COP27: When words speak louder than actions

OUTCOME POST-COP27: NEGATIVE

• National transition financing commitments are still lagging. Annual adaptation needs are estimated to reach USD 160-340 billion by 2030 and USD 315- 565 billion by 2050. Current commitments from developed countries are nowhere near the collective 100 billion promise, let alone the total adaptation needs. A new, collective climate finance target is expected for 2024. Procrastination at its best.
• News from around the corner: Belgium announced a EUR 138 million financing target by 2024 with a focus on adapting grants-based finance to support its African partner countries and the least developed countries.
• Public-private partnerships are on the rise, luckily. And we must admit that the US and EU are taking up a leading role here. Through a mix of grants, loans and investments, private sector finance is reaching developing countries, while simultaneously bringing in risk sharing too. Initiatives like the Just Energy Transition Partnerships (which had already been announced last year) support South Africa’s transition away from coal power, and clearly triggered other initiatives. As such, Indonesia announced a USD 20 billion agreement at the G-20 summit, Vietnam is working on an agreement, and Egypt announced a major new partnership at COP27. But are these commitments sufficiently locked-in? Will political shifts (e.g., the US elections) or geopolitical tensions (e.g., the energy crisis and ongoing wars) hamper the achievements of these commitments?
• Linked to public-private partnerships, no significant outcomes were reached on John Kerry’s proposal for a new carbon offset market, allowing companies to buy offsets from countries who use those proceeds to transition away from coal power. The credibility of the system, including the price volatility, are still of concern. The same goes for offsets from countries with extensive natural resources. If those were to be converted into carbon credits, countries like Belize could access financial means to further adapt or mitigate climate change. On a positive note, the IMF also promoted the use of so-called ‘debt-for-nature swaps’. The topic gained traction at the conference, as the UK’s export credit agency also introduced Climate Resilient Debt Clauses in its direct sovereign lending. This system would allow participants to defer debt repayments in the event of a severe climate shock or natural disaster.
• No progress was made on Article 6 of the Paris Agreement: the international carbon market. Although developments on high-integrity carbon credit principles prior to COP27 were positive news, negotiators at the COP didn’t seem too eager to turn the concept into a formal text.