Forward Progress at COP27 in Egypt and the Path Ahead

Countries leave the climate summit in Sharm El-Sheikh, Egypt (COP27) showing that they can deliver more equity, implementation, and ambition in the global response to climate change. They have proven that during a global pandemic, an invasion of Ukraine, and geopolitical challenges that they can continue to advance global action on climate change. But much more work remains ahead as the end of this decisive decade is getting closer by the minute.

As NRDC concluded: “The world took an important step forward to confront the climate crisis, and yet much more must be done.”

Coming to Egypt leaders needed to mobilize key actions to ensure that the global response to climate change is more equitable, fully implemented, and ambitious enough to hold temperatures to 1.5°C. At COP27 we saw some important delivery of more actions and a clearer focus on the path ahead. [This post assesses actions delivered in the lead-in and at COP27 against the equity, implementation, and ambition pieces we set out in our preview commentary.]

Turning Emissions-Cutting Promises into Action…and Delivering More Ambition

We came into COP27 with national country targets – Nationally Determined Contributions (NDCs) – that would result in global emissions 16 percent above 2010 levels, as compared to the 45 percent below required to be on a 1.5°C consistent path by 2030. This left us with a significant emissions gap from the national pledges and an even worse picture if only the current domestic actions were delivered by countries. Yet, the international response to climate change has become much more diverse over the years as states/provinces, cities, companies, investors, and others have brought forward sectoral actions to speed-up the transformation – what we used to call “galvanizing the groundswell”. If we fully delivered all the commitments from countries, companies, investors, and key sectors we could be on a trajectory to hold temperatures to 1.7°C.

At the climate summit in Egypt we witnessed some nuggets that will further drive greater climate action this decade, but we leave facing a shrinking timeframe for delivery. Several new elements emerged at COP27 that will shrink the 2030 emissions gap:

• Egypt announced a $500 million deal with Germany, the European Bank for Reconstruction and Development, and the U.S. to shrink its fossil gas consumption and expand renewable energy. Egypt will enhance its climate target by June 2023 under the deal.
• Indonesia announced a new $20 billion Just Energy Transition Partnership (JETP) with major developed countries and private banks to speed-up the decline of coal electricity emissions and expand renewable energy to meet the country’s energy needs. Indonesia should be able to enhance its 2030 climate target based on delivering this partnership.
• Brazil is back as President-elect Lula recommits to have zero deforestation and degradation. He will have to reverse the trend of increased deforestation and forest degradation in Brazil that his predecessor was driving through with weakened enforcement, changes to laws, and illegal encroachment on indigenous land. Given the size of Brazil’s deforestation emissions this shift could have a significant impact on the 2030 global emissions trajectory.
• European Union has signaled that it can enhance its 2030 emissions reduction target to 57 percent (from its current 55 percent).
• China has indicated that its methane action plan will be publicly released soon. Its methane emissions are around one-fifth of the global total so reductions in this sector can help to close the emissions gap.
• Implementation matters. We’ve seen the implementation of a plethora of new domestic and sectoral actions that could help to shift the implementation gap this decade, but significant new delivery will be required in the days and months ahead.

Addressing the Impacts that Can’t be Adapted To: Loss and Damage

As climate impacts mount globally, they are also outstripping the ability of many communities – particularly the poorest and most vulnerable – to cope. You can already see this in the economic development data, with the fifty-five most climate-vulnerable countries having lost about one-fifth of their GDP over the last two decades due to climate impacts. At COP27, there was movement to address the financing needs of loss and damage through two financing strategies.

Agreeing on a loss and damage fund under the UNFCCC. Countries agreed to develop funding arrangements to address loss and damage including the creation of a fund specifically for supporting particularly vulnerable developing countries. Countries created a transitional committee to help operationalize the new loss and damage funding mechanisms, which must make recommendations on the arrangements for consideration and adoption by COP28. The most vulnerable countries in the world pushed for a concrete agreement on financing for loss and damage as this was a central element of what they believed the current international system was missing.

