Covington & Burling LLP

11/23/2022 | News release | Distributed by Public on 11/23/2022 18:40

COP27: A Flawed Though StillConsequential Climate Summit

The United Nations annual climate change conference-officially known as the 27th Conference
of the Parties to the UN Framework Convention on Climate Change ("UNFCCC"), or COP27 for
short-held in Sharm el Sheik, Egypt, finally concluded early Sunday morning, more than 24
hours late.

COP27 was held amidst the ongoing Russian war in Ukraine and the consequent economic
turmoil, including Europe's scramble to secure non-Russian gas. It was previewed by a
UNFCCC report which concluded that on its current trajectory the world faced warming of
between 2.5 and 2.9 degrees Celsius by the end of the century, and accompanied by a new
report from the International Energy Agency's 2022 World Energy Outlook, which concluded
that the world needed to spend at least $4 trillion annually to tackle climate change from now
until 2030.

Against this challenging backdrop, COP27 was never going to be straightforward. But those
difficulties were compounded by divisions between the developing and developed world over
the priorities that should form the focus for COP27. Those divisions manifested themselves
most clearly in tensions before, during, and at the conclusion of the Conference over the issue
of "loss and damage." This acrimony overshadowed almost all other aspects of the COP, which
will nonetheless be viewed as historic for being the first COP to not only place the loss and
damage issue on the official agenda, but for its creation of a separate fund to compensate
countries most impacted by climate change. But loss and damage aside, the broader picture
that emerged from COP27 was one of lost opportunities to adopt more ambitious and
accelerated climate mitigation commitments in response to the dire scientific warnings about the
impact of rapid global warming on the planet. In particular, efforts calling for a phase down of all
fossil fuels were ultimately unsuccessful in the Summit's final agreement and highlighted the
mismatch between the pace of global emissions reduction commitments and that which is
needed to avoid the most disruptive climate impacts.

COP27-A Recap

COP21 resulted in the historic Paris Agreement in 2015, which established that every country
would submit a national action plan to reduce emissions, known as their Nationally Determined
Contributions ("NDCs"). The NDCs in aggregate were to keep the world on track to avoid the
worst impacts of climate change, and to do so were to be reviewed every five years. That review
period was to act as a ratchet, forcing every country to come back to the COP with more
ambitious NDCs. We missed a COP in 2020 due to Covid, so last year's COP26 in Glasgow became the first five-year review point to assess emissions reduction progress after adoption of
the Paris Agreement. The Glasgow COP was also important due to U.S. reengagement on
climate issues on the world stage, and the authoritative scientific assessments issued by the
Intergovernmental Panel on Climate Change, setting out the increasingly dire impact of
emissions trajectories, clearly demonstrating that this is the decisive decade for the world to
lower its emissions to avoid catastrophic global warming impacts.

While Glasgow delivered dozens of bold governmental and private sector emissions reduction
commitments, the conclusion of last year's COP left the Chair near tears because the aggregate
of the NDCs barely kept alive the science-based Paris goal of restricting temperature rises to a
1.5 degree Celsius rise over pre-industrial levels. Every tenth of a degree rise over that 1.5 goal
will have cataclysmic weather implications for the planet, yet key agreements to better achieve
that goal have proved elusive.

The UNFCCC assessed that countries had not made enough progress towards the 1.5 degree
Celsius target and asked all member countries to return to COP27 with improved goals. The
focus of COP27 was therefore on "implementation" of prior agreements-encapsulated by the
Conference rubric of "Together for Implementation" -not an expectation that major new climate
change texts would be negotiated. Yet despite the effort to use COP27 to hold feet to fire, out of
the nearly 195 countries present, only 29 came with improved NDCs.

According to the United Nations, in addition to the national delegations at COP27, there were
also nearly 2,000 official observer organizations-comprising a total of some 33,500 delegates.
At any one time, usually scheduled on an hourly basis, there were dozens of official UN
negotiations of subparts of the global agreement occurring simultaneously, alongside hundreds
of separate official, country, business, and NGO-sponsored events, not to mention the myriad
unofficial meetings, negotiations, and conversations. This broad-based participation exuded a
messy creativity at COP27, which took place at a sprawling compound set up by the UN and the
Egyptian government.

So What Happened?

