be required to direct financial assistance for climate mitigation and adaptation to poorer, vulnerable nations which have contributed the least to the climate crisis,
The success of the loss and damage fund will depend on how quickly this fund gets off the ground. To succeed this fund must also address the gaps in climate finance. According to the 2022 Adaptation Gap Report the international adaptation finance flows to developing countries are 5 – 10 times below what is needed. The report estimates we will need over US$300 billion per year by 2030. Combined adaptation and mitigation finance flow in 2020 fell at least US$17 billion short of the US$100 billion pledged to developing countries. It should also be noted that the success of these and other efforts is contingent on significant emissions drawdowns.
Scaling loss damage funding requires broadening the donor base and innovative finance tools like debt for loss and damage swaps and a dedicated finance facility for loss and damage. Other related measures that were discussed at COP27 include windfall taxes on fossil fuel companies.
Renewable energy and justice
Social justice and making the transition to low-carbon sources of energy are central tenets of the COP climate action plan. As Guterres said, “we need to massively invest in renewables and end our addiction to fossil fuels,” The COP27 implementation plan suggests that we must cut emissions by 43 percent by 2030 relative to the 2019 level to limit global warming to 1.5 °C. Achieving these goals requires investments of around US$4 trillion per year in renewable energy, the phasedown of unabated coal power, and the phase-out of inefficient fossil fuel subsidies.
Guterres also explained that climate finance is at the heart of justice efforts. This includes “making good on the long-delayed promise of $100 billion a year in climate finance for developing countries” and doubling adaptation finance. The UN chief points out that to address these goals the business models of development banks and international financial institutions must assume more risk.
Guterres lauded the success of COP27 saying, “this COP has taken an important step toward justice” and he added ” it is a much-needed political signal to rebuild broken trust.” The COP27 implementation plan calls for a “just and equitable” transition, while emphasizing care, and community, with special consideration for vulnerable and marginalized communities. It also emphasizes the importance of human rights including the right to a clean, healthy, and sustainable environment.
Social justice considerations are noted throughout the plan including those associated with recovery from the COVID pandemic and issues around agriculture and food security. The plan affirms social protections for those affected by the transition to low-emissions energy and supports solutions to the climate crisis founded on meaningful and effective social dialogue and the participation of all stakeholders. Although governments are expected to play a pivotal role, non-party stakeholders must also be engaged (Indigenous peoples, local communities, cities, youth and children, women) alongside civl society. The plan also stresses the importance of education to help make the transition.
The UN chief has emphasized the need to increase our ambition “to end the suicidal war on nature that is fueling the climate crisis, driving species to extinction and destroying ecosystems.” He also noted th growing urgency of the calls for action to limit biodiversity loss.
The draft agreement from COP27 calls for “ensuring the integrity of all ecosystems,” and UNEP is currently supporting over 50 ecosystem-based adaptation projects. These projects aim to restore around 113,000 hectares and benefit around 2.5 million people worldwide. UNEP is also supporting demand-driven technical assistance for climate information such as early warning systems and capacity building.
Guterres referred to the 2022 UN Biodiversity Conference in Montreal (COP15) as “the moment to adopt an ambitious global biodiversity framework for the next decade, drawing from the power of nature-based solutions and the critical role of indigenous communities.” After the announcement of the deal reached at COP15, Guterres announced “We are finally beginning to close a peace pact with nature”.
The scale of the required undertaking means that everyone must be on board. “On every climate front, the only solution is decisive action in solidarity. COP27 is the place for all countries […] to show they are in this fight and in it together,” Guterres said before the start of COP27. He also emphasized, “the critical role of multilateralism based on United Nations values and principles, including in the context of the implementation of the Convention and the Paris Agreement.”
A coordinated global effort is required to keep temperatures below the upper threshold limit (1.5-2C). that means government, civil society, and industry must work together. “We need all hands on deck to drive justice and ambition,” Guterres said. “It will take each and every one of us fighting in the trenches each and every day. Together, let’s not relent in the fight for climate justice and climate ambition,” He has repeatedly emphasized the importance of including civil society pointing to the power that people have to augur change. He has called everyone to protect the rights of young people while pointing to the nexus between human rights and climate action. He offered a message to those who are growing impatient, telling them he shares their frustration and encouraging them to keep up the fight because “we need you now more than ever”.
