Perspectives from COP27 | United Nations Framework Convention on Climate Change, Sharm El-Sheikh, Egypt – What’s Different this Year?

COP27 high-level dialogue is complicated, and negotiations have been tough. The agreement spurs heated debate, but climate change hopes for convergence toward achieving the 2015 Paris Agreement goals remain.

Concerted global action is needed to put the brakes on global warming and save the planet. The COP27 deal endorsed the global commitment to limit temperature rise to 1.5 degrees Celsius above pre-industrial levels. The pledge also reinforced action by countries to reduce greenhouse gas emissions and adjust to the expected impacts of climate change—enhancing the financial support, innovative technology, and capacity building needed by developing countries. It disappointed countries pushing to phase out all fossil fuels. The deal was a win for strong proponents of the “loss and damage” program, through which rich countries commit to helping developing countries technologically and financially cope with climate change’s devastating consequences. However, a more significant impact is needed. Climate talks are supposed to provide opportunities for solutions by mobilizing action. COP27 fell short of clearly defining this desperately needed action to reduce emissions aggressively. The influence of the fossil fuel industry and oil-rich countries prevailed.

I attended the COP27 meeting at Sharm El-Sheikh from November 10-16, 2022, and my general impression is optimistic, based on the energy in the pavilions, the panel discussions, the youth forums, and, most notably, the messages by the decision-makers. Following are my firsthand impressions.

The Public Sector

Governments need to instill credibility in climate action. One such credible act is the Inflation Reduction Act (IRA) in the United States, which sends a strong message to the rest of the world. The IRA dedicates $369 billion to energy security and climate change. The US pledge is a 50 percent reduction in greenhouse gas (GHG) emissions by 2030. President Biden, in his speech at Sharm El-Sheikh during the COP27 meeting, reassured the world leaders that the US stands firmly behind this pledge.

A more anticipated and eagerly awaited answer to a more difficult question for President Biden at COP27 was the increased involvement of the US in climate finance to aid developing countries in their transition to green energy. The US and other rich countries lag in fulfilling their promise to contribute to climate finance, which was expected to start in 2020. International climate finance is at the crux of this year’s COP27 discussions, as developing countries that suffer from climate change demand financial and technological help from the rich countries to cope with the “loss and damage.” In the US, not everyone is equally affected by climate change, with vulnerable populations suffering the worst impacts of global warming.

Brazil’s President-Elect, Luiz Inacio Lula da Silva, has sent a strong signal of his commitment to climate action by making COP27 his first international meeting after defeating President Jair Bolsonaro in October 2022. He vowed to reduce deforestation of the world’s largest rainforest and promised to protect the indigenous people who live in the rainforest. Lula will also create positions in his Cabinet dedicated to climate action.

Pakistani Prime Minister Shehbaz Sharif pleaded for Pakistan to be helped, not drowned financially. The country was stranded for funds, on the verge of default coping with devastating floods across one-third of its territory. While Pakistan received a $1 billion loan from the International Monetary Fund to help with the disaster, the damage was estimated to be over $30 billion. With the increased cost of borrowing, Sharif argued, most vulnerable countries risk being pushed into a “debt trap.” Rich countries have not fulfilled their promise to provide $100 billion annually for climate finance to the developing world.

Saudi Arabia has committed to eliminating GHG emissions by 2060. They invest billions of dollars in renewable energy and have installed two impressive giant green domes showcasing the Saudi Green Initiative. At the same time, their rhetoric includes keeping business as usual regarding oil production. The message was: “we can do both.” The United Arab Emirates, the host of next year’s COP28, has committed to eliminating planet-warming emissions by 2050.

The European Union (EU) has a complicated political situation. Senegal activists accused the bloc of buying gas from Senegal to solve EU problems and reduce dependency on Russia, not to help Africa. What helps the EU, though, is that the union has been the best actor in providing the $100 billion pledged by the rich nations to help developing countries. Additionally, Europe has been involved in an enormous scope of innovation and clean energy implementation across the board. Ursula von der Leyen, the Commission President, stated in her Sharm El-Sheikh address that the EU is “massively accelerating the roll-out of renewables.”

The Private Sector and Its Confluence with the Public Sector

If every government in the world makes commitments towards net zero, the world will still fall short of including the crucial obligations of the private sector. Corporations are essential partners on the journey to net zero, enabling target setting for emission reduction in a tangible way with solid and visible results when targets are met. The world needs the public and private sectors to act synchronously through open dialogue to save the planet.

