South Africa: Sharm El- Sheikh COP 27 – Day 1

Monday 7 November 2022

Monday was the first official working day of the Conference of the Parties (COP) 27 in Sharm El-Sheikh, Egypt following the opening ceremony on Sunday. COP 27 marks the 30^th anniversary of the adoption of the United Nations Framework Convention on Climate Change (UNFCCC), which is an international environmental agreement to combat “dangerous human interference with the climate system” adopted in 1992 in Rio de Janeiro, Brazil. To realize the UNFCCC's goal of combatting climate change, the COP meets annually to negotiate approaches towards achieving climate stabilisation.

The UNFCCC established three different parties to the agreement, namely, developed countries, developed countries with special financial responsibilities and developing countries. All countries participating in the UNFCCC have common but differentiated responsibilities. One of the most often highlighted responsibilities is the obligation of developed countries to provide and assist developing countries on implementing action for climate change mitigation and adaptation.

Finance is one of four areas of the climate crisis that will be in focus at COP 27. The other three areas are mitigation, adaptation and collaboration.

Sharm El-Sheikh Climate Implementation Summit

Heads of state and government arrived in full force and were invited by the Egyptian President Abdel to outline actions and credible plans to continue raising ambition. Many of the world leaders accordingly took to the main stage to make national statements. There was also a high-level segment opening ceremony and a high-level roundtable discussion.

To highlight a few, we heard from the following:

• Rishi Sunak said that acting on climate is the “right thing to do” and the UK is supporting clean growth, but his speech was criticised as “tepid” by the social justice campaign group Global Justice.
• Emmanuel Macron confirmed that climate commitments to the energy crisis will not be sacrificed by the aggression of Russia in Ukraine. He also said “we must come to terms with the idea of financial solidarity” (see below on climate finance discussion).
• UN Secretary-General Antonio Guterres called for a climate solidarity pact between developed countries and emerging economies, with leadership by the US and China, and for taxing the windfall profits of fossil fuel companies. “Cooperate or perish,” he warned, adding that “failure to deliver on climate is a collective suicide pact”.
• Prime Minister of Barbados, Mia Amor Mottley, said that the global south needed more access to technology in order to tackle the climate crisis and have better growth.

Climate Finance

Negotiations on finance are expected to dominate COP 27. Thirteen years ago, at the Copenhagen COP 15 negotiations, developed countries pledged to mobilise USD 100 billion a year by 2020 to address the needs of developing countries. These funds were intended to come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of financing.

Developing countries repeatedly draw attention to the fact that developed countries are not providing the levels of finance necessary for developing countries to implement critical climate change and adaptation measures, and to address the impacts of extreme weather events. To date financial commitments made at Copenhagen COP 15 and subsequent COP meetings have gone unfulfilled. In 2021, the OECD in its “Forward-looking Scenarios of Climate Finance Provided and Mobilised by Developed Countries in 2021-2025 Report” noted that the funds will not be delivered until at least 2023. Utilising the USA as an example, its expected contribution to this total should be approximately USD 40 billion, yet it only provided USD 7.6 billion in 2020, the latest year for which data is available.

A more recent report co-written by Nicholas Stern and presented at COP 27 notes that about USD 2 thousand billion will be required annually by 2030 to help developing countries cut their greenhouse gas (GHG) and to cope with the impacts of climate change. The report reinforces the need for bilateral and multilateral finance, for example through the World Bank, and also points out that private sector investment is likely to be greater than investments from the public sector. The report doubles down on the appreciated reality that combatting climate change requires new models and rewiring of the international financial system. Measures necessary include restraint on fossil fuels and initial investment of private or public sector finance to underwrite risk, to make investments more attractive in developing countries.

Further, new reports from the UNFCCC's Standing Committee on Finance find that while there has been an increase in the overall global climate finance flows – an international obligation to make financial flows consistent with a pathway to lower GHG emissions is established by the Paris Agreement Article 2 (1) (c) – key targets to mobilize climate finance for developing countries have not been met yet.

The first day of COP 27 saw particularly African leaders speaking about their frustration. Recently elected President of Kenya William Ruto – a strong voice on climate change among the 55-member country strong African Union (AU) – deemed the actions of developed countries during previous COP meetings as “cruel and unjust… stalling, delaying tactics and procrastination” and condemned developed countries “egregious and unexplained default” on climate finance Copenhagen COP 15.

Therefore, delivering on climate finance commitments is the agenda item for Wednesday, 6 November, the date designated as “finance day” within the COP 27 meetings. Developing countries are expected to urge delivery of this finance commitment. Calls from developing countries are expected to implement more grant-based financing, more funding for adaptation, and more finance to be channelled through the funds under the UNFCCC's guidance.

Loss and Damage

Another issue relevant to finance is Loss and Damage (L&D), which refers to the irreversible economic and non-economic costs of extreme weather events. Such extreme weather events disproportionately affect and result in millions of dollars in damages in developing countries, which have contributed the least to global greenhouse gas (GHG) levels that have induced climate change. Developing countries, therefore, argue that developed countries should establish a fund for compensation of L&D.

COP 27 is significant for L&D because for the first time within COP meetings the issue has been included on the negotiation agenda. This inclusion comes more than 30 years after the issue of L&D was first raised by Vanuatu as chair of the Alliance of Small Island States (AOSIS) at the 1991 international climate negotiations. Throughout the history of COP meetings only nascent progress has been made on L&D, primarily at COP 25 with the establishment of the Warsaw Mechanism for Loss and Damage, a mechanism established to generate joint initiatives on L&D that does not, however, include a monetary mechanism. Last year's Glasgow COP 26 saw the creation of the Santiago Network on Loss and Damage, a technical body that does not address L&D from a monetary perspective.

Wealthy developed countries, including the US and EU member countries, have resisted L&D on two main arguments, namely that (i) recognising L&D exposes developed countries to liability and accountability for climate change, setting the ground for potential climate change litigation and right of compensation of developing countries, and (ii) quantifying and accounting for non-economic losses is problematic for determination of L&D.

Beyond the arguments against L&D, given the poor record on fulfilling climate finance pledges, it is unclear as to how financial models would function to provide L&D compensation. Other practical considerations include questions on how to ensure that compensation for L&D is directed to the right segments that most directly suffer harm from L&D. For example, coastal communities. Larger questions also remain on whether L&D compensation is an appropriate response or could be better spent on climate change mitigation. Given these challenges, L&D is set to be a key but contentious issue throughout the two weeks of negotiations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.