The COP27 climate summit in Sharm el-Sheikh, Egypt concluded with an historic breakthrough to help vulnerable countries deal with losses and damages from the impacts of climate change. But the talks also disappointed many stakeholders by not taking any significant new steps to curb emissions, which are critical to limit temperature rise to 1.5 degrees C (2.7 degrees F) and avoid a far more dangerous world. And despite some bright spots, progress on adaptation was also less than hoped for.
The climate summit witnessed some noteworthy moments, such as a visit from Brazilian President-elect Luiz Inácio Lula da Silva, greater attention to Barbados Prime Minister Mia Mottley’s Bridgetown Agenda which calls for reforms to the global financial system and the resumption of climate discussions between China and the United States. While there was major geopolitical fracturing this year, this gathering showed that international cooperation on climate change still can yield dividends, as the agreement on loss and damage finance demonstrates. This coming year will be an opportunity for that essential cooperative action to go much further.
Here are key takeaways from the COP27 climate summit, and where the world needs to go next:
1) Fund Established to Aid Countries Facing Severe Damage from Climate Change
For nearly three decades, vulnerable countries have called for financial support to help them cope with the most severe impacts of climate change, only to be stonewalled by rich nations time and time again. Creating a funding stream to address “loss and damage” became the litmus test for success at COP27.
After two weeks of hard-fought negotiations that teetered on the verge of collapse, countries finally reached consensus to establish funding arrangements, including a dedicated fund for loss and damage. This was nothing short of a breakthrough on a topic long neglected by UN climate talks. If properly resourced and mobilized, the loss and damage fund can complement a wider mosaic of solutions to provide lifelines for poor families whose houses are destroyed, farmers whose fields are ruined, and islanders forced from their ancestral homes.
COP27 saw other important progress addressing losses and damages as well. Governments made progress on the governance structure and host selection process for the Santiago Network on Loss and Damage, which will provide technical assistance to developing countries and become fully operational by COP28. The UN also unveiled a $3.1 billion plan to ensure everyone on the planet is covered by early-warning systems in the next five years to bolster countries’ ability to prepare for hazardous weather.
The V20 and G7 jointly launched the Global Shield against Climate Risks to provide vulnerable countries more means to protect themselves from increasingly extreme weather, with Germany providing €170 million ($179 million) in grants. Denmark, Belgium, Scotland, Austria, New Zealand, Canada, Ireland, the U.S., the U.K., Spain, the E.U. and France made financial commitments related to addressing loss and damage, with the U.K. also announcing it will suspend vulnerable nations’ debt repayments for up to two years following a climate disaster. However, not all of these commitments were new and additional. They are largely part of broader funding arrangements outside the UNFCCC, that comprise the mosaic of solutions to address loss and damage.
What’s next? Now that countries have established a fund, the hard work of designing and ultimately filling it begins. Negotiators formed a Transitional Committee to develop recommendations, which should be operationalized by the UN climate summit in Dubai in 2023 (COP28), along with the broader framework for funding arrangements, including funds and initiatives inside and outside the UNFCCC. Furthermore, over the next year countries will work on selecting the host organization, electing members of the Advisory Board, and hiring the secretariat for the Santiago Network.
2) Progress on Adaptation, but not at the Scale or Speed Necessary
Unlike the breakthrough on loss and damage, the progress on adaptation fell far short of what’s needed to address accelerating and severe impacts.
For one, developed countries did not make significant headway towards honoring the commitment made as part of the COP26 Glasgow Climate Pact to double adaptation finance from 2019 levels by 2025. A roadmap for implementation of this goal was not agreed to as planned, leaving parties with less confidence that this goal will be met by 2025.
Countries were also expected to make progress on defining the Global Goal on Adaptation, the Paris Agreement’s equivalent to the 1.5-degree-C (2.7 degrees F) target for mitigation. COP27 saw intense but welcome discussions on potential components of the goal, including a more structured approach that systematically considers themes like gender responsiveness, capacity building, as well as local and indigenous knowledge. But in the end, parties fell short of defining the goal and instead established a framework to guide its formulation, which will be considered and adopted at COP28 next year.
In other positive news, the Adaptation Fund received $230 million in pledges and contributions to be channeled to countries most vulnerable to climate impacts, some of which is fulfilling earlier commitments made at COP26.
