COP27: 8 key takeaways

Climate change adaptation is how we address the impact of climate change. Every fraction of a degree of warming sees adaptation needs and costs rise quickly.

Wealthy countries, whose pollution has contributed the most to climate change, have agreed to discuss creating a loss and damage fund for developing countries at these talks, but an official decision could still be years away. Pakistan was the most vocal country during the summit, given its recent flooding, with President Arif Alvi pushing the leaders of wealthy countries to “pay up”.

Leading global experts from the natural and social sciences presented 10 essential insights on climate change since 2021. There is a keen focus on the limits of humankind to adapt to the inevitable impacts of climate change, which include ever more frequent and severe drought, storms and floods. The findings indicate that the potential to adapt to climate change is not limitless. Rising sea levels capable of submerging coastal communities and extreme heat intolerable to the human body, are examples of ‘hard’ limits to our ability to adapt. The report also highlighted that over 3 billion people will inhabit ‘vulnerability hotspots’.

The COP27 Presidency launched the Food and Agriculture for Sustainable Transformation (FAST), to improve the quantity and quality of climate finance contributions to transform agriculture and food systems by 2030, supporting adaptation and maintaining a 1.5°C pathway whilst supporting food and economic security. This multi-stakeholder cooperation programme will have concrete deliverables for enhancing country capacities to access climate finance and investment, increase knowledge, and provide policy support and dialogue.

The US Development Finance Corporation said that it is looking to support small- and medium-sized businesses that have plans to improve climate adaptation in the areas of agriculture, water, infrastructure and health.

For decades those countries on the frontlines of climate change who have contributed least to global emissions have called on developed countries to provide finance for the permanent losses of lives, livelihoods, land and nature they are contending with. Developing countries and small island states wanted a clear reference to new funding facilities that will help cover the loss and damage caused by increasingly extreme weather events. 

Negotiators at the summit agreed to establish a loss and damage fund, which will see rich nations pay poorer countries for the damage and economic losses caused by climate change. Its structure is to be set up by the next summit in 2023. The agreement does not yet state which countries will be required to contribute to the fund nor does it detail a timeline for the commitments to be met.

Developing countries will need an estimated USD2tn a year in climate funding by 2030, in order to switch away from fossil fuels and cope with extreme weather impact. The estimates, which would cover the needs of all of the world’s developing economies except China, are far higher than any climate finance that has yet been forthcoming to help poor countries.

COP countries have not yet delivered on a pledge made in 2009 to support developing countries with USD100bn in climate finance. The UN estimates that USD125 trillion of investment is needed by 2050 to meet net zero. Private finance will play an integral role in raising this necessary capital.

McKinsey now estimates that the cumulative capital spending on physical assets for the net-zero transition—such as technology, infrastructure, and natural resources—would need to change from today’s annual average of USD5.7 trillion to USD9.2 trillion through 2050.

Around half of the required financing can be reasonably expected to come from local sources, from strengthening domestic public finance and domestic capital markets, including tapping into large pools of local finance that national development banks can mobilise. However, external finance, as well as the World Bank and other multilateral development banks, must also play a key role.

Close to 70% of global greenhouse gas emissions are tied to the energy used in electricity, heat and transportation. Moving away from direct fossil fuel consumption in homes, vehicles and industry and simultaneously decarbonising the power grid are essential to meeting global climate goals.

A New Carbon Action Tracker analysis showed that massive gas expansion plans – caused by the rush for natural gas in the backdrop of the Ukraine war – threaten the 1.5°C warming limit. Gas capacities currently under construction, combined with plans for expansion, could increase emissions by over 1.9 gigatonnes of CO2 equivalent per year in 2030. Since the invasion of Ukraine, 26 tankers docking facilities have been announced in the EU, according to a new report from Climate Action Tracker, a climate think tank.

A new Global Registry of Fossil Fuels is being developed that will provide standardised, comprehensive, government-vetted and publicly available data on fossil fuels reserves. This means countries know what reserves other countries have, enabling negotiations on cuts to go ahead. It would also enable countries to be held to account for pledged cuts. At present, there is very limited public data on fossil fuel reserves. The treaty however clashes with the commentaries from many African countries during COP27 demanding the same opportunism than advanced nations on the exploitation of fossil fuels for economic development.

A US-Japan partnership will offer Indonesia USD15Bn to accelerate coal phase out. The Just Energy Transition Partnership (JETP) pact with Japan, the US and others follows roughly a year of negotiations and would enable Indonesia to accelerate efforts to shutter excess fossil fuel generation capacity, and to limit its pipeline of coal power projects. The JETP model was pioneered at the COP26 Summit in Glasgow last year for South Africa.

Vietnam is also set to transition away from coal, with a climate financing package of at least USD11 billion.  

COP27 also saw the launch of the Africa Just and Affordable Energy Transition Initiative (AJAETI). By 2027, its three primary objectives are to offer technical and policy support to facilitate affordable energy for at least 300 million people in Africa; provide access to clean cooking fuels and technologies; and increase the share of renewable electricity generation by 25%.

A new global initiative - the Planning for Climate Commission – was announced. The focus is on speeding up planning and approvals for the massive deployment of renewables and green hydrogen needed to address climate change and energy security. The Commission is a joint initiative by the Green Hydrogen Organisation, International Hydropower Association, the Global Wind Energy Council and the Global Solar Council.

RMI and Lion’s Head Global Partners partnered to launch a targeted USD15 million Project Preparation Facility and an associated USD75 million Caribbean Climate Smart Fund to invest in energy projects across the Caribbean. These projects will support climate resilience in the face of intensifying storms, stabilize electricity prices, and increase energy security, while saving tens of millions of dollars each year in fossil fuel imports.

