​Limited Progress on Climate at COP 27

The COP 27 in Sharm El Sheik has closed without major steps forward in the global commitment to combat climate change. Several reasons contributed to the modest outcome of the summit. First of all, the increase in energy prices following the war in Ukraine has slowed the efforts of many countries towards the energy transition, which itself would require a progressive increase in the cost of fossil fuels that today is difficult to sustain. Added to this is the inflationary wave connected to the growth of public debt that almost all the economies of the planet fueled to get out of the Covid-19 crisis.

The overlapping of the G20 in Bali with COP 27 has reduced the pressure on the leaders of the governments of the main economies, who were not present in Sharm in the last days when negotiations are usually closed with political compromises.

So the media protagonist of the last week (except for the last days in which he was put out of action by Covid) was the head of the US delegation John Kerry, to whom only Brazilian President Lula stole the scene when in his speech in plenary session he guaranteed the stop of deforestation in the Amazon, even if the most concrete commitment was brought by the Vice-President of the European Commission Frans Timmermans with the increase from 55% to 57% of the reductions of EU emissions by 2030.

The Egyptian Presidency of the COP was unable to define a well-structured and targeted agenda: many issues were discussed without reaching a result. This is also reflected in the ineffective final resolution, the Sharm el-Sheikh Implementation Plan, adopted in extra time.

Let's look analytically at the progress, or lack of it, on the issues where developments had been expected.

The recent publication of the IPCC's sixth assessment report on climate change highlighted the need to strengthen decarbonization policies and measures to pursue the more ambitious goal of the Paris Agreement of limiting the increase in the planet's temperature to 1.5 degrees by the end of the century. In fact, the final resolution of COP 27 merely states generically that the 1.5 degree target requires a rapid process of reducing emissions by 43% by 2030 compared to 2019 levels, without indicating how to achieve it.
Considering that the average temperature of the planet has already increased by 1.2 degrees and the peak of emissions has not yet arrived, despite their collapse in 2020 due to Covid, this goal looks increasingly unrealistic.

Moreover, the emission gap report by UN Environment, with the unreassuring title "The closing window", clearly shows that the current commitments are not even in line with the 2 degree target.

The COP 26 in Glasgow closed last year with the commitment to strengthen NDCs, the national emission reduction commitments, precisely because they were considered insufficient. In fact, only a few countries have communicated strengthened commitments. The most recent estimates indicate between 2.4 and 2.6 degrees the increase in temperatures at the end of the century. However, it must be borne in mind that in most cases the commitments of developing countries are conditional on the financial support of developed countries and therefore present a margin of uncertainty.

Precisely the theme of financial support is one of the most debated and controversial results in this COP. The final resolution estimates annual financial flows to developing countries at around $800 million, which corresponds to one-third of what is required to meet the goals of the Paris Agreement.

Only at the last moment was agreement reached on the establishment of a new fund, as part of the so-called loss and damage mechanism, which provides for compensation to the countries that suffer most from the consequences of climate change, which are precisely the developing countries. To make this new fund operational and to systematize the use of the resources already earmarked for this purpose, a special Transition Committee has been set up, which will have to submit its proposals to the next COP.

In relation to climate finance, there is also little progress on Article 6 of the Paris Agreement, the one that provides for the launch of two new market instruments, ITMO (International transferable mitigation outcome) and SDM (Sustainable development mechanism), whose rules were defined last year in Glasgow. On the former, tradable emission rights, there is no decision on certain procedural aspects that allow their transferability. On the latter, which allow credits to be attributed to those who carry out mitigation projects, the United Nations body that should issue them has not been established.

While the final resolution merely reiterates the need to progressively reduce the use of coal (without reference to oil and gas) and eliminate inefficient subsidies to fossil fuels, there is also no significant progress on the voluntary agreements, complementary to the Paris Agreement, which had characterized COP 26 in relation to several sectors. These include the BOGA - Beyond oil and gas alliance, stalled due to the tensions on energy market prices that have discouraged further commitments on the elimination of fossil fuels and the weight of the interests of the extractor countries in this African COP.

Parallel to the negotiations, a rich calendar of side events, official (i.e. approved by the United Nations and carried out in the spaces made available by them) and unofficial (i.e. carried out in the various pavilions and stands of governmental and non-governmental organizations participating in the COP) animated the occasion, touching on a variety of themes, including the protection of biodiversity, the oceans, social justice, the urban dimension. Bocconi University organized an official side event on this last theme, through the SUR Lab, recently established thanks to the collaboration of Hines, Banca Intesa, Prelios and Milano Sesto. The event, organized together with the NGO Cambiamo and the UN Habitat agency, highlighted the contribution of sustainable urban regeneration to reducing emissions and increasing resilience, also through the experience of a series of international cases (link).

The next COP will take place next year in Dubai. Meanwhile, the carbon budget, i.e. the amount of emissions that the planet can still bear, is thinning and will now run out in about a decade at the current rate to remain in line with the 1.5 degree target. To avoid devastating consequences on nature, health, food availability and the economy, it is necessary to reverse course immediately and reach the peak of emissions before 2025. Otherwise we would have to rely increasingly on carbon capture and sequestration technologies, including direct capture technologies from the atmosphere, which are still not available at reasonable scale and cost and whose future development is uncertain.

According to the International Energy Agency, the global investments necessary for a low-carbon transformation of economies require investments of the order of 4/6 trillion dollars a year: a difficult goal in the absence of an international reference framework that eliminates ambiguities, makes all the instruments envisaged active and coordinates the efforts of all the actors involved.