And the COP27 Egyptian Presidency, with the High-Level Climate Champions and Marrakech Partnership, launched the Sharm El-Sheikh Adaptation Agenda, a joint action plan to accelerate transformative solutions through systems interventions and a set of adaptation outcome targets, rallying both state and non-state actors work towards achieving them by 2030. The finer details of how this agenda will be implemented and progress monitored are yet to be worked out.
What’s next? Over 2023, all eyes will be on whether parties adopt a strong framework for the Global Goal on Adaptation, whether financial pledges — to the Adaptation Fund, Least Developed Countries Fund and others — are fulfilled; if progress is made towards doubling adaptation finance and the extent to which MDBs scale their adaptation efforts. There will also be attention on whether these funds are accessible and reach local levels.
3) Climate Finance Reforms Gained Traction
Climate finance took center stage in negotiations this year. The COP27 decision reflects developing countries’ serious concern that developed countries’ commitment to provide $100 billion annually has still not been met, even as the need for finance grows ever-more obvious.
Many developing countries also expressed dissatisfaction with the way finance is being provided, including the large percentage coming as loans, increasing the debt burden in already debt-stressed countries, and the lack of accountability and transparency.
The need to reform the broader public financial system, including multilateral development banks, received increased attention, including in the cover decision. This serves as acknowledgment of the need for more climate finance and to address the way debt might hamstring developing countries’ climate action, as laid out in the Bridgetown Initiative, a call to reform the international financial system announced earlier in the year by Prime Minister Mottley of Barbados. At COP27, leaders from both developing and developed countries expressed support for the initiative, including President Emmanuel Macron of France.
Ultimately, new climate finance pledges were more limited than what was hoped for; indeed, countries are still waiting for fulfillment of previous pledges. Meanwhile, negotiations on important agenda items — most notably the new finance goal for 2025 — did not make significant headway. Instead, Parties focused on procedural issues and pushed to the future important decisions around the amount, timeframe, sources and accountability mechanisms that may be relevant to a new finance goal. Negotiators also postponed in-depth discussions on a shared definition of climate finance and on operationalizing Article 2.1(c) of the Paris Agreement, which calls for consistency of global financial flows with the Paris Agreement.
What’s next? In 2023, we will see whether developed countries finally come through on their commitment to provide $100 billion annually to developing countries, and if they show signs of accelerating pledges to make up for the shortfall in prior years. We will also see how far Parties manage to come in negotiating the details (quality of funding, timelines, instruments, sources, access, etc.) of the new climate finance goal and provide some stepping stones for its establishment in 2024. More will emerge on the MDB reform agenda by the IMF/World Bank spring meetings in April 2023, a date by which U.S. climate envoy John Kerry said he wants to see actionable proposals. COP28 will also need to enhance the understanding of the scope of Article 2.1(c) and on ways to achieve it by building on the two workshops on the topic to be held in 2023.
4) Emission Cuts Didn’t Add Up
Countries at COP27 agreed to outcomes that reflected only modest, incremental progress on reducing emissions, despite a clear emissions gap between current national climate plans and what’s needed to limit temperature rise to 1.5 degrees C (2.7 degrees F).
The Glasgow Climate Pact adopted at COP26 requested parties to “revisit and strengthen their 2030 targets” to align with the Paris Agreement temperature goal. Yet since then, only 34 of 194 parties have submitted new or updated NDCs though this did include major economies such as Australia, Mexico, and Indonesia. The COP27 decision reiterated the request to Parties that have not yet done so to revisit and strengthen their targets to align with the Paris temperature goal. Encouragingly, the E.U., which had already strengthened its target in 2020, announced that it would further boost its target from a 55% to a 57% reduction by 2030
The Glasgow Climate Pact also urged countries to develop long-term strategies “towards just transitions to net-zero emissions” no later than COP27 and invited countries to update those strategies regularly. Yet the last year saw only 11 new strategies, bringing the total to only 54. The COP27 decision urges remaining parties to communicate their long-term strategies by COP28.
COP27 also saw progress on the Mitigation Work Programme, adopted at COP26 to focus on scaling up ambition and implementation this decade (i.e. leading up to 2030). Negotiators determined that the Programme will run through at least 2026, focus on all sectors, and provide recommendations for annual COP decisions, though it stopped short of allowing the process to establish new goals to reduce emissions. Each year under the Programme, at least two dialogues and a subsequent summary report will be produced and considered by countries at the political level to catalyze stronger national mitigation ambition and action.
