In the run-up to COP27, there was a lot of doubt if this climate summit could succeed. Energy scarcity because of the Russia-Ukraine war, tensions between the two biggest emitters, China and the US, and tensions between the Global North and Global South did all not bode well. Moreover, the seven biggest private sector oil companies made around USD 150 billion in profits in the first nine months of this year. Yet governments continue to supplement this loot by granting oil and gas companies USD 64 billion per year in public subsidies.
The urgency is more than clear
Just before COP27 an avalanche of research was published to show the need of stepping up mitigation plans and their swift execution:
- The emission gap report of the UN describes the state of our climate as a closing window.
- Climate Plans Remain Insufficient according to the UN: The combined climate pledges of 193 Parties under the Paris Agreement could put the world on track for around 2.5 degrees Celsius of warming by the end of the century.
- IEA forecasts fossil fuel demand will peak this decade.
- EU risks undermining climate goals with focus on energy prices.
- Scientists warn that exceeding 1.5ºC global warming could trigger multiple climate trigger points.
- Climate change is happening now and is already costing trillions – and low-income countries are paying the price.
Essentially, five key areas were on the table. For most of them progress is meagre:
- Mitigation: A key goal for COP27 was to strengthen the emission pledges made last year in Glasgow to keep global warming limited to 1.5ºC. No such commitments have been made in Egypt, however, meaning that we can kiss this Paris objective goodbye. Or, in the words of Alok Sharma, COP26 President: "I said in Glasgow that the pulse of 1.5 degrees was weak. Unfortunately, it remains on life support. And all of us need to look ourselves in the mirror and consider we have fully risen to that challenge of the past two weeks."
- Loss and damage: As expected, this was one of the most fierce battlefields. Poorer nations wanted more compensation, while richer countries still needed to live up to the 2015 promise to fund them with a yearly USD 100 billion. The good news is that there will be a loss and damage fund. The bad news is that there is no money in it, yet. The total funding required for adaptation is at least USD 2.5 trillion by 2030.
- Nature: There is a strong link between climate change and biodiversity loss. Although this will be the topic of the biodiversity COP15 next month, it would help if there was some notion of the importance of this. Only President Lula from Brazil pledged to do everything he could to protect the rainforest.
- Phasing out gas and coal: It is necessary that in the (near) future, gas and coal are phased out. The only (somewhat) positive note here is the pledge from India.
- Adaptation: Adaptation would come in the form of better flood defences, seawalls, moving communities to higher ground and protecting road and rail links from storms and inundations. Some improvements to previous commitments have been suggested at Cop27, and a doubling of funding for adaptation could be agreed. However, scientists again warn that levels of promised funding still lie well below the investments that will be needed soon.
In all honesty, even with the low expectations, the summit disappointed. As Frans Timmermans, EU Climate Policy Chief stated: "This is the make-or-break decade, but what we have in front of us is not enough of a step forward for people and planet."
Not doing anything is not a policy abstraction. It implies that we let, now and in the future, more people die and suffer from extreme weather events. That we refuse to show solidarity with the poorest people in the world and that we accept wealth inequality remain exacerbating carbon inequality.
Can finance be a force for good on its own?
It does not help to wait for government action. They are playing a chicken game to the max: between the Global North and South, current and future generations, and haves and have-nots. But they forget in this game that you must hit the brake long before you are close to the ravine: the braking distance of climate change is decades.
At Triodos Bank, we made our pledge AsOneToZero: we want to finance net-zero activities. But we also want to do this so that we go together with our clients to zero emissions as soon as possible. Government policies – from carbon taxes to investments in renewable energy infrastructure – would make that task easier for us and our clients.
A global transformation from a heavy fossil fuel-dependent economy to a low-carbon economy is expected to require investments of at least USD 4–6 trillion a year, a relatively small (1.5%–2%) share of total financial assets managed but significant (20%–28%) in terms of the additional annual resources to be allocated. The emissions gap report lists seven recommendations to accelerate climate finance:
🔸 stop funding fossil fuels: they will be stranded assets of USD 4 trillion and hence systemic risk
🔸 Increase the efficiency of financial markets (that risks are priced in)
🔸 Introduce carbon pricing
🔸 Nudge financial behaviour
🔸 Create markets (regulations, blended finance, taxes, subsidies)
🔸 Mobilise central banks
🔸 Set up climate clubs and international cross-border financial initiatives
George Monbiot summarises it nicely in the Guardian:
“The rich world’s governments arrived at the conference in Egypt saying “it’s now or never”. They left saying “how about never?”. We sail through every target and objective, red line and promised restraint towards a future in which the possibility of anyone’s existence starts to dwindle towards zero. Every life is a madly improbable gift. For how much longer will we sit and watch while our governments throw it all away?”
Of course, there is always hope. But there is much more courage needed. Not only from politicians and policy makers, but from everyone who wants to have a liveable future for future generations.