COP27 Ends With Patchy Deal, Divisions

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The COP27 climate conference in Egypt ended on Sunday with a deal that made progress on compensation for developing countries, but failed to make significant advances in other areas.

The agreement — which disappointed European and other advocates of stronger action — became bogged down over the weekend in wrangling over a tightening of the language from last year's conference in Glasgow, particularly over fossil fuels.

The summit's biggest legacy will likely be the creation of a landmark "loss and damage" fund to provide financial compensation to countries hit by adverse impacts from climate change.

The issue was not even on the original agenda going into the talks, and earlier in the week, sources had not expected anything to come of it until 2023-24. The breakthrough came when the EU warmed up to the concept.

Amid lengthy haggling that sent Saturday's negotiations into Sunday morning, negotiators ultimately omitted several items that would have sent a stronger signal on tackling climate change. That included stronger language on limiting global warming to 1.5ºC and on "phasing down" all fossil fuels.

Europe, in particular, had pushed for these in return for its concession on loss and damage. But proposals to expand last year’s language on phasing down coal use to all fossil fuels were resisted by large oil and gas producers. The text ended up using identical wording to Glasgow's COP26 conference.

German Foreign Minister Annalena Baerbock, a member of the Green Party, said it was "more than frustrating to see overdue steps on mitigation and the phaseout of fossil energies being stonewalled by a number of large emitters and oil producers."

However, Carbon Tracker founder Mark Campanale noted that proposed tougher language saw "greater support than ever before, sending an unequivocal message to investors."

UK climate negotiator Alok Sharma expressed strong disappointment with the overall agreement in closing remarks.

"Emissions peaking before 2025 as the science tells us to do? Not in this text. Clear follow-through on the phase-down of coal? Not in this text. A clear commitment to phase out fossil fuels? Not in this text," he said "The pulse of 1.5ºC was weak, and unfortunately it remains on life support."

A new clause on energy was also amended at the last moment to add "low-emission" energy to renewables as a pathway to reducing CO2 emissions, a move interpreted as creating space for lower-carbon oil and gas, as advocated by Mideast Gulf producers.

Sharma, who led the COP26 summit, complained that the energy text was "weakened in the final minutes."

Highlights of the Deal

Select takeaways from the agreement:

• A "loss and damage" fund was created. This will focus on developing countries that are "particularly vulnerable to the adverse effects of climate change" — addressing concerns by some parties that a vaguer focus on "developing countries" could have been interpreted loosely. The EU attempted to include wealthier developing nations such as China and Saudi Arabia as funders, but these were limited to voluntary contributions. A committee will work on details of the fund and report to next year's COP28 meeting in the United Arab Emirates (UAE).

• Wording on fossil fuels was limited to "accelerating efforts towards the phase-down of unabated coal power and phaseout of inefficient fossil fuel subsidies." This did not include a commitment to reduce consumption of oil and gas as some had advocated, but it withstood proposals to water down the language on subsidies.

• A new section on low-carbon energy was added. It states that "the unprecedented global energy crisis underlines the urgency to rapidly transform energy systems" and calls for "accelerating clean and just transitions to renewable energy during this critical decade of action." The final text stressed “the importance of enhancing a clean energy mix, including low-emission and renewable energy, at all levels as part of diversifying energy mixes and systems, in line with national circumstances."

• Language to advance carbon markets and help ensure validation and legitimacy of credits was agreed under Article 6 of the Paris Agreement, which allows for countries to work together to achieve emissions goals.

• A section on climate finance urged financial institutions like multilateral development banks to "scale up funding" and "ensure simplified access" to climate finance.

• Although high-ambition players like the EU had urged a clear and strong call to limit global warming to 1.5⁰C, the final wording was more of an acknowledgement than a call to action. It "reiterates that the impacts of climate change will be much lower at the temperature increase of 1.5⁰C compared with 2⁰C" and "resolves to pursue further efforts to limit the temperature increase to 1.5⁰C."

Different Agendas

Despite a lackluster formal concluding agreement, dialogue over the two-week event suggested that the low-carbon transition continues to advance despite pressures resulting from the energy crisis.

Conversations indicated that policymakers and many companies have deepened and accelerated long-term planning, and that issues of energy security and price volatility raised by the crisis are reinforcing calls to step up investment in low-carbon energy.

Multiple hydrogen deals were announced at COP — despite some skepticism about its role in the future energy mix — alongside a series of other clean energy deals. A number of countries also emphasized carbon capture technology as a driver.

The formal agreement indicated that relations between developed and developing countries on climate change have taken some steps forward, but that significant differences remain between producers and consumers.

The summit started off on a positive note, with multiple producers emphasizing their climate credentials, but tensions came to the fore in the final stage of agreeing a text.

Oil and gas producers found themselves on the backfoot at last year's COP26 conference and had positioned themselves for a more central role at this event, helped by its location in Egypt.

Gulf producers rolled out climate change initiatives while insisting on a role for cleaner hydrocarbons, arguing that the energy crisis shows that fossil fuels cannot be phased out too quickly.

In the final negotiations, Saudi Arabia and Russia reportedly opposed attempts to expand the final communique from phasing down coal to include unabated oil and gas (production without carbon capture). Other producers such as Canada had previously expressed opposition to this too.

Key consumer India originally proposed the expansion and the EU threw itself behind the idea. "We support the phase-down of fossil fuels, if it is on top of [what we agreed in Glasgow], not as an alternative to what we agreed in Glasgow," EU Climate Action Commissioner Frans Timmermans told Energy Intelligence.

The US also supported the failed proposal, alongside Colombia, Australia and others, according to reports.

Still, veteran COP attendees noted that the conference was more inclusive than earlier summits, which were marked by anti-industry rhetoric and a stronger activist presence. The UAE has promised a similar "big-tent" approach at COP28 next year.

China aligned itself with the statements of the G77 group of developing countries during the talks, but was otherwise noticeably quiet, especially compared with India's vocal presence. An agreement between the US and China to resume talks on important issues, including climate change, was considered a breakthrough.

Carbon Markets Boost

The new language to boost carbon markets received fairly widespread support, and could be significant for companies seeking access to carbon offsets as a way to meet emissions targets.

In closing remarks, a spokeswoman for the Umbrella negotiating group — which includes the US — applauded the progress, arguing that cooperative carbon trading can "unlock emissions reductions beyond what countries can do on their own."

COP27 also saw a landmark agreement between Switzerland and Ghana under Article 6 of the Paris Agreement for the purchase of carbon credits underpinned by a major sustainable rice project in the West African country.

Next year’s COP28 in the UAE will be a "stocktaking" conference, where progress toward the Paris climate goals will be in focus. This could dial up pressure on policymakers to take stronger action, observers say.

Low-Carbon Policy, CO2 Emissions, Carbon Markets , Hydrogen, Renewable Electricity
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