Outside the formal negotiations, more countries committed to reducing emissions of short-lived climate pollutants. Twenty additional countries signed on to the Global Methane Pledge, launched at COP26 to reduce methane emissions by 30% from 2020 levels by 2030, bringing the total to 150 (including 12 of the top 20 methane emitters). China, which has not joined the pledge, announced that formal approval was pending for its completed plan to address methane emissions.
What’s next? As gaps in emissions reductions persist, countries, especially major emitters, must urgently put forward robust and ambitious climate plans and pursue stronger policies to cut emissions, including through action in sectors and methane, to drive the transformations needed to limit temperature rise to 1.5 degrees C (2.7 degrees F). Nex year, the first steps in the Mitigation Work Programme and the outcomes of the first Global Stocktake at COP28 will serve as a key opportunity for countries to collectively agree to paths forward for cutting emissions in key sectors.
5) Debate Lingered on Accelerating the Energy Transition
The transition away from fossil fuels became an unexpectedly hot topic during COP27.
Last year, COP26 ended with a debate over language on phasing out unabated coal power, which ended in a compromise calling for a “phase down.” This year, as it had done in 2021, India proposed extending the phase down to all fossil fuels, a proposal that gained support in Sharm el-Sheikh from 80 countries, including those in the E.U.
Some countries resisted that proposal, and it was ultimately excluded from the final COP27 outcome, but the issue will likely resurface as a key issue at COP28.
Also, given the decision at last year’s COP on coal power, questions remain about how much headway countries have made on honoring their commitments to phase down coal.
Meanwhile, for the first time ever, the COP cover decision included a call to accelerate renewable energy deployment. But that progress was blunted in the waning moments of the COP when language on deploying low-emissions energy was also added without many delegations knowing about it. While many have interpreted the reference to “low emissions” as referring to natural gas, natural gas is not actually a low emissions power source, particularly given the continued high level of methane leakage.
Outside the negotiations, just energy transition partnerships (JETP) — a concept first announced at COP26 as a support package for South Africa — received increased attention. The South African government recently released a detailed investment plan of its own for a just energy transition; it indicates a total amount of $98.7 billion in needed investment, while donor governments have pledged $8.5 billion, only 2.7% of which will be in the form of grants. South Africa has now signed loan agreements with France and Germany for the two European nations to each extend €300 million in concessional financing to South Africa to support the country’s just energy transition.
At the G20 Summit in Bali, which took place simultaneously with COP27, a JETP framework for Indonesia was announced, with $10 billion in finance from the U.S., Japan and multiple E.U. countries, plus $10 billion from the private sector. The details, including what the private investment component will look like, will be worked out later. Meanwhile, a JETP for Vietnam may be launched at the EU-ASEAN summit in mid-December and could total as much as $14 billion. Reports suggest that between $5 billion and $7 billion will come from public loans and grants, with the rest from private sources.
What’s next? Next year is likely to see a continued debate on the question of whether all fossil fuels, not only coal, should be phased down or out, potentially a central issue for COP28. And as the JETP approach gains attention, important questions will need to be answered, including what types of finance they involve (such as how much in highly concessional finance and grants) and support for workers and communities will be reflected in the financing and investment plans — including for Indonesia and Vietnam, as well as for South Africa.
6) The Global Stocktake Shifts from the Technical to the Political
The Paris Agreement’s “Global Stocktake” is a process where countries assess collective progress toward the Paris Agreement’s goals every five years, with the intention of ratcheting up ambition and action over time. COP27 saw the mid-way point of the first Global Stocktake process. Countries agreed on the need to prepare for the final political phase of the process, which will conclude at COP28 in the UAE. That phase will include a COP decision or declaration with recommendations and political messages on key issues for climate action and support.
At Sharm El-Sheikh, technical discussions under the Global Stocktake focused on how countries and non-state actors can address current gaps in climate action across mitigation, adaptation and support. The third and final technical dialogue is expected to be held at the intersessional meeting in Bonn, Germany in June 2023, with the political phase concluding at COP28 in 2023.
What’s next? To prepare for the final political phase of the Stocktake over the coming year, countries agreed to communicate and discuss their views on its approach and desired political outcome. This marks a shift of focus from the technical to the potential political outcomes of the process, which will be critical to ensuring impact. The Global Stocktake can play a critical role in driving further sectoral action, cooperation, and support in this decade and beyond, and nations should push for a politically relevant outcome rather than an information-sharing exercise with vague recommendations. Moreover, countries reiterated the invitation to hold events at national, regional and international levels to support the process and welcomed the UN Secretary-General’s efforts to convene a climate ambition summit in 2023 ahead of the conclusion of the first Global Stocktake.
