COP27 and The Global Economy's Pathway to a Net Zero Future
As always, the COP27 has offered a platform for world leaders to build effective roadmaps and share a sustainable agenda focusing on climate change as a pathway to achieve economic prosperity and a net zero future.
Although previously held COPs have laid the foundation to fight climate change, the COP27 is being called the 'COP of implementation,' where initiatives are taken to secure climate financing to fulfill the funding requirements for novel tech and eco-friendly projects in the regions of Latin America, Africa, and Asia.
No matter how much-advanced economies pledge towards climate solutions, achieving a net zero future becomes impossible unless developing economies and each member of society participate in shaping a zero-emission future.
What is Net Zero Future?
Think of it as a pledge made by countries to halt man-made changes to the climate. It requires shifting to novel energy infrastructure and technologies that don't produce greenhouse gasses while taking steps to remove already created atmospheric emissions.
Let's dig in deep to know the goals of this year's COP for a clear picture.
Goals of COP27
This summit emphasized four key objectives:
Mitigation
All stakeholders must take action and lead by example in a collective effort to reduce global warming below two degrees Celsius.
Adaption
Ensuring the climate change strategy assists vulnerable communities and enhances climate change resilience.
Finance
Speeding up the delivery of the pledged $100 billion per year in the Paris agreement to support developing countries.
Collaboration
Effective and streamlined collaboration between all stakeholders as every negotiation and agreement is consensus-based.
Key Areas Of Discussion at COP27
Food
Around 12% of the global GDP and 40% of jobs are linked to global food, ocean, and land. The war between Russia and Ukraine has already disrupted the global supply chains, increasing energy prices, and agricultural products, leading to an increase in the food crisis. The global food systems and climate change influence each other.
Recent climate changes have decreased land productivity by 21% and will continue to deteriorate until collaborative efforts are made to achieve climate-resilient food systems. This includes commercializing technologies, promoting eco-friendly agricultural practices, and using climate-resilient farming instead of industrial methods.
Water
Climate change increases the incidence of natural disasters like floods and droughts. Estimates from the IPCC calculate that a two degrees rise in temperature can lead around 3 billion people to face physical water scarcity. This negative effect will be most evident in climate-vulnerable regions like Africa. The COP27 emphasized working on urgent water solutions to achieve a net zero future.
Industry Decarbonization
With increasing population and urbanization across the globe, it's imperative to achieve a low carbon footprint in construction and industries. The logistics used to transport raw materials like steel, aluminum, concrete, and chemicals account for 30% of the total greenhouse emissions, and the percentage is increasing over time.
The focus here is to cut down on the prices of relevant tech and practice clean methods to assist these sectors in transitioning effectively. The first significant milestone in this transition is the First Movers Coalition, where 55 conglomerates worldwide and ten governments have made a public-private partnership to reduce the long-range logistics and transport carbon footprint by scaling clean technologies.
Climate
Amid climate changes, natural disasters are becoming more frequent and devastating. Almost 3.3 billion people live in vulnerable climates and are not well resourced to take the required intervention against these disasters.
If implemented correctly, investing $1.8 trillion in climate adoptions like early warning systems, nature-based solutions, and climate-resilient infrastructure can generate up to $7 trillion within a decade, as suggested by a report by the Global Commission on Adaptation (GCA). This climate adoption agenda was also kept at the forefront of discussions.
Significant Achievements and Agreements in COP27
While keeping the aforementioned goals and areas of focus in mind, the COP27 was held from the 6th until the 20th of November 2022.
Let's review the implications of COP27 on the global economy and what steps are being made to achieve a net zero future.
Creation of Loss and Damage Fund
Since the Paris Agreement's signing in 2015, where developed economies pledged $100 billion to implement practical climate solutions, the next major milestone was the Glasgow Climate Pact held last year — further pushing these leaders to take action. COP27 marks another milestone as the unanimous decision was made to fund, establish, and run a loss and damage fund.
Financial Reformation For Nature and Climate
As mentioned in the agenda discussed earlier, this year's COP involved taking steps in the structural reformation of financial systems that will aid in creating innovative mechanisms. These mechanisms will be tweaked to support climate outcomes and nature at a country or ecosystem level.
Besides financing adaptation measures being a central topic of discussion, little progress has been reported since the Glasgow agreement.
The multilateral development banks were encouraged in discussions to look into providing sustainability-linked loans and sovereign bonds. Furthermore, all the stakeholders of the Financial Sector Commitment on Eliminating Commodity-Driven Deforestation have been using the FSDA initiative.
These FSDA members have already increased their engagement with policymakers and data providers to achieve their goals.
10-Point Plan for Financing Biodiversity
This 10-point plan was moved to connect the worldwide biodiversity finance gap. Sixteen countries came together for this plan, emphasizing that the climate change and nature crises are linked and should be recognized more than ever.
Despite many countries looking ahead at the biodiversity COP15, the outcomes will need to be improved as achieving net zero emissions is never enough to prevent the temperatures from rising.
Political Will to Increase Reforestation
The Forest and Climate Leaders Partnership emphasized halting deforestation, taking strict measures to reverse the loss of forests by 2030, and pledging to show progress in the upcoming COP28. All FCLP member countries have made an action plan where meetings will be held to encourage accountability.
The FCLP will be publishing a global progress report highlighting their progress toward 2030 goals. Significant moves were made by country leaders from tropical regions, including Brazil, Indonesia, and the Democratic Republic of Congo, to prioritize deforestation initiatives in efforts to protect rainforests.