Mobilizing the full suite of finance and tools. The COP27 decision and announcements from key countries sent a strong signal that a variety of financing mechanisms and tools need to be mobilized to support the most vulnerable in minimizing and addressing loss and damage from climate change. This includes:

• A $213 million commitment for the new Global Shield initiative launched by the V20 and G7 countries which will help developing countries more rapidly respond to the impacts of climate change.
• Debt relief measures. Developing countries have significant debt challenges tied to losses and damages that can be addressed through debt relief measures. Relieving this debt burden creates fiscal space for the country to have resources available to respond to the impacts of climate change without going into further debt. There is also an emerging innovation to include extreme weather clauses in country debt agreements.
• Reforms of the multilateral development banks (MDBs). The loss and damage finance agreement asked the international financial institutions, such as the World Bank Group (WBG) and International Monetary Fund (IMF), to find ways to contribute loss and damage finance. The MDBs must accelerate the speed of resource disbursement following a disaster and change eligibility requirements so that all vulnerable countries can access concessional financing after a disaster.
• Mobilization of resources now through existing channels. The E.U. announced over $60 million for loss and damage in Africa, Canada announced $1.25 million for setting up the Santiago Network for Loss and Damage, Austria announced over $50 million over the next four years, First Minister of Scotland Nicola Sturgeon announced around $6 million, Belgium announced over $2 million, and New Zealand announced a dedicated allocation of over $12 million in funding for loss and damage.
• The U.N. Secretary General launched a call for $3.7 billion between 2023 and 2027 for an “Executive Action Plan for the Early Warnings for All initiative”. The initiative seeks to support the expansion of systems to provide advance warning of extreme weather events so countries and communities can minimize the loss of life and damage from climate-induced weather events. Such early warning systems have been a key part of saving lives in India from extreme heat. The COP27 decision also recognized this need and encouraged financing contributions to help expand these systems to all countries.

Mobilizing more Climate Finance

To meet the Paris goals of keeping global temperature rise to 1.5°C and ensuring countries and communities are resilient to the impacts of a warming world, there is a need for significantly scaled-up climate finance. The overarching COP27 decision noted the mismatch between climate investment needs of $4-6 trillion per year up to 2030 and global climate finance flows of $803 billion in 2019-2020. COP27 saw several key developments on ramping up climate finance to support developing countries. These will require continued focus in the coming months to see results.

Delivering on the $100 billion per year target. Developed countries have still not delivered on their commitment to mobilize $100 billion per year by 2020 to support climate action in developing countries, as agreed in 2009. This funding is a vital lifeline for countries struggling to adapt to increasingly severe climate impacts and invest in a just transition to clean economies. The failure to deliver has eroded trust in the negotiations, and COP27 did not deliver major progress in rebuilding this:

• Developed countries have reaffirmed their expectation that they will deliver the target in 2023 and projected that they will exceed it in the following years such that funding between 2021 and 2025 would average $100 billion. Incorporating a commitment to averaging $100 billion over this period into a formal COP decision would have been in the spirit of the original goal, and could have helped restore trust. But some rich countries opposed mention of addressing the shortfalls.
• After COP26 commissioned a report by the Standing Committee on Finance (SCF, the UNFCCC’s technical body on climate finance) on progress towards the $100 billion goal, COP27 requested the SCF to produce further reports in 2024, 2026 and 2028 on progress towards the goal. The report this year did not include any recommendations, after developed and developing country governments disagreed. They need to do better to ensure future reports contain actionable recommendations.

The U.S. needs to deliver more international climate finance in the upcoming budget. Coming out of COP27, the Congressional appropriations negotiations in December represent a can’t-miss opportunity for the U.S. to raise the floor of its international public climate finance. If the United States were to pull its weight on climate finance, it could close the gap to $100 billion. A broad coalition of development, faith-based, environment, health, foreign policy, and business organizations are urging Congressional and Administration leadership to prioritize securing $6.7 billion in direct climate finance for fiscal year 2023, as part of a wider effort to get as close as possible this year to President Biden’s $11.4 billion per year commitment.