Organisations representing wind, solar, hydropower, green hydrogen, long duration energy storage and geothermal energy industries unveiled plans to officially join forces in an unprecedented Global Renewables Alliance. This brings together all the technologies required for the energy transition in order to ensure an accelerated energy transition. As well as ensuring targets are met, the alliance also aims to position renewable energy as a pillar of sustainable development and economic growth.

New analysis from the Africa Green Hydrogen Alliance (AGHA) and McKinsey concluded that green hydrogen could sustainably industrialise Africa and boost GDP by 6 to 12% in six key countries. The reports finds that by 2050, green hydrogen could increase the GDP of  Egypt, Kenya, Mauritania, Morocco, Namibia, and South Africa by USD126bn, equivalent to 12% of these countries’ current GDP. AGHA, with support from the UN Climate Change High-Level Champions, the Green Hydrogen Organisation and the African Development Bank, calls for greater cooperation between governments and the private sector to unlock the investment needed.

Belgium, Colombia, Germany, Ireland, Japan, the Netherlands, Norway, the UK and the US joined the Global Offshore Wind Alliance (GOWA). The Alliance aims to be a global driving force for the uptake of offshore wind by bringing together governments, international organisations and the private sector to close the emissions gap and enhance energy security.

Negotiators were unable to agree on provisions that would accelerate emissions cuts, with only few countries having submitted new plans to reduce their emissions. The phase-down of all fossil fuels was not in the final agreement, despite the push by dozens of countries to include it. Instead the final agreement mentions “efforts towards phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies”.

Methane released by human activities is responsible for around 25% of anthropogenic climate changes. There were several developments on this front at COP27.

A COP26 commitment to cut emissions of one of the most potent greenhouse gases by 30% by the end of the decade has now garnered more than 150 signatures. China and India are the main absentees. There are ongoing efforts to get other major methane emitters like Algeria, Azerbaijan and Turkmenistan to sign up.

China also announced it has drawn up a draft national strategy on methane. The strategy will target the three main source of emissions – energy, agriculture and waste. They will set preliminary targets which in an area where China is currently judged to have weak statistical capability.

The UN announced plans to launch a public database of global methane leaks that are detected by space satellites. The Methane Alert and Response System (MARS) is a new initiative to scale up global efforts to detect and act on major emissions sources in a transparent manner and accelerate implementation of the Global Methane Pledge. MARS will alert governments, companies and operators about large methane sources to foster rapid mitigation action of this potent gas. This would effectively add more scrutiny to O&G companies and operators to limit methane emissions.

Negotiators at COP27 were put under pressure this year to establish strict guidelines to ensure the credits used in the global carbon market represent real emissions reductions. Carbon pricing currently covers 30% of global emissions with an average price of USD 6/tCO2

US climate envoy John Kerry proposed a new plan to expand the sale of carbon credits in order to boost renewable projects in developing countries. The project called the “Energy Transition Accelerator” has been criticized by carbon-market experts and environmentalists who warned in interviews that it mirrors a failed offset system created decades ago – the UN’s Clean Development Mechanism.

A group of African countries including Kenya, Malawi, Gabon, Nigeria and Togo, together with Standard Chartered, announced their intention to back a new initiative to expand the use of carbon offsets on the continent. It aims to produce 300 million credits annually by 2030, and 1.5 billion by 2050.

A report from the United Nations’ high‑level expert group on the net zero emissions commitments of non-state entities emphasised the role of carbon credits. High integrity carbon credits in voluntary markets should be used for beyond value chain mitigation but cannot be counted toward a non-state actor’s interim emissions reductions required by its net zero pathway, according to the findings.

The High-Quality Blue Carbon Principles and Guidance framework was recently launched to guide the development and purchasing of high-quality blue carbon projects and credits. The market for carbon credits is forecast to reach USD50b in 2030 with blue carbon experiencing high demand. Coastal blue carbon ecosystems are valued at over USD190 billion per year and are estimated to reduce costs associated with impacts such as flooding by over USD65 billion annually.

The COP 27 Presidency launched the Action on Water Adaptation and Resilience Initiative (AWARe). The aim is to put water front and centre of adaptation and resilience action by offering transitional adaptation solutions for the planet and people, starting with the world’s most vulnerable communities and ecosystems in Africa. The initiative is arranged across three main priorities: decrease water loss and improve water supply worldwide; propose and support implementing mutually agreed policy and methods for cooperative water-related adaptation action and its co-benefits; and promote cooperation and interlinkages between water and climate action in order to achieve the UN’s sixth Sustainable Development Goal (SDG) - clean water and sanitation for all.

The African Cities Water Adaptation Fund (ACWA Fund) is a new Africa-focused blended finance instrument that aims to support the development and implementation of more than 200 projects in 100 African cities by 2032. Launched by the World Resource Institute (WRI) together with public and private sector partners, development banks, impact investors, state and non-State actors and experts, it supports city leaders to fund and scale high-impact water resilience solutions across Africa by leveraging private financing while better coordinating public sector funds alongside climate and development aid.

Signatories to the Glasgow Declaration for Fair Water Footprint called on governments in both developed and developing countries, progressive businesses, financiers and NGOs to join this leadership initiative which puts climate resilient and equitable water management at the heart of the global economy by 2030. Action is already underway by Peru, Malawi, Madagascar, Finland, Panama, the UK, businesses, investors and civil-society across the coalition.