COP27 delivers on finance for Loss and Damage, disappoints on fossil fuels, adaptation

The UN climate change conference COP27 in Sharm el-Sheikh failed to advance climate action and ended with only one achievement: the decision to establish a designated fund to provide financial support to victims of climate impacts.

“While the cover decisions from last year’s climate change conference COP26 embarked on a new and ambitious path, by mentioning the need to phase down fossil fuels, the COP27 outcome only represents a standstill on that path. Sadly, the overall outcome lacks the sense of urgency that emanated from the science presented in the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC),” says Richard J.T. Klein, Senior Research Fellow.

Historic decision on Loss and Damage

In one regard only did COP27 exceed expectations: It ended with a decision to establish a designated fund to “respond to the losses and damages associated with the adverse impacts of climate change.” The decision comes 30 years after small island states first called for finance to enable their populations to recover from climate impacts, particularly in light of their own negligible contribution to global greenhouse gas emissions.

“The establishment of the fund represents a victory for particularly vulnerable and marginalised populations who have been losing their homes and livelihoods due to climate impacts and have continually been left without sufficient support,” says Zoha Shawoo, Associate Scientist.

“Overall, the outcome on loss and damage offers hope to countries and communities from the Global South who came to COP27 with a strong, united voice on the need for a loss and damage fund and refused to compromise on their demand”, adds Zoha Shawoo.

Important issues however still need to be worked out including the questions of which countries will be responsible for paying into the fund, and which countries will be eligible to receive finance from it. It is expected that the fund would be operationalised at COP28.

Weak on fossil fuels, and opening potential loopholes

For some time during the closing days of this COP, it looked as if negotiators would come close to naming what is required to meet agreed climate goals: the phasedown of all fossil fuel use and production.

“It is very unfortunate that they fell short and ended up merely repeating the call for the phasedown of “unabated coal power” and phase-out of “inefficient” subsidies that already stood at the end of last year’s COP26,” says Michael Lazarus, centre director of SEI US and an author of the Production Gap Report.

“The science is clear: global oil and gas as well as coal use and production must start declining immediately and steeply to be consistent with limiting long-term warming to 1.5°C.,” says Lazarus. “As the Production Gap Report has shown, the world’s governments plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with limiting warming to 1.5°C. Policy makers to must take immediate steps to align their energy policies with climate ambitions, and wind down the production and use of all fossil fuels.”

But in what looks like a contradiction to this science, the COP27 deal referenced the need to increase “low emission and renewable energy.” While this phrase could mean expanding solar, wind or nuclear power, it could also mean expanding rather than winding down fossil gas, a source of both carbon dioxide and methane emissions.

Few silver linings on finance

Parties had come into COP 27 with trust over climate finance at a low and made little progress in Egypt toward resolving underlying disagreements over the scale of finance, issues of transparency and accountability, and continuing barriers to access.

“One important exception is the announcement of a new deal between Indonesia and a group of wealthy countries that is modeled after the Just Energy Transition Partnership or JETP agreement between the same countries and South Africa, that was announced at COP 26,” says Katherine Browne, Research Fellow. The $20 billion deal will enable Indonesia to move its peak emissions forward by seven years, to 2030, and could be a model to support energy transitions in emerging economies. “With more of these agreements in the works, for example with Senegal and Vietnam, we need increased transparency and specificity around key details like timelines, public-private finance ratios, and equity provisions,” adds Browne.

Importantly, the cover decision noted that delivering needed funding would require a ‘transformation of the financial system,’ reflecting the so-called Bridgetown Agenda from Barbados Prime Minister Mia Mottley’s calling for a reform of the World Bank, International Monetary Fund and multilateral development banks. “The question going forward is if multilateral development banks will take these calls for reform to heart, and this is a space to watch.”

“Adaptation COP”

Dubbed the “Adaptation COP” for an expected focus on the needs particularly of climate-vulnerable countries to adapt to the impacts of climate change, COP27 did not end up deserving that label. Just a day before COP27 was scheduled to end, the draft decision looked to reaffirm adaptation as the global challenge the Paris Agreement had pronounced it to be, as well as recognizing the need for a coordinated global response. This kind of text would have done justice to the science gathered in February’s IPCC report, setting out how climate impacts and risks are increasingly complex and difficult to manage, and highlighting the need for building systemic resilience to compound, cascading and cross-border climate risks.

“But none of this language has made it into the decision on the global goal on adaptation or the cover decision, which urges governments to “adopt a transformational approach” to advancing climate adaptation but contains no vision nor details on how that could be achieved”, says Senior Research Fellow Richard Klein.

For more information and interviews contact 

Ulrika Lamberth, ulrika.lamberth@sei.org, +46 73 801 70 53

Andrea Lindblom, andrea.lindblom@sei.org, +46 73 345 05 71

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