COP27 has now come to a close. Against the global backdrop of political and economic turbulence, many questions were asked as to what could realistically be expected as outcomes of COP27. We now have the answers to those questions.

Sharm el-Sheik Implementation Plan

Much media coverage has centred around the lack of ambition of the outcome of COP27. Although "further ambition" was not really a central demand going into the negotiations, it has been seen as disappointing that progress has not been made from the "phasing down" of fossil fuels, which was eventually decided upon at Glasgow (COP26). Instead, the Sharm el-Sheik Implementation Plan references a resolution to "implement ambitious, just, equitable and inclusive transitions to low-emission and climate-resilient development". It also "emphasizes the urgent need for immediate, deep, rapid and sustained reductions in global greenhouse gas emissions by Parties across all applicable sectors, including through increase in low-emission and renewable energy, just energy transition partnerships and other cooperative actions" and "recognizes that the unprecedented global energy crisis underlines the urgency to rapidly transform energy systems to be more secure, reliable, and resilient, including by accelerating clean and just transitions to renewable energy during this critical decade of action". This is likely to be of soft comfort to those in the low carbon sector, but does not give a strong signal to those who are wondering at what point to drastically change the emissions profile of their businesses.

Loss and damage

In a decision relating to "Funding arrangements for responding to loss and damage associated with the adverse effects of climate change, including a focus on addressing loss and damage", the parties decided to "establish new funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change, in responding to loss and damage, including with a focus on addressing loss and damage by providing and assisting in mobilizing new and additional resources, and that these new arrangements complement and include sources, funds, processes and initiatives under and outside the Convention and the Paris Agreement". However, they have been kicked down the road with the establishment of a transitional committee on the operationalisation of new funding arrangements and establishment of a loss and damage fund. These commitments fall far short of any "admission" of liability by historic polluters and leave you wondering if the proposed finance mechanisms will get sufficient money flowing quickly enough.

Article 6(4) of the Paris Agreement

A limited amount of progress was made in respect of carbon markets under Art. 6(4) of the Paris Agreement. A subsidiary body under the UNFCCC will continue to work on the rules for Art. 6(4). However, the rules of procedure for the body that supervises the Art. 6(4) mechanism have already been adopted and there are many issues remaining to be discussed. These include whether the Art. 6(4) mechanism can include emission avoidance and conservation activities, arrangements for connection of the electronic registry for the Art. 6(4) mechanism and requirements for the statement of a host party where any Art. 6(4) activity will take place to the Art 6(4). supervisory body. This further kicking of the can of important issues down the road will be a disappointment to many. Given the urgency, it is not surprising that the supervisory body has been tasked with facilitating the transition of existing projects under the Clean Development Mechanisms to the Art. 6(4) mechanism by June 2023.

Looking forward

There are, however, two factors that may prove significant for next year at COP28 (Dubai). Both the return of Brazil to the COP scene and the concurrent G-20 announcement regarding the novel Indonesian Just Energy Transition Partnership are likely to restore faith in the ability of large developing countries to constructively contribute to the climate challenge. Brazil has already promised zero deforestation by 2030. Further, the speed at which the change of direction occurred in respect of the agreement to the creation of a loss and damage fund indicates that significant advances can be made in a relatively short amount of time where sufficient pressure builds. One matter to note for those who have questioned the EU's ability to press on with its climate neutrality agenda is that the EU's representatives have been very clear in their disappointment that "What we have in front of us is not enough of a step forward." German Foreign Minister Annalena Baerbock complained about stonewalling from "an alliance of oil-rich nations and major emitters". Some were more stark in their criticism. According to Laurence Tubiana, Chief Executive Officer at the European Climate Foundation and architect of the Paris Agreement, "The influence of the fossil-fuel industry was found across the board ... The Egyptian presidency has produced a text that clearly protects oil and gas petro-states and the fossil-fuel industries — this trend cannot continue in the United Arab Emirates next year". Perhaps the expression of this disappointment will be the catalyst for greater change.

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