7) Important New African Initiatives Launched
COP27 was dubbed the “African COP” due to its location in Egypt, and under this theme, several African-led initiatives earned the spotlight.
For example, three financing partners of AFR100, an initiative where 32 African governments committed to restore more than 120 million hectares of degraded land by 2030, announced a $2 billion blended finance mechanism to support and accelerate locally led restoration. The massive financial commitment sends a clear signal that restoration enterprises are sound investments.
The African Cities Water Adaptation Fund (ACWA), and its supporting coalition, was launched at COP27 as well. The new effort will enable African city leaders to directly access funding and technical support to implement innovative solutions targeting a range of water issues, including integrated governance, watershed management, increasing sanitation services, improved stormwater management and wastewater management. The Fund will deliver $222 million in grants, $288 million in direct investments, and indirectly leverage $5 billion in additional investments to help implement resilient water solutions in 100 African cities by 2032.
These initiatives are indicative of growing interests in using blended-finance — combining public and private funds — to further mobilize much-needed capital for resilience investments in Africa. Scaling such vehicles and investing in local capacities to design, implement and leverage further investments remains crucial to meet the scale of the challenge.
8) Carbon Market Rules Raise Concerns
Most rules for carbon markets were finalized at COP26, and COP27 was meant to iron out operational details. Unfortunately, Parties struggled with the sheer volume and highly technical nature of the text.
Anticipated recommendations on activities involving removals released at the outset of COP27 were insufficient and will be updated before COP28 — ideally with a greater focus on safeguards and human rights. No decisions were taken to address double counting of emission reductions between countries (as part of their NDCs) and non-state actors such as companies — or to clarify in which cases this could undermine the integrity of carbon markets and give the impression that emissions are being reduced more than they actually are.
On a promising note, the UN Secretary-General’s High-Level Expert Group on Net-Zero Emissions Commitments of Non-State Entities released a new report during COP27. Among other recommendations, the report suggested that high-quality carbon credits cannot substitute for emissions cuts needed for achieving targets along the net-zero pathway. Instead, high-value carbon credits should only count toward curbing emissions beyond a corporation’s own value chain.
What’s next? While many hoped that the finer details of how carbon markets should operate would be hashed out in Egypt, parties instead agreed to continue negotiations over the next two years. Over the next year, multi-stakeholder initiatives such as the Integrity Council for the Voluntary Carbon Market (IC-VCM) and the Voluntary Carbon Market Integrity Initiative (VCMI) will continue to advance their respective efforts to promote carbon credit quality and the integrity of corporate claims based on carbon credit use.
9) Nature-Based Solutions are Elevated
At COP27, nature-based solutions were included in a UN climate negotiations’ cover decision for the first time. The text encourages Parties to consider nature-based solutions or ecosystem-based approaches while ensuring relevant social and environmental safeguards, though an effort to more explicitly link nature and climate in the cover decision ultimately failed.
The decision text was complemented by signs of increased political will and new financial commitments.
Outside the negotiations, the launch of the Forest and Climate Leader’s Partnership (FCLP) brought together 28 countries (and counting) to halt and reverse forest loss and degradation by 2030. Brazil, Indonesia and the Democratic Republic of the Congo also announced a partnership to cooperate on forest preservation. While a unified voice from tropical forest countries could raise much-needed finance, as the partnership’s strategy develops, it will be crucial to ensure local communities play a significant role.
Of the $12 billion pledged by governments at COP26 to protect, restore and sustainably manage forests over five years (2021-2026), countries announced that $2.67 billion has already been spent. Germany doubled its committed finance from €1 billion to €2 billion. Private entities added $3.6 billion to the $7.2 billion committed in Glasgow for protection and restoration, including the LEAF coalition’s announcement of $500 million to purchase high-integrity emissions-reduction credits, as well as the establishment of the Forests, People, Climate collaborative, which committed $400 million of philanthropic funding.
What’s next? On COP27’s Biodiversity Day, key climate leaders as well as a group of 350 scientists, Indigenous Peoples, businesses and NGOs urged governments to prioritize the UN’s Biodiversity Conference (COP15) and create a Paris Agreement-like treaty to turn the tide on biodiversity loss. We will know whether this happens before the end of the year.
