In review of the first week of COP27, Eva Cairns, Head of Sustainability Insights & Climate Strategy and Jeremy Lawson, Chief Economist, abrdn reflect on their key takeaways.
At the end of week 1 here at Sharm El-Sheik, it is clear that COP27 is proceeding very differently from COP26 in Glasgow. It was always meant to focus on implementation rather than major new announcements – but have we seen enough progress?
1. A different focus for climate finance: COP26 was all about transition finance, with GFANZ launched to highlight that trillions potentially available to support net zero goals if policymakers got their act together. At COP27, the focus has been much more on the finance needed to adapt to climate change and compensate developing countries for the loss and damage they are incurring. It is encouraging that this is firmly on the agenda and the Egyptian presidency has set clear 2030 adaptation outcomes. A number of countries including Austria and New Zealand have already pledged modest sums, but mobilising private finance is proving a lot more difficult. Scaling up blended finance – de-risking investment through public and private partnerships – has been a key theme of the meetings.
2. The disappearing ratcheting mechanism: At COP26, Climate Action Tracker analysis highlighted that 2030 pledges (Nationally Determined Contributions) added up to 2.4 degrees of warming, with countries asked to update their pledges by COP27 to more closely align with 1.5C. Only 24 countries updated their NCDs since COP26 and the most recent Climate Action Tracker analysis suggests that these have not moved the dial from where we were a year ago. It is remarkable how little attention this is receiving.
3. Little evidence of implementation at the ‘implementation’ COP: Just as there has been inadequate progress on targets, implementation is also lagging behind. Indeed, global emissions in 2022 are expected to reach a new record high according to the UN Emissions Gap report after a short-lived reduction in 2021 due to the pandemic. The Climate Action Tracker report highlights that the growth in LNG following the energy crisis exacerbated by the invasion of Ukraine is likely to have a detrimental impact on the transition to net zero. And new data based on satellite imagery and artificial intelligence techniques, suggests that oil and gas emissions are being drastically under-reported. The upshot is that achieving net zero by 2050 is falling even further out of reach.
- A focus on carbon markets to mobilise capital for decarbonisation: In the absence of much stronger regulations and formal carbon pricing, public and private actors are doubling down on their reliance on offsetting and voluntary carbon trading initiatives. John Kerry announced a mechanism to help developing countries wean themselves off coal fired power. A number of African countries launched the African Carbon markets initiative with the ambition to reach 300 million credits worth $6billion produced annually by 2030. And with much fanfare, Vella announced its one billionth carbon credit at COP27. These have all received mixed responses given concerns about the integrity and additionality of voluntary carbon markets, as well as the potential for offsetting to distract from real world decarbonisation.
5. Positive progress on disclosure and standardisation: There has been some encouraging progress on standardising frameworks for disclosure and transition plans, including:
1. The global ISSB standard on sustainability related disclosures was launched and officially incorporated into CDP disclosure requirements
2. The UK Transition Plan Taskforce published its framework and implementation guide for consultation to provide a level playing field for transition planning
3. The HLEG published an expectations framework for net zero commitments from non-state actors to strengthen the credibility of commitments and avoid greenwashing
4. The innovative data platform climatetrace.org was launched by Al Gore – It provides GHG emissions data based on satellite measurement and could be a game changer for understand emissions in regions of low disclosure such as emerging markets, but also for validating self-reported emissions
“The upshot is that unless there are significant breakthroughs over the coming days, Sharm El-Sheik will probably go down as one of the most disappointing COPs of the past decade.”