What Really Happened at COP27 in Sharm El-Sheikh?

The Twenty-Seventh Conference of the Parties (COP27) of the United Nations Framework Convention on Climate Change (UNFCCC), held November 7-20 in Sharm El-Sheikh, Egypt, turned out to be important in several ways, but disappointing in others. 

The Most Important Development During COP27 for Long-Term Climate Policy

Ever since Donald Trump was elected U.S. President in November 2016, a major question has been when would the United States and China return to the highly effective co-leadership they had played during the years of the Obama administration in the runup to the Paris Agreement.  This was an important question at last year’s COP26 in Glasgow.  It turned out that this year’s COP27 provided an answer, although in somewhat surprising fashion.

In my view, the most important development during COP27 held November 7-20 in Sharm El-Sheikh, took place six thousands miles away in Bali, Indonesia, when U.S. President Joe Biden and China President Xi Jinping met on November 14 on the sidelines of the G20 summit, shook hands, and engaged on in a three-hour conversation in which, among other topics, they signaled their return to the cooperative stance that had previously been so crucial for international progress on climate change.  That three-hour meeting marked the end of the breakoff of talks that had been initiated by China in response to Speaker Nancy Pelosi’s trip to Taiwan in early August, and the two leaders’ intention to not allow disagreements regarding international trade, human rights, movement away from democracy in Hong Kong, and Taiwan’s security to contaminate their cooperation on climate change.

The discussion between the two heads of state quickly (and explicitly) trickled down to the heads of the respective negotiating teams at COP27 — John Kerry of the United States and Xie Zhenhua of China.  They are longtime friends, but had not been engaged in discussions or cooperation on climate change because of the problems that had existed since August at the highest level between the two governments. After the Biden-Xi meeting in Bali, statements from both John Kerry and Xie Zhenhua indicated that the two countries will resume cooperation.  I believe it is reasonable to anticipate that there may even be something of a return to the co-leadership on climate change policy which China and the United States had previously exercised, and which was absolutely essential for the successful enactment of the Paris Agreement (adopted by 196 Parties at COP21 in Paris, December 12, 2015, and entered into force on November 4, 2016), but cooperation that had disappeared long before Pelosi’s trip to Taiwan, namely with the beginning of the former Trump administration and throughout much of the first two years of the Biden administration.

The Most Contentious and Dramatic Decision at COP27

If the restart of China-U.S. climate cooperation was the most important development during the COP for long-term climate policy, the most dramatic and contentious decision reached within the halls of COP27 by the negotiators from 195 countries was the establishment of a fund for so-called “Loss and Damage,” an issue that has been kicked down the road since it was first floated in 1991 when Vanuatu, a small island nation in the Pacific, suggested the creation of a United Nations fund to help pay for the consequences of rising sea levels.  For thirty years, action on this notion has been delayed, including with a clever approach in the Paris Agreement itself.  One year ago, at the conclusion of COP26 in Glasgow, I predicted that this Loss & Damage issue would be the major focus of this year’s COP27.  My predictions do not always come true, but this one did.

First, some background for those of you who are not UNFCCC/COP junkies.  “Loss and Damage” refers to the range of impacts associated with climate change, since even if emissions are reduced to zero tomorrow morning, damages will continue due to the long lag time of greenhouse gases (GHGs) in the atmosphere, particularly CO2 with its atmospheric half-life of more than 100 years.  Most of the Paris Agreement targets reducing emissions (via the mechanism of the Nationally Determined Contributions), and the famous $100 billion commitment for finance from developed countries for developing countries targets mitigation and adaptation.  But adaptation is not possible for all impacts – think about the very existence of small island states, or this year’s floods in Pakistan.

The controversy has been with regard to who should pay for such loss and damage, with the focus on those most responsible for climate change, namely the countries with the greatest contributions to the accumulated stock of GHGs in the atmosphere – the United States and other large, wealthy countries, plus – importantly – China.

This has been controversial because, on the one hand, it is absolutely (and understandably) viewed as essential by countries such as the small island states, whereas countries such as the USA, China, and the EU member states worry that talk of “loss and damage” raises the specter of compensation for bad weather and unlimited legal liability.  Indeed, at some climate talks before the Paris Agreement (2015), debates on this issue nearly caused the talks to collapse. 

