Historic win on Loss and Damages but 1.5°C target ‘remains on life support’
I t has been a fortnight since the conclusion of the 27th Conference of the Parties (COP27) talks on climate change in Sharm el-Sheikh, Egypt. Following an eleventh-hour U-turn by representatives from the European Commission, the final agreement succeeded in committing to a ‘Loss and Damages’ financing mechanism for vulnerable countries hit by climate disasters. Yet this historic win has been overshadowed by failures to secure stronger emissions reduction targets, amidst a conference marked by the concerted efforts of fossil fuel–producing countries to weaken previous commitments.
By all measures, this year’s agreement has left the target to limit temperature rises to 1.5°C ‘on life support’. There is no language on peaking emissions by 2025 or on phasing out fossil fuels beyond coal. The national plans submitted by countries are still collectively insufficient to meet the 50% reduction in emissions needed by 2030 to keep the Paris Agreement target on track. Instead, we continue to emit record levels of greenhouse gases globally each year.
Such failures can be partially explained by a powerful bloc of fossil fuel–producing countries, who also made concerted efforts to roll back on the 1.5°C target itself, as well as commitments to submit national emissions reduction plans every year. Indeed, this year’s COP was striking in the huge numbers of fossil fuel lobbyists present — over 600, more than representatives of the Small Island Developing States (SIDS). This serves as a stark reminder of the proximity and power of vested interests as obstacles to achieving the transformative change we need. Our current status quo — ‘fossil fuel dependency’ — continues to reap enormous financial benefits for certain countries and corporations. It also gives them disproportionate power and agency to influence the COP process compared to entire regions who will be most impacted by climate change.
The historic development
From this perspective, the inclusion of a Loss and Damages financing mechanism in the final agreement is an historic development. Various nations of the Global South have been calling for such climate-related compensation finance for over 30 years. This year, the issue was galvanised by month after month of catastrophic climate disasters — from wildfires and extreme drought across the world, to devastating flooding in Pakistan. Barbados Prime Minister, Mia Mottley, speaking at a panel co-hosted by IIPP and the Scottish government, emphatically underscored the structural economic inequalities that further exacerbate developing nations’ vulnerability to climate disasters. Pointing out that rich nations can borrow money at 1–4% whilst the Global South borrows at 14%, she argued: ‘this world looks still too much like it did when it was part of an imperialistic empire’. Developing nations are not responsible for the lions’ share of all emissions, yet they are bearing the brunt of damages, and are least able economically to invest to adapt and build resilience to face a hotter future.
Together with new pledges to reform international financial institutions like the World Bank, the redistributive promise of the Loss and Damages mechanism is long overdue. Yet, as ever, the devil will be in the detail. We still do not know who exactly will fund it, and how much finance it can expect to receive. There is a poor track record of delivering on previous redistributive promises: the $100 billion per year by 2020 pledged by rich nations to the Global South at the 2009 Copenhagen COP never materialised, and remains a broken promise never held to account. Moreover, few rich nations have ever historically made any financial transfers relating to Loss and Damages. Some nations, such as the USA, are loathe to admit unequal responsibility, with terms like ‘compensation’ remaining politically contested. It will be critical to observe how negotiations for the mechanism proceed over the next year.
The challenge of funding
Many developing nations remain weakened after the pandemic, with debt burdens worsened by plummeting exchange rates, weak recovery of revenues (e.g., relating to tourism), and global supply-side inflation. At this stage, what is needed is not more loans but grant funding. And they need not billions, but trillions worth. Yet the precise funding mechanism is important: there is a big difference in funds directly going into reconstruction or development projects, versus being used to ‘de-risk’ projects for private investors. De-risking refers to the use of public or aid funding to make development projects ‘investible’ for mainstream private investors, either by socialising losses or guaranteeing upfront returns. It has received criticism for subsidizing private investors rather than catering to the needs of local populations. For example, a recently-announced de-risking partnership for renewable energy in South Africa effectively comes at the expense of fuel subsidies for households — a decision that will exacerbate cost of living pressures right in the midst of a devastating energy supply shock.
To deliver on climate justice, the aftermath of this and future COPs need to push for more ambitious redistributive mechanisms, including widespread debt restructuring and forgiveness, debt-for-climate swaps, and fair distributions of green sovereign drawing rights. We also need to see far more focus on accelerating finance and capabilities for climate adaptation. With significant adverse climate impacts into the medium term now already ‘locked in’, we need to adapt to a hotter world with a more volatile climate. Part of the solution should be synergistically accelerating the deployment of nature restoration, which can have numerous benefits in building the resilience of local environments to climate fluctuations.
Just a talking shop?
The COP meetings are critically important to building robust political consensus on how to ensure a habitable future on our shared planet. Yet, judged by slow progress on decarbonisation and adaptation, the COP process is in danger of looking like another grand event spurring big talk but no action. With next year’s Conference taking place in the United Arab Emirates, we urgently need to address how to resist the growing influence of vested interests in obstructing more ambitious action. Emissions need to be halved in seven years but are continuing to rise. Meanwhile, scientists have identified five climate tipping points that could breach over the course of the next decade with disastrous consequences. COP meetings can no longer continue to be a talking shop for rich nations, and a greenwashing opportunity for fossil fuel producers. COP27 has been historic in more ways than one, but we now need to hold our governments to account in delivering on truly ambitious actions.