Doubling adaptation finance. Adaptation made up only 24 percent of overall climate finance from developed to developing countries between 2016 to 2020, according to the Organization for Economic Cooperation and Development (OECD), and only 37 percent of their public financing was in the form of grants. At COP26, developed countries committed to at least double their collective adaptation finance from 2019 levels by 2025. Despite being a priority of the Egyptian Presidency, COP27 saw only incremental progress on adaptation finance:

• There were welcome new pledges to UN adaptation funds: the Adaptation Fund saw $230 million in new pledges and contributions, the Least Developed Countries Fund received $70 million in contributions, and the Special Climate Change Fund $35 million. These funds have proven track records in rapidly delivering grant-based funding to vulnerable countries.
• Several governments made pledges to increase their adaptation funding for vulnerable countries. The UK pledged to triple its adaptation finance to £1.5 ($1.8) billion per year by 2025, the US announced over $150 million in new adaptation support across Africa, and the Netherlands committed €100 ($103) million for the Africa Adaptation Acceleration Program.
• However, none of these announcements get close to the $20 billion a year in additional finance needed to meet the doubling goal (based on OECD analysis which put adaptation funding at $20 billion in 2019, the baseline year). The final decision text requested that the Standing Committee on Finance produce a report on the doubling of adaptation finance by COP28. But the mandate is vague. Governments must cooperate to ensure the report provides detailed analysis and recommendations to ensure the goal is met, and that there is proper follow-up in the coming years.

Reforming international financial institutions for climate. Efforts to reform the international financial system to help address climate change, deliver on the sustainable development goals, and alleviate poverty have risen on the agenda of world leaders in recent months. Unfortunately, some of the key institutions in the international financial architecture, the multilateral development banks (MDBs), didn’t bring major new shifts in their climate finance at COP27, with a joint communique that failed to grapple with the scale of the crisis. But COP27 saw some key milestones in the coming months that could deliver more action to reform the international financial institutions for better and more climate action:

• A broad and growing group of countries are getting behind the MDB reform agenda. Major World Bank Group shareholders have put the Bank on notice that they need to provide an “initial roadmap” for how they will evolve to better address the challenges of today, including around climate change, by the end of the year. At COP27, French President Emmanuel Macron supported Prime Minister Mottley’s call for a task force to make recommendations for reforms to unlock more climate finance by the spring meetings of the World Bank and IMF in April 2023. And other major economies are calling for MDB reforms: the statement from the ministers of Brazil, South Africa, India, and China (BASIC) and the G20 communique from the Indonesia summit indicate that frustration with MDB intransigence and bureaucracy is widely felt by developed and developing country governments.
• The COP27 outcome text includes several calls on multilateral development banks and their shareholders to make reforms that would allow them to scale up their climate finance, improve access to funding, better mobilize finance from other sources, and ensure funding is better tailored to the needs of developing countries. Moreover, the Sharm el-Sheikh outcome recognizes the need for “a transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors.” This is the most explicit statement the UN climate negotiations have produced on the need for broad financial system reform to achieve the Paris Agreement’s goals.
• With clear signals from COP27 and the G20, governments need to make 2023 the moment to address developing country debt, MDB reforms, debt deferment clauses tied to extreme weather events, and re-channeling of Special Drawing Rights (SDRs). Countries should commit to reforms that enable the MDBs to scale up their climate finance and expand their overall lending capacity. We and our partners have recommended five reforms that could significantly increase the World Bank Group’s investment and action to address climate change.