But the issue was finessed in the Paris Agreement’s Article 8, which recognizes the importance of loss and damage, but then eliminates the most contentious aspects in Decision 52 (a document that accompanied the Paris Agreement), where the Parties agreed that loss and damage “does not involve or provide a basis for any liability or compensation.”  Understandably, some countries were not satisfied with this “resolution.”

The developing-country voices regarding loss and damage – this time favoring the creation of a new fund for loss and damage payments – were more prominent at COP26 last year than at any previous COP, but on the final day of the talks last year the wealthy countries blocked such proposals, and instead agreed to talk more about it in the future by setting up a “dialogue” on the issue in future COPs.

That brief history will convey the significance of what happened at COP27, when China, the European Union, and a few other developed countries came out in support of a loss & damage fund; and, then, as the second week of the COP was approaching its close, John Kerry announced that the U.S. also supported (in principle) the creation of such a fund, reversing its long-standing opposition. It’s important to note that the agenda item on Loss & Damage, which was adopted at the outset of COP27 (and was the basis for the Loss & Damage decision), was agreed on the understanding (in the report of the meeting) that Loss & Damage does not involve compensation or legal liability, and, furthermore, that understanding is cross-referenced in the preamble to the Loss & Damage decision. Hence, the important caveat from Decision 52 accompanying the Paris Agreement was reiterated in the Loss & Damage decision produced at COP27.

Such a fund could – on the demand side – eventually amount to trillions of dollars per year.  Note that the World Bank has estimated that this year’s floods in Pakistan caused $40 billion in damages.  However, on the supply side, the few quantitative financial pledges stated thus far are in the tens of millions of dollars.  COP27 established a transition committee to develop recommendations on funding arrangements at COP28 in 2023.  The transition committee will have a majority of developing country representatives (which may not be a prescription for a pragmatic and effective process).

So, is the new Loss and Damage Fund an empty shell?  China is important, as the world’s largest emitter, but not the greatest contributor to the atmospheric stock of greenhouse gases, a title held by the United States.  And damages are a function of the existing stock, not the emissions in any year.  However, depending on relative rates of economic growth and other factors, China may become the largest contributor to the stock in a decade or two.  China’s announced position at COP27 was that it supports the creation of the Loss and Damage Fund, but that as a “developing country” it will not be responsible for any contributions to the fund.  By the way, China’s definition of itself as a “developing country” links to the 1992 list of non-Annex I countries under the UNFCCC, when China’s per capita GDP was less than $400/year.  The fact that its per capita GDP has grown by 3,330% since then is not considered relevant by China.

Interestingly, there is some convergence on the Loss and Damage Fund between China and the United States, although certainly not in regard to China’s self-proclaimed exemption from financial contributor status.  Rather, the U.S. has a story that winds up in a similar place.  It goes like this.  “We support the Loss & Damage fund, but due to the new Republican majority in the House of Representatives, it is impossible for us to make any commitment of new funding.”  (Minor caveat:  What about a quick move via inclusion in the Omnibus Budget Bill in December, before the Republicans take control?  Not going to happen.)

So, is the new Loss and Damage Fund an empty shell, or is it a principled first step toward equitable allocation of responsibility under the Paris Agreement?  It may be both.  How it will evolve in the future is difficult to say.

Other Developments and Issues at COP27

There were plenty of other debates and developments at COP27, but in my view they were of secondary consequence compared with the Biden-Xi rapprochement and the establishment of the Loss & Damage fund.

Of course, the UNFCCC, the Paris Agreement, and the annual COPs are ultimately and mainly about reducing emissions of GHGs.   There have been many statements in the popular press and from some of the delegations of disappointment because the COP27 closing statement did not fully embrace the 1.5 C target (relative to pre-industrial temperatures), versus 2 C target of the Paris Agreement, nor did it state the intention – in what is really no more than a non-binding resolution – to phase out not just “unabated coal,” as in the Glasgow decision, but all fossil fuels. 

