At the COP27 UN climate negotiations, money talks louder than ever

President Joe Biden and other world leaders are gathering this week in Sharm El Sheikh, Egypt, for negotiations on mitigating climate change. The two-week meeting, known as COP27, follows yet another year of devastating floods, storms, heat waves, and droughts around the world, worsened by rising average temperatures.

Carbon dioxide levels in the atmosphere this year reached 421 parts per million, the highest in human history, and the planet just experienced one of its hottest summers on record.

But climate change isn’t the only issue on everyone’s minds: Inflation, conflict, food shortages, supply chain snarls, rising energy prices, and still, the Covid-19 pandemic are also present concerns, even if they aren’t specifically on the agenda. That’s likely to impair the push for more aggressive cuts in greenhouse gas emissions.

The United States is awaiting the outcome of midterm elections that could speed up or stall its climate change efforts. Russia’s invasion of Ukraine and the resulting energy crisis has led countries like Germany to restart coal power plants, while fuel shortages are driving up demand for more mining and drilling for fossil fuels. Inflation worries have tempered efforts to deploy clean energy in Canada, while China approved more than 15 gigawatts in new coal-fired power generation. Driving and flying are also up compared to 2021.

As a result, one of the targets of the Paris climate agreement — keeping global average temperatures from rising more than 1.5 degrees Celsius above pre-industrial levels this century — is drifting even further out of reach, and time is running out. Meeting this target would require global greenhouse gas emissions to fall by roughly half from current levels by 2030, but they are poised to rise once again this year.

“The 1.5 degrees [target] is in intensive care, and the machines are shaking. So, it is in high danger. But it is still possible,” said UN Secretary-General Antonio Guterres during a press conference last week. “And my objective in Egypt is to make sure that we gather enough political will to make this possibility really moving forward, to make the machines work.”

However so far, only 24 of the 193 parties to the Paris climate agreement have stepped up their climate change targets since the last COP meeting in Glasgow, Scotland.

So what can this meeting accomplish that the last ones did not?

While other worries abound for negotiators, the economic and environmental dangers of continuing to rely on fossil fuels have never been more vivid. Some countries are more eager than ever to get off of coal, oil, and natural gas. Clean energy technologies like wind and solar are cheaper than ever, undercutting fossil fuels in many regions. Meanwhile, developing countries already facing the acute effects of sea level rise, heat waves, and flooding are hoping that delegates will finally hammer out some agreement on getting wealthier countries to pay for climate damages and adaptation.

However, just about every past COP meeting has overshot its deadline as negotiators quibbled over every “might,” “must,” and “shall,” forming tepid agreements that left few happy. For an urgent problem like climate change, the process is agonizingly tedious. But it’s the best system we have.

Energy is expensive, but so is climate change

It’s getting more expensive to gas up cars, turn on the lights, and heat homes in much of the world. And as the northern hemisphere heads into winter, prices are projected to rise higher.

That’s due to a number of factors, including Russia’s invasion of Ukraine, the global economic rebound after the Covid-19 pandemic, and overstretched supply chains. Faced with these constraints, negotiators will likely have less ambition to ramp up their efforts to cut greenhouse gas emissions in the near term or spend money to adapt to warmer temperatures.

“We’re not tone-deaf as a nation or as an administration to the pull and tug that has taken place with respect to the marketplace — from Covid, from the impacts of inflation, and the impacts of inflation which came significantly through the war and the cut-off of major energy supplies and realignment thereof,” said John Kerry, the US climate envoy, during a press conference last week.

The costs of climate change are also increasingly apparent. Few countries are arriving in Egypt unscathed from the effects of rising temperatures. The White House estimated in April that by 2100, climate change would cost the US economy $2 trillion per year.

At the same time, some countries are finding that cleaner energy sources like wind and solar power help to insulate them from international fuel market shocks while also meeting their demand.

The International Energy Agency reported last week in its World Energy Outlook that “higher shares of renewables were correlated with lower electricity prices.” The report adds that renewable energy will meet most of the increase in energy demand in the coming years. It also projects that coal, oil, and natural gas demand will peak and decline before the end of the decade as countries rethink their energy systems.

“The environmental case for clean energy needed no reinforcement, but the economic arguments in favor of cost-competitive and affordable clean technologies are now stronger — and so too is the energy security case,” IEA Executive Director Fatih Birol said in a statement.

The question, then, is how this will manifest in the negotiations. Countries have been reluctant to commit to doing more to curb their own emissions. Most are failing to meet their existing pledges. And the current round of pledges, known and Nationally Determined Contributions (NDCs), are already inadequate to meet the goals of the Paris agreement.

IMF

So the challenge at COP27 is not just to increase ambitions on climate change, but to enhance accountability to put those commitments into action.

Money talks, and the world is saying very little

Money is the perennial stumbling block at COP meetings, particularly the funding to address the fundamental inequity of climate change: The countries that stand to suffer the most from rising average temperatures contributed the least to the problem.

In principle, there are some mechanisms in place to do this, but they’ve fallen short. One involves wealthy countries pooling $100 billion per year to finance climate change adaptation and mitigation projects in developing countries. But funders missed the 2020 deadline for their pledges and have pushed it back to 2023. The US pledged last year to double its contributions to the program, adding $11.4 billion a year. But Congress this year only appropriated $1 billion.

Another issue is compensating countries for the loss and damage already occurring due to changes in the climate — things like property damage, degraded ecosystems, and declines in crop yields. One estimate found that this could cost the world between $290 billion and $580 billion a year by 2030. However, there is no agreement on what counts as a climate-related loss, and there’s no funding target in place. Wealthy countries continue to resist even acknowledging these effects for fear of opening the door to legal claims of liability.

“With wealthy countries, it’s always a fear of some kind of reparations framework coming out which will impose higher and higher costs,” Rachel Kyte, an adviser to the climate negotiations and dean of the Fletcher School at Tufts University, told Vox last year. “They’re prepared to talk about today and tomorrow. They don’t want to talk about yesterday.”

Fida Hussein/AFP via Getty Images

With rising inflation, many countries are trying to get their own houses in order. But discussions on international climate finance have dragged on for years, threatening the credibility of the negotiation process.

“Commitment and making clear progress on loss and damage would be the litmus test for this COP,” Ani Dasgupta, CEO of the World Resources Institute think tank, told reporters last week. “We hope to see the US and the EU stop being hesitant on this and start to be real leaders.”

This week, leaders including Biden and United Kingdom Prime Minister Rishi Sunak will attend the meeting and give speeches to set expectations. But the heads of some of the largest greenhouse gas-emitting countries, including China’s Xi Jinping, India’s Narendra Modi, and Russia’s Vladimir Putin, are not attending. All the while, behind closed doors, delegates will meet face-to-face to hash out some of the trickier topics and lay the groundwork for the future of the planet.