In Sharm El-Sheikh, it was inspiring to hear a panel featuring the First Movers Coalition (FMC) of 65 companies that joined and committed to making substantial progress towards net zero and sustainability. President Biden launched FMC in partnership with the World Economic Forum at COP26 in Glasgow. FMC is dedicated to decarbonizing seven “hard to abate” industry sectors (Aluminum, Aviation, Chemicals, Concrete, Shipping, Steel, and Trucking), accounting for approximately 30 percent of global emissions. The FMC members have pledged to decarbonize these sectors at a pace to keep the earth on a pathway that does not exceed 1.5 degrees Celsius increase in temperature by the end of the century. For this life-saving mission to be accomplished, low-carbon technologies (not yet competitive with current carbon-intensive solutions) must reach commercial scale by 2030 and realize net-zero emissions worldwide by 2050. Besides incurring higher costs, FMC is increasing its commitment to purchasing materials and transportation solutions from suppliers using zero-carbon solutions. The Coalition has responsibilities to connect members with financial institutions to ensure investment in critical technologies contributing to the planet’s longer, net-zero future.

Alongside COP27 was the World Climate Summit (Investment COP), where encouraging partnerships between the public and private sectors were visible. The Investment COP was hopeful and promising, and in addition to pledges, actions taken towards net zero were onstage. One impressive panel discussion featured Jan Dusik, Deputy Minister in charge of the Climate Protection Directorate at the Ministry of the Environment of the Czech Republic, and Drew Murphy, SVP of Strategy, Corporate Development, and Sustainability at Edison International.

Dusik talked about the importance of creating a governance framework for a sustainable future, stressing the need for the financial markets to embrace the new way of thinking. While the government, he said, can pave the road, the private sector needs to take it from there and walk that road. He emphasized the need for financial institutions to be motivated and to embrace the challenge of financing the solution to climate change.

Edison’s Murphy discussed the need to think horizontally and vertically, engage in collaborations across sectors, and cooperate with the supply chain. He stated that the energy market is very local, with different infrastructure, costs, and regulatory environments. Hence, the energy solutions need to be local. He added that the electrification of vehicles and buildings is an excellent way to start. Edison spent billions of dollars in California to modernize the grid to make it more resilient. In the energy transition, he said, it is essential to coordinate the efforts and invest the money in the right places.

The Role of Finance in Climate Change

Unlike before, emerging markets were the centerpiece of the climate-finance discussion this year and are a vital piece of the puzzle. The complete picture is essential for climate-focused commitments to Just Energy Transition Partnerships. Developing economies need help, and developed economies need to commit to helping.

Finance is essential for achieving the Paris Agreement goal of not exceeding the 1.5 degrees Celsius increase in temperature by the end of the century. Finance can help by facilitating the issuance of green or blue bonds, obtaining resources to protect the environment, preserving biodiversity, keeping the coral alive, and improving air quality. But this is not all. Finance is more than bonds, more than loans for a good cause. Finance is at the core of the private sector. It can facilitate significant investments in innovative green technologies and help them grow and become competitive with their carbon-based counterparts.

In 2022, it has become more challenging to lend to renewable energy projects since the world is no longer in a low-interest-rate environment like the decade after the 2008 global financial crisis. The interest rates have increased, and inflation is the highest in over forty years. Naturally, at the COP27 meeting, there were discussions about the risk of borrowing and lowering the cost of green borrowing. While longer-term borrowing might be safer in developed countries, additional risks, e.g., political risk, may need to be considered in emerging markets. This added risk could increase borrowing costs and stifle innovative technology development.

Disinformation in Time of Climate Crisis

Working on solutions to climate change is challenging enough. Disinformation about climate change is akin to adding fuel to the fire. The problem of disinformation about climate change has become severe, and many academics are engaging in research aimed at dispelling the deception and educating the public about the dangers of global warming.

One such project, “Disinformation in Time of Climate Crisis,” has been funded by the Boston University Institute for Global Sustainability (IGS) in partnership with the Rafik B. Hariri Institute for Computing and Computational Science & Engineering and supported by three BU Colleges: College of Communication (COM), Metropolitan College (MET), and College of Engineering (ENG). The project leaders (Wells, Vodenska, and Robinson) and champions (Amazeen, Kim, Stringhini, and Krishna) have grappled with analyzing the disinformation on social media and native advertising. The preliminary finding is that disinformation is in disguise, and it is difficult to disentangle it from the truth. How do you wrap your head around it? How do you keep people who spread disinformation accountable? Reading the disinformation leaves the impression that someone does not want to present the entire picture but just one piece of the puzzle. Seeing the big picture with only two or three parts of a 100-piece puzzle will be tough. The answer should involve policymakers. Climate change disinformation needs to be regulated. Half-truths and misleading communication regarding climate change are damaging. People and corporations that disinform or mislead the public must be held accountable for their harmful actions.

I am honored to be one of the leaders of this project. Moreover, the research questions surrounding disinformation in climate change keep me up at night. There is a great urgency to establish a policy framework to deal with the proliferation of misleading statements on climate change. We hope that with our focused research, we can contribute to paving the way for establishing such a framework.

Irena Vodenska, affiliated faculty with the Boston University Institute for Global Sustainability (IGS), is a Professor of Finance and Director of Finance Programs at Boston University’s Metropolitan College, where she is also a chair of the Administrative Sciences Department.

The opinions expressed herein are those of the author and do not necessarily represent the views of the Boston University Institute for Global Sustainability.