These are valid, indeed important concerns.  But I remember when the Business-as-Usual (BAU) predictions from the Intergovernmental Panel on Climate Change (IPCC) were as high as 7.0 C this century, then with Paris, 3 C; then with enhanced Paris & the Kigali amendments to the Montreal Protocol, 2.5 C; and now with the latest pledges from China and India, capping warming at 1.7 C this century may be feasible, according to the International Energy Agency.  Much will depend upon future actions by the large emerging economies – China, India, Brazil, Korea, South Africa, Mexico, and Indonesia – as well as by the United States and other developed countries.  But this COP need not cause excessive hang-wringing, let alone depression.  This is a marathon, not a sprint.

Also, since I have written extensively – and worked at the annual COPs – on international linkage, trading, and Article 6 of the Paris Agreement, I should at least note that a variety of technical decisions regarding operationalizing the Article 6.2 mechanism were deferred to COP28.  To some degree, this is good news, since developments with Article 6.2 since the Rulebook for it was completed at COP26 are not encouraging, nor are the interpretations of 6.2 that many policy participants seem to hold.  More about this in the future.

In the meantime, there were also significant discussions and developments regarding a very important non-CO2 GHG, namely methane.  In this regard, in a previous blog post, I described a podcast conversation with my Harvard colleague, Professor Daniel Jacob, who specializes in this realm.  And in my most recent previous blog post, I described my own activities and speaking engagements at COP27 regarding our work at Harvard on satellite-detection of methane concentrations, statistical estimation of related emissions, and development and implementation of appropriate public policies.  This was an important focus of several bilateral meetings at COP27, as well as some of my speaking engagements (others were on carbon pricing).  I’ll have more to say about our methane work and U.S. and global developments in future essays at this blog.

Next Year:  COP28 in Dubai

This year was officially the “Implementation COP,” and next year’s COP28 in Dubai, United Arab Emirates (UAE), is officially the “Global Stocktake COP.”  But if COP27 was, in effect, the “Loss & Damage COP,” we might anticipate that the incoming UAE presidency of COP28 will make it the “Carbon Removal COP,” with renewed attention to carbon capture & storage, carbon capture & utilization, direct carbon removal, as well as solar radiation management.  If that happens, it will be controversial, like loss & damage was, but for different reasons and with very different parties.

Photos from COP27

Finally, I’m including a few photos below from some of my speaking engagements and meetings.  You can find more photos and stories about activities at COP27 of the Harvard Project on Climate Agreements here.

Entrance to COP27

Speaking at China Pavilion

Panel session at China Pavilion

Speaking at China Pavilion

Group of presenters at China Pavilion

Room View at China Pavilion

Room View of session on Frontiers in Carbon Pricing in IETA Pavilion

Panel session on Frontiers in Carbon Pricing in IETA Pavilion

Panel Session Frontiers in Carbon Pricing in IETA Pavilion

Speaking in IETA Pavilion

Interview with Lisa Friedman, New York Times

Video interview with Michael Jung, Executive Director, ICF Climate Center

Meeting with Prof. Jos Delbeke, European University Institute, and Prof. Simone Borghesi, University of Siena, Italy

View of Room for HPCA-Enel Foundation Side Event on Methane Emissions Reduction

Professor Daniel Jacob speaking at Side Event on Methane Emissions Reduction

Panel at HPCA Side Event with Lena Hoglund Isaksson on Methane Emission Reduction

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The European Green Deal

From his perspective as Principal Advisor to the Directorate General for Climate Action in the European Commission (EC), Jacob Werksman is cautiously optimistic about the direction of international climate policy.  Werksman was my guest in the second webinar of our new series of Conversations on Climate Change and Energy Policy, held July 9th, sponsored by the Harvard Project on Climate Agreements (HPCA)A recording plus transcript of the webinar is available here.

Stavins and Werksman during remote conversation, July 2020
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Jake Werksman’s role since 2012 as Principal Adviser to the Directorate General for Climate Action in the European Commission has focused on the international aspects of European climate policy.  His responsibilities include leading aspects of the European Union negotiations under the Paris Agreement and – more broadly – the United Nations Framework Convention on Climate Change.