Any supposition that global climate negotiations have now pivoted to an easier glide path of
pure implementation was dashed at COP27. These negotiations demonstrated that
"implementation" still must grapple with difficult questions of the sufficiency and pace of
emissions reductions, as well as profound equity issues around who bears the impacts and
burdens of climate disruptions versus the benefits of economic development. Although this year
saw extraordinary droughts in Europe and China, it is lesser-developed countries that have for
some time been increasingly bearing the brunt of climate-related natural disasters, as the
historic flooding in Pakistan and Nigeria demonstrate. In recognition of this inequality and the
importance of developing world countries attached to addressing it, in addition to Egypt's role as
host, COP27 had been billed as an "African COP."

Historically, the global response to climate change could be broadly categorized as falling into
either "mitigation" (emissions reduction) or "adaptation" (preparation for the future changes that
climate change will bring-for example, reinforced sea walls or improved protection for critical
national infrastructure). This COP added another official category-"loss and damage"-which,
while closer to adaptation in that it deals with the effects of climate change, is focused on the current economic adverse effects of climate change, and those which a country can't recover
from through resiliency efforts.

The priority of many developing countries was the creation of some form of fund to address the
damage that their societies and economies are suffering. However, developed countries were
more focused on mitigation, on the basis that failure to do so now will create even more damage
and be even more expensive to address in the future. Thus, COP27 was always destined to
lead to tensions between competing views of the desired outcome.

Those tensions led the UN Secretary General to comment that "trust has broken down between
global north and global south" as he rushed back from the G20 meeting in Bali to try and
breathe new life and hope into the ailing talks in Egypt. The critical negotiations in the final 48
hours were further hampered by the physical absence of U.S. Climate Envoy Secretary John
Kerry-a key deal-maker and experienced negotiator-who was confined to his room with Covid
and had to resort to energetic telephone diplomacy.

Eventually, in the small hours of Sunday, November 20, a deal was reached. The EU's lastminute offer to establish a fund to help vulnerable countries cope with the impact of climate
change-and John Kerry's support for the plan once it was established that no legal liability
would be included-was key to unlocking the agreement. The Alliance of Small Island States, a
negotiating bloc at the talks, hailed the fund as "a win for our entire world."

However, critical details of how the fund will work, including who pays, how much, and how it
will operate, were left to be worked out at future talks. That is important, since it may be
politically challenging for the U.S. to obtain additional climate appropriations for a loss and
damage fund from Congress and there may be challenging questions around the need for
Senate ratification of any such agreement. Other key developed countries may also have
funding challenges, faced with record inflation and a widespread cost-of-living crisis triggered by
Russia's invasion of Ukraine. And there remain unanswered questions about the role of other
key emitters-most notably China-in contributing to such a fund.

Not Everyone Was Happy . . .

Although the developing world achieved its long-time goal of creating a loss and damage fund,
COP27 failed in its objective to force countries to improve their NDCs. The negotiations also
failed to secure an agreement to start a phase-out of all fossil fuels-language which at one
point had seemed to have made its way into the text, only to be withdrawn and replaced by the
Glasgow language of "phasing down" coal and "phasing out inefficient fossil fuel subsidies" after
objections from Saudi Arabia, Iran, and Russia.

Although an attempt to remove the 1.5 degree Celsius goal from the Declaration in favor of the
Paris Agreement's upper limit of 2 degrees failed, there was no mention of the requirement for
global emissions to peak by 2025, which scientists see as critical if the world is to meet the 1.5
degree Celsius target. And the focus on reducing emissions appeared to be undermined by the
last minute insertion by Egypt of a call to increase "low-emission" energy (as Russia's invasion
of Ukraine and the subsequent sanctions on Russian hydrocarbon companies have triggered a
demand for non-Russian gas).

The EU and the UK expressed disappointment that the final outcome did not improve the
commitments to cutting emissions, which were made at COP26. The Commission Vice
President said countries had "fallen short" adding: "We should have done much more … and we
are disappointed we didn't achieve this." That disappointment was echoed by the UK's Alok
Sharma-the COP26 President-who noted the omission of a commitment to phase-out fossil
fuel and any language requiring emissions to peak by 2025. Debate and controversy about the
role of gas as a transitional fuel was heightened by an enhanced scientific understanding of the
short-term climate impact of methane leakage from natural gas production and the concept of
locking-in higher emissions trajectories than with a pure renewables play. Sharma concluded
that, "I said in Glasgow that the pulse of 1.5 degrees was weak. Unfortunately, it remains on life

But It Wasn't All Bad News . . .