To succeed some major geopolitical hurdles will need to be overcome. The U.S. and China will need to find a way to work together on climate issues because as Guterres explained, this relationship is “crucial” to climate action. “It needs to be re-established because without those two countries working together, it will be absolutely impossible to reverse the present trends,” Guterres said.
The urgency of what needs to be done
As COP27 came to a close, Guterres lauded the success of the Sharm el-Sheikh plan but made it clear that much more needs to be done in the short term . “I welcome the decision to establish a loss and damage fund and to operationalize it in the coming period,” but he emphatically stated, “this will not be enough.” While loss and damage finance is a big win, there is much more that needs to be done starting with immediate and drastic emissions cuts. “The world still needs a giant leap on climate ambition,” Guterres said. The UN Chief made the urgency of the situation emphatically clear when he said, “Our planet is still in the emergency room.”
While he lauded progress on climate finance he decried the fact that emissions reduction was not addressed at COP27. While we should appreciate progress, we must also acknowledge climate finance means nothing without emissions reduction. As Guterres said, “A fund for loss and damage is essential – but it’s not an answer if the climate crisis washes a small island state off the map – or turns an entire African country to desert”.
After three decades of climate negotiations, we are still seeing rising emissions that are pushing us ever closer to tipping points from which we may not be able to recover. Despite ever-increasing climate-related extreme events, efforts to address the crises are being met by powerful headwinds including the worst geopolitical tensions in years, rising inflation, and fears of a looming recession. Perhaps most significantly, the impact of Russia’s unprovoked war of aggression against Ukraine on energy and food security. Guterres warned, that we must stay within temperature thresholds but our chances of doing so are diminishing. “We still have a chance but we are rapidly losing it,” Guterres said. “I’d say the 1.5C is in intensive care, and the machines are shaking. So either we act immediately and in a very strong way, or it’s lost and probably lost forever.”
We are not doing enough to reduce emissions as evidenced by two UNEP reports (UNEP’s Adaptation Gap Report 2022: Too Little, Too Slow – Climate adaptation failure puts world at risk and UNEP’s Emissions Gap Report 2022: The Closing Window – Climate crisis calls for rapid transformation of societies). We are currently on track for a 2.4C world Guterres said, so we must substantially reduce emissions in the near term “to keep the 1.5-degree limit alive and pull humanity back from the climate cliff”.
We will also need to do more on climate finance. Rich countries will need to do more to slash their GHG emissions and make good on their pledge to provide at least US$100 billion a year to help poor countries cut their emissions and adapt to the impacts of the climate crisis. Guterres pointed out that rich countries had managed to raise $16tn to deal with the Covid-19 pandemic, but they can’t seem to raise US$100 billion for poor countries.
Time is of the essence, as explained by professor McDonald, these talks come are critical, “we risk running out of time in our efforts to avoid climate catastrophe.” As Guterres said recently, “we are approaching tipping points, and tipping points will make [climate breakdown] irreversible,”
We are on the cusp of the collapse of civilization. It is now or never. If we fail to act in the short term it will be too late. Contrary to the defeatist rantings of the doomers, it is not too late to address the multiple crises we face. We know what we have to do, we just have to do it.
It takes courage to hope for a better world, but if we succumb to defeatism we are sure to augur a catastrophe beyond our wildest nightmares. COP27 concludes with much to do and little time the UN chief said at the end of the summit, adding “We can and must win this battle for our lives.” Progress is not possible without some hope but hope is only useful if it augurs action. Urgent action is needed, but we are sure to do nothing if we have no hope.
The situation is dire, but there are reasons to be optimistic, after kicking the can on loss damage for many years, wealthy nations have finally owned up to their responsibility. However, the historic progress on climate finance we saw at COP27 mean nothing if we do not quickly and massively decrease emissions.
Click here to see the draft Sharm el-Sheikh Implementation Plan.
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