Implementing Forest Pledges
Although the global community pledged to stop and reverse forest loss, little has been done practically to meet the goals of 2030. A UN report reveals that one gigaton of emission reductions are required by 2025, but at the current pace and initiatives, only 24% of the milestone is achieved.
However, everything terrible didn't happen with implementations. The path to reducing forest loss was best practiced by tropical Asia, where Malaysia's deforestation rate dropped by 24% while Indonesia's rate decreased by 25%. Several commitments in disbursing finances for tropical rainforest protection and using resources to plant and grow 7 billion trees in over 60 countries are all initiatives worth noting.
Moving to Nature-Based Solutions
Nature-based solutions were included in COP27, where food and agriculture were discussed. However, it will take time to transform food systems globally genuinely. To achieve net zero emissions and a prosperous global economy, the basic framework of article 6 was decided back in COP26, Glasgow.
Since the start of 2022, stakeholders have been determined to develop a feasible mechanism allowing countries to trade effectively. Discussions regarding this issue remain very complex as countries have to find common ground on issues like how countries would report, how registries will work, and what trading information should be included.
Food Resources
Food made it to the main agenda at COP27. The Egyptian COP leadership launched the Food and Agriculture for Sustainable Transformation, a collaboration to make access to finance easier and ensure food security in countries or regions most affected by climate.
Halting Fossil Fuel Usage
Last year at COP26, the discussions fell apart when it came to the use of coal. While developed economies favored halting coal usage, large economies like China and India disagreed, as many industries and businesses rely on a stable coal supply.
COP27 From a Financial Perspective
Throughout the summit, the delivery of financial resources needed to address natural disasters was bleak. The estimates highlight that clean energy investments must be tripled by 2030, further increasing the investment by $4 trillion. The cost of adopting these positive climate interventions would require $340 billion annually.
Despite the Paris agreement requiring Annex 2 countries to provide $100 billion in funding each year, most stakeholders made smaller contributions. In contrast, other countries like Germany, Japan, Netherlands, and France gave more than the agreed-upon funds.
The pledged public finance is piling in at COP27, but the amount remains far below the expected. America has already committed to delivering $11 billion annually by 2024 and another $160 million for adaptation measures in developing countries.
The United States has announced the Emergency Plan for Adaption and Resilience in Africa, including installing early warning systems, $10 million for the Cairo Center for Learning, $24 million to provide farmers with better insurance, and $25 million for the African Adaption Initiative. Another key player is Germany, which keeps the G7 initiative at the forefront.
The G7 initiative aims at improving disaster risk management in economically unstable and vulnerable countries. The contributions to this initiative include 20 million Euros from France, 170 million from Germany, 7 million from Canada, and 10 million Euros from Ireland.
An overall lack of finances is reported as most Annex 2 countries focus more on their domestic issues than paying the pledged funds. The loss and damage fund made headlines in COP27. Still, several serious questions are being debated, like how to quantify loss and damage, the countries who will pay for the compensation, where the funds will be collected and put, and the acceptable way to disburse the funds.
COP27 and The Private Sector
There are potentially trillions of dollars ready to be unlocked using the proper infrastructure. However, these developments have halted. For example, at COP26, The Glasgow Alliance For Net Zero pledged to disburse $130 trillion from investment banks, equity firms, and hedge funds to improve the climate.
However, the pledge is encountering an uncertain future as the race to zero needs to be acted upon by the alliance.
The most notable deals were prepared outside the COP27 and were focused on specific countries. For example, Indonesia presented its phase out of a coal plant by 2030 and reached zero emissions by 2050. However, this announcement was made at the G20 summit, miles away from COP27.
Other expected side deals include the announcement of $11 billion for JETP in the coming ASEAN-EU summit. Egypt is working to secure $500 million in investments from the EU, US, and Germany for transitioning to clean energy.
The Role Of Global Businesses In COP27
Businesses, mainly the private sector, stepped up during the summit to work on climate adaptation and using low-carbon technology and working to achieve the 1.5 degrees goal.
In the cement and concrete industry, the First Movers coalition of governments and companies signaled the transition to low-carbon technologies to decarbonize the industry.
In an effort to speed up the net zero transition, more than 100 executives and CEOs of conglomerates and corporations signed an open letter at COP27 with a commitment to work with governments for climate change.
Furthermore, companies involved with trading and processing agriculture-related commodities are implementing science-based actions that are traceable and transparent. In the transport and logistics industry, 26 countries also signed an MOU ensuring the new sales of trucks and buses will be emission-free by the year 2040.
Businesses transitioning towards low-carbon technologies will take time and dedication. Still, the future looks promising as businesses slowly recognize the impact climate change has on several aspects of a business, ranging from procurement of raw materials to having issues maintaining a supply chain.
The private sector will undoubtedly play a pivotal role in meeting the global climate goals. 2023 will be the year when governments, businesses, and every stakeholder will implement climate changes and show how they achieved their climate commitments.
Sources
https://www.weforum.org/agenda/2022/11/what-happened-cop27-climate-change-what-is-next
https://www.weforum.org/agenda/2022/09/cop27-emerging-markets-to-shape-climate-agenda/
https://www.weforum.org/agenda/2022/10/cop27-why-it-matters-and-5-key-areas-for-action/
https://www.thegef.org/blog/next-challenge-business-adapting-climate-change
https://www.chathamhouse.org/2022/11/cop27-what-was-achieved-and-what-needs-happen-now
