Climate finance at COP27: Progress needed

Die 27. Vertragsstaatenkonferenz der UN-Klimarahmenkonvention findet vom 6. bis zum 17. November im ägyptischen Sharm El Sheikh statt.

The upcoming UN Climate Change Conference COP27 takes place in a time of multiple global crises. Success is uncertain but urgently needed, including on climate finance. What can we expect?

The COP27 faces particular challenges – not least the war in Ukraine is creating a significantly altered geopolitical context and also poses major risks for multilateralism in our world; indirect consequences, such as the energy crisis currently omnipresent in many countries and the global food crisis, which in turn impacts on the growing debt crisis in the Global South, are anything but favorable omens for progress in international climate policy. In addition, there is worrying news on the climate agenda itself. These include, on the one hand, the increasingly visible and severe impacts of the worsening climate crisis, be it the extreme heat waves and forest fires in many countries, the unprecedented drought in eastern Africa, or the catastrophic floods in Pakistan. These dire events are set against the glaring inadequacy of countries’ climate targets under the Paris Agreement. As the UN Climate Change Secretariat recently reported, global emissions are set to increase by about 11 percent by 2030 (compared to 2010). As the IPCC reports, staying within the Paris Agreement’s 1.5°C limit would instead require a reduction of about 45% by that time. Appalingly, most countries have simply ignored the COP26 stipulation that each country should improve its inadequate climate targets within a year (i.e. by COP27). This includes the EU although it has nevertheless vaguely held out the prospect of a further improvement of its climate target at a later date, following the most recent Council conclusioons on COP27. In any case, this is not an easy starting point for the COP27.

Climate finance as key to success

Climate finance can play a key role here – support from developed countries is integral to poorer countries’ ability to adapt to change, protect against future climate risks, advance climate-compatible development, and deal with inevitable loss and damage. Yet, the OECD had confirmed in July that, with 2020 levels reaching only $83.3 billion, developed countries had significantly broken their promise to increase support to $100 billion annually by 2020. Also, the support that developed countries report having provided and mobilised is, according to various assessments (including this one), significantly overestimated, consists largely of loans that further increase the debt burden of poorer countries, and continues to neglect adaptation.

Against this backdrop, COP27 faces these four key challenges on climate finance:

1. Developed countries are still under pressure to fulfill their $100-billion pledge. The current target year is now 2023, but even that is not certain. COP27 could now call on developed countries to further increase cliamte finance so that an average of 100 billion US dollars per year is available over the period 2020-2025 – thus making up for underachievements in earlier years through added climate finace in later years.
2. COP26 set the goal for developed countries to double funding for adaptation by 2025 (within the 100 billion, not in addition). However, experience with the $100-billion pledge shows that there must also be reliable implementation plans in order to generate sufficient certainty that targets and pledges will actually be achieved or met. COP27 should therefore commit developed countries to present a concrete roadmap on how the doubling will be achieved.
3. COP27’s majopr challenge will be how to deal with unavoidable loss and damage as a result of climate change, when the limits of adaptation options are increasingly being reached. There is still no reliable and predictable (let along adequate) financial support for vulnerable countries to address such losses and damages, such as throughh post-disaster reconstruction or compensation for people’s gradual loss of income as a result of slow-onset impacts, e.g. in food production. So far, developed countries have blocked the establishment of a special facility that could reliably provide such support or coordinate it in interaction with other existing institutions. COP27 could at least take a landmark directional decision that establishes such a facility, while also agreeing to work out the details afterwards (e.g. through the Glasgow Dialogue on Loss and Damage. Likewise, at a minimum, a clear mandate to address possible new and additional sources of funding would be necessary.
4. COP29 in 2024 will set a new global goal for climate finance for the period after 2025, which is to build on the 100 billion target but take greater account of the actual needs of poorer countries. Since COP26, governments have been discussing the various aspects of this new target in three Technical Expert Dialogues. A is now scheduled for COP27. It will be particularly important for the new goal to distinguish between a component for direct support for the poorer countries by developed countries and a component for mobilising or redirecting global investment flows. In addition, it would probably make sense to establish a separate sub-goal for adaptation and one for loss and damage. Finally, to keep the new goal linked to evolving needs in developing countries, the new goal should be reviewed and adjusted in periodic intervals.

Outside the formal COP27 agenda

In addition to the items on the formal negotiation agenda, climate finance is also likely to show up as an issue elsewhere. For example, a number of pledges by individual developed countries to various multilateral climate funds – such as the Adaptation Fund or the Least Developed Countries Fund – are to be expected. The German government and other actors could also make pledges to the Global Shield against Climate Risks launched by the G7. Such pledges are usually important and welcome, but happen within the $100-billion pledge and thus do not provide additional money. Also of interest for COP27 is the question of when the German government will begin to implement its pledge to increase climate finance to at least six billion euros by 2025 – so far, funds are to remain at around 4.3 billion euros at least for 2022 and 2023, and there are currently no plans for growth by 2025, even though Chancellor Olaf Scholz reaffirmed his predecessor’s pledge at this year’s G7 summit. The German government could also embarrass itself with regard to the initiative launched at COP26 by numerous countries (including Germany) to end public investment in fossil energy projects abroad – against the backdrop of plans to replace the elimination of gas imports with new gas projects abroad, there is a danger of double standards and inconsistency here.

Jan Kowalzig, Oxfam
Sabine Minninger, Brot für die Welt
Sven Harmeling, CARE
David Ryfisch, Germanwatch