COP27: Little progress on energy transition, emissions as loss and damage deal clinched

The UN Climate Change Conference concluded in Sharm el-Sheikh, Egypt, in the early hours of Nov. 20, with no major progress in the final text on emissions reductions or energy transition from COP26 in Glasgow in 2021, despite being billed as the "implementation COP."

In what was characterized as a major breakthrough, however, the conference agreed to set up a fund for nations hardest hit by climate change, with a new transitional committee to make recommendations on "operationalization" of the fund at COP28 in November, 2023.

Further, the importance of low-carbon and renewable energy investment was highlighted in the "Sharm el-Sheikh Implementation Plan," with the agreement saying $4 trillion a year was needed in renewables' spend to 2030, while "a global transformation to a low-carbon economy is expected to require investment of at least $4 trillion to $6 trillion per year," it said.

The plan maintained much of the language of Glasgow, with several delegates expressing frustration it did not go further, amid accusations of efforts to backtrack on previous commitments from some countries.

COP26 president Alok Sharma told the BBC: "We had to fight incredibly hard, relentlessly -- it was like a battle -- to make sure that we preserved what we got over the line in Glasgow."

EU executive vice-president Frans Timmermans said at COP27 there was a "yawning gap between climate science and our climate policies," and that the mitigation program agreement allowed some parties to "hide from their commitments."

"This is the make or break decade," he said. "But what we have in front of us is not enough of a step forward for people and planet. Too many parties are not ready to make progress in the fight against the climate crisis."

No mention was made of peaking emissions by mid-decade – something some delegates had being pushing for. And the language on the phase down of coal did not shift from the Glasgow agreement.

India was among countries calling for the phase down of all fossil fuels. However, Timmermans expressed concern earlier in the week that such language risked prolonging the use of more polluting coal, rather than shifting to lower emissions fuels such as gas.

Carbon markets

On international carbon markets, technical work advanced rules governing bilateral accounting for the transfer of international emissions units and a new emissions crediting system governed by the UN, under Article 6.2 and 6.4 of the Paris Agreement.

"We welcome the compromise achieved on the 6.2 and 6.4 guidance, thanks to the hard work by the Secretariat, the co-facilitators and Egyptian Presidency," The International Emissions Trading Association's CEO and President Dirk Forrister said in a statement Nov. 19, after the final drafts were submitted to the presidency.

"The texts provide key elements to implement high-integrity carbon markets that can help deliver net zero ambitions for all countries."

Work is set to continue in 2023 on infrastructure and integrity measures.

"We expect further decisions at COP28 and beyond, but it is now up to national governments to set up market-based policies under Article 6.2 to achieve NDCs [Nationally Determined Contributions under the UN climate agreement] and increase climate ambition with broad private sector participation," Forrister said.

"The pace of development of the Article 6.4 mechanism must accelerate to make a difference in the fight against climate change in this decade."

Platts, part of S&P Global Commodity Insights, assessed nature-based carbon credits at $5.70/mt on Nov. 18, up from a low of $5.20/mt on Nov. 11, but below a peak of over $16/mt at the start of the year.

Difficult negotiations

On reducing emissions, the Sharm el-Sheikh plan "recognizes that limiting global warming to 1.5 C requires rapid, deep and sustained reductions in global greenhouse gas emissions of 43 per cent by 2030 relative to the 2019," retaining similar language to that agreed in Glasgow.

The COP27 talks ran well past the planned close on Nov. 18, as delegates grappled to secure agreement over a loss and damage fund to support the developing countries worst-affected by the impacts of climate change.

Detailed planning on how to apply and support the fund were kicked into next year, with a transition committee to work on recommendations "identifying and expanding sources of funding."

"This was not easy," Egyptian COP president Sameh Shoukry said at the close. "We worked around the clock. Long days and nights. Strained and sometimes tense .... In the end we delivered."