A lot has changed between COP26 in Glasgow and this year’s conference in Sharm El-Sheikh as geopolitical turbulence, energy and food price shocks, macroeconomic slowdown and extreme weather events pose renewed challenges for global climate action. Yet among these concerns, there have been bright spots in emergent themes related to enhancing climate finance.

The uneven impacts stemming from global challenges this year have framed priorities for climate action and cooperation.

Delegates converged on Sharm El-Sheikh for the 27th Conference of Parties with the understanding that global headwinds of conflict, extreme weather events, and economic comedown compounded by energy and food price shocks would flow into negotiations. 

While the economic impacts have been borne by all nations, developing nations are being hit the hardest. Multiplying, interacting crises including rising inflation and debt, currency volatility, and the drying up of capital flows from developed nations have left governments with scant fiscal space to expedite climate action. Rising global interest rates have made this more difficult as developing nations face capital costs far higher than those of advanced economies, as have impacts from rising energy and food prices earlier in the year. At the same time, the high incidence of extreme weather events this year has highlighted the disproportionate vulnerability of developing countries to climate change impacts. 

Within this context of turbulence – dubbed by some a ‘polycrisis’ – the Egyptian presidency signalled early on that COP27 would prioritise key distributive aspects relating to the Paris Agreement, including measures to enhance climate finance to ease the mounting debt burdens across developing economies, advancing talks around loss and damage, and building on the US$40 billion of adaptation finance pledged at COP26. And so it has, particularly with regard to loss and damage which was included on the formal agenda for the first time ever after concerned efforts by the Group of 77 developing nations (G77). 

The loss and damage agreement was a breakthrough but there was little increase in climate ambition  

The good news is that, among other decisions taken, a formal resolution was reached on loss and damage, marking the culmination of a campaign that first surfaced at the Rio Earth Summit in 1992. In global climate negotiations, loss and damage, which has long been a point of contention, refers to a financial mechanism where the largest historical emitters provide compensation to developing nations most vulnerable to the irrevocable impacts of climate change. For the first time, a commitment has been made in the final text to establish ‘funding arrangements responding to loss and damage’, a momentous shift in climate negotiations – albeit a live one as a transitional committee has been established to negotiate details ahead of COP28.

The reiteration of Parties’ commitment to the global goal of limiting warming to 1.5C is also welcome, but there remain concerns that language elsewhere in the final text falls short of demonstrating this. Efforts to expand on COP26’s agreement to pursue the ‘phasedown of unabated coal power’ to encompass all fossil fuels was met with resistance with the final text instead reverting to the language from Glasgow Climate Pact. This is despite numerous analyses, including from the International Energy Agency and IPCC, stating that new fossil fuel developments are inconsistent with pathways to 1.5°C. 

Elsewhere in the text, the agreement to increase ‘low-emission and renewable’ energy  opens space for interpretation and lacks the clarity to galvanise a clear direction away from fossil fuel expansion. Additionally, the reiteration of language on phasing out ‘inefficient fossil fuel subsidies’ allows for selective definitions of efficiency in a context where fossil fuel subsidies have reached record highs.

Some signs of progress with climate finance and nature-based solutions

Climate finance was in the spotlight, with growing calls to enhance the quality and quantity of climate finance flowing to developing nations. Although no concrete pledges to increase mitigation finance emerged from COP27 – the US$20 billion Just Energy Transition Partnership with Indonesia announced at G20 was the most significant development in this regard – there were some welcome movements.

Key among these was growing support for the Bridgetown Initiative introduced by the Barbadian Prime Minister Mia Mottley. The initiative seeks reforms to the global financial architecture, particularly multilateral development banks and international financial institutions – including the World Bank and IMF – to enhance the provision of climate finance in the forms of grants and concessional loans. It proposes three steps, including the provision of emergency liquidity, the expansion of multilateral lending to governments by harnessing special drawing rights, and the activation of a climate mitigation and construction fund. 

Having gained the support of the French government and a number of other nations, the COP27 text also urges reforms of multilateral development banks. Chris Bowen, Australia’s Minister for Climate Change and Energy, has called specifically for the World Bank to increase spending and ensure funding does not ‘saddle developing countries with significant debt’. Taken together, the increasing focus on global financial reform represents nuanced but definitive progress.

Similarly, while the new post-2025 climate finance target – called the new, collectively quantified goal – is under negotiation through a work program that will be completed in 2024, the COP27 text has underlined that current estimates place the new target to be in the range of US$5.8 to 5.9 trillion, setting an established baseline for ensuing discussions.

Elsewhere, subtle signs of progress were encoded in the final text, particularly through language encouraging Parties to harness the significant potential of conservation and nature-based solutions – an important link to bridge discussions with the UN Biodiversity Conference next month – and formalising the inclusion of the ocean and climate dialogue initiated at COP27. 
Despite these incremental gains, the reaffirment of the 1.5C goal and the breakthrough on loss and damage, this was a conference that leaves much work to do in the year ahead. A number of updated Nationally Determined Contributions have been submitted this year, Australia’s among the most significant in terms of increased ambition, but current commitments still correspond to a 10.6% increase in emissions by 2030 on 2010 levels. While this is an improvement on last year’s assessment, there is little doubt that between now and COP28 ambition must move back to centre stage.

More from COP27: