Client Alert

Client Alert: COP27 Updates

The United Nations’ annual climate change conference (COP27) kicked off in Sharm el-Sheikh, Egypt. We will send updates over the next two weeks but wanted to write about a few things first.

Unlike the COP26 in Glasgow that was hosted by the UK a year ago, we believe that this meeting hosted by Egypt, a developing country, will have a much different focus. There will be fewer financial institutions and private sector players in attendance. There will be less focus on the private sector and built environment and more on global inequality and energy/food access. There will also be more focus on the Global South and lesser developed nations where energy access is the difference between poverty and not poverty. The war in Ukraine and its impact on global energy and food (grain) markets creates an enormous overhang at COP27. Storms, droughts and floods of immense magnitude are worsening an unprecedented global food crisis.

Yesterday the Financial Times wrote an article entitled “Dark Clouds Overshadow Climate Summit” citing energy security and food security as well as squeezed budgets in wealthy countries as some of the dark clouds at COP27. Alden Meyer  at thinktank E3G called these “polycrises” and we agree.

COP27 will be about a shift from national commitments to action and implementation, as National governments must radically and rapidly strengthen their announced climate action plans and implement them now…not tomorrow. The time is past for talking about what a country will do and has transitioned to the execution phase of the battle against a changing climate. We believe that the private sector has already moved into this phase but developed countries need to join them.

President Biden, new UK Prime Minister Sunak and French President Macron, as well as developing world leaders like Brazilian President-elect Luiz Inacio Lula da Silva and Barbados Prime Minister Mia Mottley will all be at COP27 and we hope that real progress is made in the next two weeks.

More to come….

Update 1 – November 8, 2022

Day one got off to a good start and the North-South divide quickly came up.

U.N. Secretary General António Guterres called for the creation of a “climate solidarity pact” between wealthier and developing countries to meet key climate goals in opening remarks at this year’s U.N. climate change conference in Egypt, known as COP27. As global temperatures continue to rise, Guterres said the planet is “on a highway to climate hell with our foot on the accelerator. Those who contributed least to the climate crisis are reaping the whirlwind sown by others.”

He issued the dire warning as world leaders gathered Monday in the resort city of Sharm el-Sheikh at the front end of two weeks of talks. No one is expecting miracles as the idea of climate justice rises to the forefront of discussions. There will be intense debate over the next two weeks on how to fund recovery and adaptation efforts in developing nations getting hammered by climate impacts. Crucially, world leaders have acknowledged that emerging economies are often the ones that pay the price of inaction.

Update 2 – November 10, 2022

Yesterday was billed as “Build 4Tomorrow by financing the building transition. The Urban Land Institute, whose board I sit on, led a panel focused on accelerating decarbonization by integrating the true cost and opportunity into real estate decisions. This was based on prior research that I was involved in. This, it turns out,  was the easy part of the day.

The harder part is how to unlock the capital needed to address climate change and in particular how to help poorer countries mitigate the impact of richer countries’ industrialization. This is the Global North versus Global South crisis I mentioned a few days ago. Given that the Global North didn’t put up the $100 Billion it promised two years ago to fight climate change there are many sceptics in Sharm El-Sheikh, but there are a few ideas floating about that are getting attention: 

  • The Bridgetown Initiative put forward by Barbados Prime Minister Mia Mottley this summer. This idea is focused on reforming the World Bank and IMF to make them more climate responsive. This idea that has gathered momentum is focused on getting the banks to increase climate finance. Given the US’ outsize vote, the White House plays a key and supportive role, but already leaders like President Macron have shown support. This is an idea to refocus existing capital and institutions.
  • The John Kerry Carbon Credit Proposal. Depending on who you ask this either is facing hurdles (Wall Street Journal) or benefits from support from groups like the Rockefeller Foundation, Bezos Earth Fund, PepsiCo and Microsoft (Washington Post and New York Times). The outline is fuzzy and details scarce, but it does have a level of support and represents new capital being brought to this challenge.