Finding innovative tools to spur more finance. Some innovative finance measures for climate finance were announced at COP27:

• At COP27, the Africa Development Bank (AfDB) announced it will launch the pilot phase of a new green finance facility that will help countries mobilize private investments toward clean energy and climate resilient infrastructure. The new Africa Green Finance Facility (AG3F) initiative will partner with commercial banks and governments to create an ecosystem of green banks or facilities across the continent. Such locally based financing solutions will be critical for mobilizing private finance at the pace and scale necessary in Africa and other developing regions.
• Expanding sources and contributors for climate finance, including for loss and damage. The Sharm El-Sheik decision on loss and damage finance included signals that there will be efforts to mobilize a variety of sources of finance both inside and outside of the UNFCCC. The E.U. was explicit that its support of such a fund would require contributions from more than just the developed countries. There were also discussions on the need to expand sources of funding in the negotiations on the new collective quantified goal on climate finance, which will be agreed in 2024 and will supersede the $100 billion goal. More than in previous years, calls for innovative approaches to raising climate finance, such as levies on fossil fuel companies, appeared to gain traction with a broad array of governments at COP.

More Ambition from Key Countries

Under the Glasgow Agreement, countries agreed to “revisit and strengthen” their 2030 national climate targets by the end of 2022. Before COP27 Only 24 countries recorded new or updated national climate plans. At COP27 two more countries announced new targets – Mexico and Turkey. We still need countries to significantly step-up their action in this decisive decade. There were some small signs of forward momentum on this during the summit in Egypt and hints of things to come.

Sharm El-Sheik outcome calls for new national targets aligned with 1.5°C by end of 2023. The summit outcome “requests Parties…to revisit and strengthen the 2030 targets in their nationally determined contributions as necessary to align with the Paris Agreement temperature goal by the end of 2023”.

U.S. needs to effectively implement their climate law and deliver more action. America’s climate law makes a significant dent in cutting emissions, but further steps will be needed by the Biden Administration to fully meet the U.S. target to cut climate pollution by 50 to 52 percent by 2030. During the meeting in Egypt the U.S. announced an updated proposed rule to cut methane emissions from America’s oil and gas sector.

E.U. is working to deliver its Green Deal and signaled it can strengthen its target. The E.U. is making its “Fit for 55” law – its target to cut emissions 55 percent below 1990 levels by 2030 – and responding to the Russian invasion of Ukraine with stronger climate action. As a result of these measures, the E.U. has signaled that they can increase their climate target to 57 percent below 1990 levels by 2030 – from their current 55 percent cut.

India will exceed its Paris Agreement targets given its massive deployment of renewable energy, new laws on energy efficiency, and focus on other key near-term actions. At COP26 India released their Long-Term Strategy (LTS), as required under the Paris Agreement, that outlines its path to its net zero target by 2070 target. India was also a forceful proponent in Egypt of including a provision to phase-down coal, oil, and gas (not just coal as the climate summit in Glasgow agreed). That provision wasn’t in the final agreement as a handful of countries blocked it, but India has helped shift the debate to what is necessary to tackle the climate crisis – a phase-down of all fossil fuel emissions. India will also play a critical role next year in helping to advance climate action as the host of the G20 which will be a key forum to advance implementation of a number of the key aspects coming out of COP27 .

China can peak its CO₂ emissions before 2030 and at a meaningfully low level, with the country providing some additional hints of new directions during the two-week climate summit. China has indicated that its methane action plan will be publicly released soon. While details aren’t yet available on the actions China will take, its methane emissions are around one-fifth of the global total, and its efforts to strengthen monitoring, mitigation, and enforcement of methane emissions controls in sectors such as coal mining, agriculture and solid waste would be a huge boost to addressing climate change this decade. During the G20 summit, China and the U.S. agreed to restart talks on climate change which is a welcome new development.

Turning Just Energy Transition Partnerships (JETP) into action. Right before and during the Egypt climate summit there was some important progress on helping key countries speed-up the early retirement of existing coal and gas infrastructure and expand renewables:

• South Africa released its JETP “investment plan” which detailed the needed investment in the electricity sector, green hydrogen, and electric vehicles. The investment plan identifies a needed $68.7 billion over the next 5 years for the country to transition from coal-fired electricity to renewable energy. The investment plan estimates that $28.2 billion of the financing need will come from the private sector and $5.6 billion will come from the multilateral development banks (MDBs) and development finance institutions (DFIs). The combination of these investments is estimated to still leave a 5-year financing gap of $17.7 billion for the electricity sector. The investment plan was endorsed by the developed country partners during COP27 and will now be part of more extensive consultations in South Africa.
• Indonesia, developed countries, and private banks agreed to a $20 billion package to support its transition from coal electricity to renewable energy. As a part of the agreement, Indonesia agreed to: (1) peaking power sector emissions by 2030 at no more than 290 MTCO₂ (down from a 2030 baseline value of 357 MT CO₂); (2) immediately declining power sector emissions after 2030 on an “ambitious trajectory and achieving net zero emissions in the power sector by 2050”; (3) accelerating renewables so that they account for 34 percent of all power generation by 2030 while also increasing energy efficiency; (4) accelerating the early retirement of coal-fired power plants, with the support of the International Partners Group (IPG); (5) restricting the development of “captive plants” (Indonesia has just approved a massive new captive coal plant and has 15 GW in total in the pipeline); (6) freezing the pipeline of planned on-grid coal power plants (Indonesia currently has over 13 GW of such plants in the pipeline); (7) developing a robust just energy transition plan in consultation with key (see leading Indonesian NGOs statement on the agreement). Indonesia and the Asian Development Bank have agreed to retire the 660 megawatt (MW) Cirebon-1 coal plant and Indonesia has been approved for a financing package to retire an additional 1-2 GW of coal electricity plants early. This agreement is a significant new step that will help Indonesia shift rapidly away from coal-fired energy to renewable power, and begin to align Indonesia's electricity sector with the global goal to limit warming to 1.5°C.
• Vietnam and the IPG are still working to finalize a JETP with a goal to agree on the details by the end of the year. Details are still being finalized but it will likely include a mix of public and private investments. The agreement needs to ensure that the energy transition clearly moves away from coal and other fossils since Vietnam’s current draft of its energy plan – Power Development Plan 8 – isn’t yet in line with a 1.5°C trajectory. The country also needs to release the four climate experts that are in jail for dubious tax reasons since “until these four experts are freed and their ability to operate is resolved I don’t think a JETP can survive”.
• Private sector banks who have financed coal plants overseas are beginning to pay for the JETPs. The Indonesia JETP includes a commitment of $10 billion from an initial set of financial institutions including Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered. These banks have been some of the largest financiers of coal fired power plants from 2016-2021: Bank of America ($3.64 billion), Citi ($6.29), Deutsche Bank ($0.62), HSBC ($3.27), MUFG ($5.80), and Standard Chartered ($2.18). Many of these banks have been significant investors in Indonesia’s and Vietnam’s coal build-out so hopefully they will put some concessional finance on the table.
• Egypt agreed to a gas energy transition and renewables expansion. Germany, the European Bank for Reconstruction and Development (EBRD), and the U.S. announced that Egypt will: retire at least 12 gas fired power plants with installed capacity of 5 GW and expand renewable electricity so it accounts for 42 percent of installed capacity by 2030 (five years earlier than Egypt originally committed). This will help deploy 10 GW of wind and solar by 2028. This transition will be mobilized with a $250 million initial amount from Germany and the U.S., with other countries and institutions investing additional amounts in helping with the Egyptian energy transitions.

Africa’s Clean Energy Development. African countries need support to bypass traditional dirty fuels and infrastructure and go straight to building sustainable, renewables-based energy systems. They needed the international community to step up, especially for helping to attract the necessary investments for a just and clean energy transition. There were high expectations that this “African COP” would deliver substantive progress for Africa, but the progress at COP27 seems to have disappointed countries and many observers. Despite some country level deals embracing accelerated coal retirement, capping methane emissions from oil and gas infrastructure, and building out renewables capacity the overall scale of solutions was inadequate in comparison to the continent’s clean energy needs.

Africa’s leaders needed to speak with a common voice in demanding support for its rapid transition to a people-centric, clean, renewable energy for the continent. Unfortunately, fossil fuel interests within the COP27 space added to the mixed messaging from Africa’s national leaders on their preferred path forward for accelerating a just, affordable and enduring clean energy transition. The upcoming US-Africa leaders' summit in December could provide a second shot at scaling up and deploying renewables faster in African countries.