Jake is an international lawyer, and holds a Bachelor’s degree from Columbia University, a J.D. degree from the University of Michigan, and an LL.M. degree from the University of London.  He has been involved in international climate change efforts for more than a decade since he began consulting for the Danish Government leading up to the 15th annual Conference of the Parties (COP-15) in Copenhagen in 2009. It was during that meeting, Werksman remarks, that two different models of international climate policy – the bottom-up ‘pledge and review’ approach versus the top-down legally binding agreement approach – first collided, all but derailing substantive action.

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Jacob Werksman

“Logistically there were huge problems,” he says. “A lot of people would certainly characterize it as not being the success at least that was hoped for.”  (But, I would note, it did lay the foundation for Cancun, and everything after that, which in a sense, led to Paris.)

The Paris Agreement, reached at COP-21 in 2015, obligates signatories to establish and achieve meaningful emissions reduction targets through the use of nationally determined contributions (NDCs), which, when aggregated, are intended to limit the increase of global temperatures to less than two degrees centigrade above pre-industrial levels.

While that goal is obviously jeopardized by the Trump Administration’s decision to withdraw from the Paris Agreement, Werksman is encouraged by the global response to that decision.

“The immediate impact of the Trump Administration’s withdrawal from Paris was that it helped to galvanize the international community around Paris. And you see that in the way in which no other party followed suit,” he says. “There may have been some that were on the edge of joining what they might have seen as a populist rejection of Paris and climate policy, but that didn’t happen.”

Much of our discussion focuses on the European Green Deal, the European Commission’s proposed ambitious roadmap to address climate change by increasing the production of renewable energy and increasing energy efficiency, more stringently regulating emissions from industrial and energy sources, and seeking to reduce emissions in the building and transportation sectors.

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Werksman representing the European Union in international climate talks

“There were a lot of bold proposals in the original European Green Deal,” Werksman says.  “As they relate to the international process, they also contain a proposal to move from our existing Paris Agreement targets of at least 40 percent reduction of emissions from 1990 levels by 2030, to a 50 to 55 percent emissions reduction target. And it contains a climate neutrality goal by 2050. So, the EU has committed to being a net zero economy, the first net zero region, by 2050. So, these are very ambitious pushes in the direction of low-carbon and a climate-resilient economy.” 

Werksman says that with the exception of the climate-neutrality goal, which has already been endorsed by EU leaders, all of the other action items in the European Green Deal will still require approval by the European Parliament and the European Council (where each member state has one vote).

A webinar viewer asks Werksman for his assessment of the $100 billion dollar climate pledge made by the richest countries in 2009, prior to the Paris Agreement. Werksman responds that the Organization for Economic Cooperation and Development (OECD), which tracks the fund raising efforts, estimates that $70 billion had been raised by 2018, while also stating that more needs to be done to better leverage private finance.

“There are significant public resources available, but we need to get better at using those through leverage and guarantees, participating with private sector banks in the shaping of softer loans in order to get the money flowing to a larger scale,” he remarks.

I wrap up the webinar by asking Jake his opinion of the youth climate movements that swept through the United States and Europe last year, and Werksman responds that he finds them both “inspiring and sobering.”

“They had two messages. One was, we agree with everything that people like me have been saying about the need to act and to act urgently. And why haven’t you succeeded? Why haven’t you done better if we can talk in incremental terms about the kind of progress that we’ve been able to make moving from the Framework Convention to the Paris Agreement? But you try to explain to a young activist who doesn’t see change on the ground how that is success after 30 years of effort and you quickly run out of words,” he says.

“I very much hope that when they’re allowed back on the streets and back into the classrooms that they won’t have forgotten this, and in particular when they’re allowed into the voting booths, they won’t have forgotten this and they will help make up for some of the shortfalls of the efforts that our generation has been making.”

As I noted at the outset, a recording of the webinar with Jake Werksman, including a complete transcript, is available here.  I hope you will check it out.

The previous webinar in this series – Conversations on Climate Change and Energy Policy – featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets.  And the next one is scheduled for 9:00 am (Eastern Time USA), August 19th, when my guest will be Rachel Kyte, Dean of the Fletcher School of Law and Diplomacy at Tufts University and long-time participant in international climate change policy research and action.  Click here to register in advance for that webinar.

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