In addition to the creation of the new loss and damage fund, other bright points from COP27

  • Reform of the World Bank (to focus its lending on tackling climate change) was placed
    firmly on the agenda;
  • The U.S. and China relaunched climate talks, which is critical to keeping a 1.5 degree
    Celsius goal alive, as they're the world's two largest emitters, together responsible for
    close to 50% of the globe's emissions;
  • A deal committing 214 companies and governments to phase out diesel and petrol cars
    by 2040;
  • A $20 billion Just Energy Transition Plan for Indonesia to follow up on that created for
    South Africa at COP26;
  • Re-affirmation of the commitment to double the 20% of the $100 billion per year funding
    allocated to adaptation;
  • Insertion of reference to "global tipping points" and "the right to a clean healthy and
    sustainable environment" in the Declaration;
  • New U.S. announcements to reduce methane emissions from oil and natural gas
    operations, develop a green shipping challenge, expand the First Mover Coalition
    sectors, and launch a new global carbon credit trading initiative to accelerate investment
    in energy transition in developing nations; and
  • Agreement on some of the details of Article 6 of the Paris Agreement dealing with
    international carbon trading markets.

Another bright spot from COP27 was the extensive discussion in many side events of climate
equity and justice issues, as well as just transitions, including a deeper assessment of the
impacts on, and opportunities around, food and agriculture.

COP27 also reflected the continued institutionalization of the business and civil society roles in
the COP process. COPs are no longer simple United Nations negotiations, but part of a regular
global convening of those interested in and affected by the global climate challenge. Sharm el
Sheik continued to elevate the climate issue globally, and to serve to concentrate media and
public attention on this challenge-reflected by the presence of over 3,000 media
representatives in Egypt.

An important part of the recognition of the business role in providing climate solutions which
emerged at COP27 was a heightened focus on integrity and transparency-ensuring that the
numerous private sector and subnational commitments announced in Glasgow will result in real
emissions reductions, with far greater attention being given to the concept of corporate net zero
plans. The centrality of this theme was underlined by a report from the UNSG's high level group,
setting out principles of transparency and consistency for those plans and backing up a new
standard for accounting on and reporting net zero emissions plans, issued by the International
Standards Organization (ISO), with new efforts also focused on the integrity of voluntary carbon
market emissions reductions. Key elements of these plans are the inclusion of science-based
targets; a need for aggressive short-term emissions reductions; and a new call for consistency
between climate advocacy positions by companies and the trade associations of which they are
members. Companies can expect enhanced scrutiny of their net zero plans based upon these
clearer standards and expectations.

Finally, the re-engagement of the U.S. over the last year on climate change issues was
showcased by the presence of President Biden, a host of Cabinet Secretaries, and an active
Congressional Delegation in Sharm El Sheik to highlight U.S. investment in addressing climate
change-in particular the largest legislative climate package in U.S. history (the Investment
Reduction Act or "IRA"), which will be instrumental in helping the U.S. operationalize its own
NDC commitment and highlights clean energy and advanced technology economic


Despite these bright spots, COP27 was characterized by disorganized negotiations and a failure
to make progress on improving mitigation actions. The weak final text has led a number of
commentators to conclude that limiting climate change to 1.5 degrees Celsius may no longer be
realistic: given the damage caused by droughts and flooding that have afflicted so many parts of
the world this year, as a result of just 1.1 degrees Celsius of warming, that is a bleak future.
Other commentators are now openly questioning the workability and usefulness of the COP
process, requiring as it does unanimity for all its decision. But, since COP is the best we have
by way of a global system for managing climate change, it is a process that will have to be
made to work.

One other important lesson which should be taken away from the heated debate over differing
priorities at COP27 is the difficulty in neatly categorizing and separating "implementation" from
the issues of emissions reduction, global ambition, equity, integrity, and transparency that
underlie a solution to addressing climate change.

In terms of what we should expect from next year's COP28, there will be a focus on how to
operationalize the loss and damage fund, as well as a continued focus on the Global Goal on
Adaptation, the New Collective Quantified Goal on climate finance, and perhaps most important
for continued mitigation, the first Global Stocktake assessing progress on the NDCs of individual
countries and the on-going role of private sector emissions reduction commitments.

But achieving these tangible outcomes will require a sustained effort to rebuild trust and
confidence between the Global North and Global South.