Deploy renewable energy faster. We need a global push to help build the 1,200 GW of wind and solar that the world needs annually through 2030 to deliver on our 1.5°C target. Limited progress was made on this at COP27 as late drafts of the final decision included language to scale-up renewables but was later watered down by fossil fuel interests. One promising movement was the launch of a new partnership between all the renewable energy associations – the Global Renewables Alliance – with a commitment to work together to rapidly scale renewable energy deployment.  

More climate action coming in Canada, but still needs to address its forests climate liability. Canada is moving forward with a series of regulations, rules, and investments to implement its national climate target to cut emissions 40-45 percent by 2030. However, as a recent report from NRDC and Nature Canada shows, the logging industry, which clearcuts more than 1.3 million acres of forest each year, is responsible for more than 10 percent of Canada’s total annual greenhouse gas emissions. Much of this logging occurs in irreplaceable, carbon-rich primary forests, placing Canada’s rate of intact forest landscape loss just behind that of Brazil. The integrity of Canada’s climate plan, as well as its commitment under the Glasgow Leaders’ Declaration on Forests and Land Use, depends on: a full, accurate, and transparent accounting of all major sectors, including logging; a strategy to reduce the logging industry’s emissions in alignment with its broader 2030 climate commitments; and recognition that reducing logging’s emissions is itself a climate imperative that needs to occur in tandem with, not in lieu of, ambition in other sectors.

Laggard country Brazil: is back. A political shift in Brazil has turned the tide in Brazilian Amazon and other key biomes as President-elect Luiz Inácio Lula da Silva has pledged to prioritize climate action, end deforestation, and create a new ministry for indigenous peoples. During his previous two terms as president (2003-2010) Lula da Silva enacted policies to protect the Amazon and Brazil saw deforestation rates drop by over 70 percent.

Laggard country Mexico: signals new climate target but still blocking renewables domestically. There is a potential turning point in Mexico as they announced a stronger NDC during COP27. Mexico indicated its commitment to reduce its greenhouse gas emissions by 35 percent by 2030, an increase from the previous target of 22 percent. Mexico will need to significantly change its direction as its current words don’t match its actions. Groups in Mexico have outlined the kinds of actions that Mexico will need to take to credibly deliver on this target.

Laggard country Turkey: New 2030 target but too weak. Turkey announced a new national target, but the new target still represents a 30 percent increase from today’s levels. This was a missed opportunity as the country could halve its dependence on foreign fossil fuels by reaching 30 GW of wind and 40 GW of solar by 2030.

Sectoral progress: some implementation and some missing actions. Limited progress was mobilized to deliver on the sectoral commitments at the Glasgow climate summit, but there were some promising announcements to scale electric vehicles in heavy-duty trucks, launch a Forest and Climate Leaders’ Partnership to help reverse forest loss and degradation as leaders committed in Glasgow, new implementation of green shipping, and some additional commitments on industrial sectors. Unfortunately, there was limited progress to implement the restriction on overseas public financing of fossil fuels, with the U.S. failing to make public its guidance.

Roadmap for Climate Equity, Implementation, and Ambition: From COP27 to Action

The climate summit in Sharm El-Sheik saw some important progress to deliver a more equitable, implemented, and ambitious response to the climate crisis. Countries rallied around new financing structures to address loss and damage, put a clear spotlight on the need for major reforms to the multilateral development banks, and helped deliver important progress on energy transitions in key emitting countries. The promise of the Paris Agreement is still alive, but we desperately need more leadership in the coming days. As NRDC President and CEO Manish Bapna concluded: “No single climate meeting will solve the climate crisis overnight. But the window to stem the worst of climate impacts is closing quickly. The world must regroup and rekindle its momentum—and never look back.”

COP27 provides a roadmap for the kinds of actions countries must deliver right now!