What both are intended to do is to show a path to aggregating the massive amount of capital that countries must have to address the impact of climate change.

Tomorrow President Biden will attend COP27 in Egypt bringing the weight of the US commitment to the meeting, but he will be expected to bring new funding and increased climate commitments.

And if you didn’t watch Al Gore’s speech at the Opening of the COP27 from earlier this week, it is worth 15 minutes to hear his well-researched and thoughtful warning to the world’s leaders. Watch Here

Update 3 – November 14, 2022

President Biden touched down in Sharm El-Sheikh Egypt today and after meeting with Egyptian President Abdel Fatah El-Sisi, who is hosting the conference, he sought to assure the leaders at COP27 that the US was serious about confronting climate change, but he met with a mixed reaction.

The fact that Biden came to Egypt was recognized as critically important in raising the profile of the convening and the bi-partisan US congressional delegation brought a broad view set of ideas that included not only solar and wind but also nuclear and natural gas. Biden touted new proposals that included requirements for all major federal contractors to set targets for reducing their emissions in line with the 2015 Paris climate accord (GreenGen is an impacted energy contractor to the US government), and for oil and gas operations to better monitor and fix leaks that cause emissions of methane, a powerful greenhouse gas (GreenGen is developing a carbon offset methodology with Verra/VCS to address this very issue). Both of these proposals have our full support and are positive in nature.

But “loss and damage” remains a key issue for many countries. Poorer countries have been pushing for government money, and Friday one of their top representatives in Egypt suggested that rich nations should pass new taxes to help. Munir Akram, the chief climate negotiator for the largest bloc of developing nations, told The Washington Post that he “wholeheartedly” supports the idea of taxing fossil fuel companies to pay for “loss and damage” — the irreversible harms from climate change that are already bombarding the developing world.

The source of capital remains a key challenge given the economic challenges in the world and the historically high interest rates. The key US financing proposal to-date focuses on how to aggregate private sector capital to help address climate change rather than large sums of public dollars.

We expect that this will be a key issue as we move into the second week of the COP27.

Update 4 – November 21, 2022

This weekend, the COP27 Summit in Sharm El-Sheikh Egypt ended with a widely anticipated Agreement brokered by the Egyptian Minister of Foreign Affairs Sameh Shoukry. Despite initial optimism, I think COP27 was a failure. 

  • The agreement made no progress on emissions-cutting measures that could avert even worse climate disasters
  • There was no call for the world to burn less oil or use fewer fossil fuels, a goal desired by most wealthy countries but resisted by a few key Gulf Nations
  • The agreement did not ratchet up the level of ambition for securing more emissions cuts on a faster timeline than was contained in the Glasgow Accord last year

But there was an agreement to create a fund for climate-related damage as part of a broader agreement. This was a goal of poorer nations, who sought a degree of climate justice. While this fund earmarks money for what is known as “loss and damage” it didn’t lay out who will pay in (or the formula for doing so) or how countries can request project funding. This level of detail was reserved to a transitional committee that is yet to be formed.

Typically project financing addresses both the source and use of funds which was not the case here. Another key issue is that much of the funding is expected to go towards resilience and adaption rather than greenhouse gas mitigation, i.e. renewables. While I recognize we need to help countries adapt, the lack of focus on mitigating greenhouse gases at the most basic level is stupefying. Remember when people talk about limiting temperature increases to 1.5C it isn’t as a target but rather a limit.

I will reiterate how little COP27 focused on the built environment which was a key area of focus at COP26….the good news here is that countries around the world and cities in the US have stepped into the gap and are aggressively addressing this issue with regulation, benchmarking and penalties. The fact that 200+ countries can agree on anything is remarkable but so much more needs to be done. COP28 will be hosted by the UAE and it remains to be seen how they will focus the meeting next year.

Other reasons to be optimistic include Brazil’s being back in the climate action tent, with President-elect Da Silva promising zero deforestation by 2030

 As always , please let me know if you have any questions and have a good Thanksgiving.