As COP27 fades into the distance, the distinct overall impression is of a disappointing outcome and wasted opportunity, particularly from the point of view of businesses looking to press forward with their net-zero targets or decarbonisation plans.
The main success at Sharm El-Sheikh was the agreement to establish a fund for developing countries to cope with loss and damage from climate change. This is a significant moment, and even though the details remain to be worked out, it will lead to opportunities in the future to make emerging economies more resilient to the impacts of climate change.
But there was a feeling that the conference was hijacked slightly by oil and gas producers – buoyed by the energy crisis caused by the war in Ukraine and with one eye on next year’s COP28 in the UAE – and that it failed to send the signals that companies need to see to give them confidence to invest in the energy transition.
Gas, gas, gas?
The final COP27 agreement has, of course, been criticised for not going far enough to tackle emissions. It lacked resolutions to reach peak emissions by 2025 and phase down all fossil fuels (as opposed to just coal). The text also included references to “low emission and renewable energy”. The inclusion of “low emission” has been highlighted by many commentators as a sleight of hand loophole for the development of further gas projects.
However, despite the possible gas loophole, there was a huge increase in the number of countries signed up to the global methane pledge – from fewer than 100 at COP26 in Glasgow to more than 150. These nations agree to cut methane emissions by at least 30% from 2020 levels by 2030.
US climate envoy John Kerry said that signatories, who now include major gas producers Australia, Egypt and Qatar, would address not just methane emissions from oil and gas production, but also from waste and animal agriculture, which is also significant.
The summit did bang another nail in the coffin of the coal sector, with the announcement of a $20bn just energy transition partnership between Indonesia and countries including the US, the UK and Japan to help the world’s largest coal exporter to move away from fossil fuels and towards renewable energy sources.
It follows the deal agreed for South Africa agreed at Glasgow. A similar arrangement for Vietnam is also in the works, with India also interested, which would be a huge development.
India also pushed for the agreement to say that all fossil fuels, not just coal, should be phased down. And though that ultimately failed, it is something that will no doubt rear its head again next year.
With consensus growing that limiting temperature rises to 1.5C is increasingly unrealistic, at least for now, COP27 saw the launch of the Sharm-El-Sheikh Adaptation Agenda, which contains 30 adaptation goals for a resilient world by 2030. “This framework signals a growing expectation that business, alongside other actors (countries, cities, investors, civil society), take action to adapt to the acute hazards now facing us,” according to Bob Moritz, global chairman at PwC, and Antonia Gawel, head of climate at the World Economic Forum.
Adaptation is not only a crucial part of the fight against climate change, it also brings huge opportunities, they argue. Transitioning to climate-resilient farming practices could increase yields by 17% without increasing land use. Adaptation will spur the expansion of industries, such as water conservation, heat-resistant infrastructure, and drought-resistant agricultures, supporting prosperity and security for billions of people as a climate-resilient world is built.
Some business leaders view adaptation as a ‘nice-to-have’ initiative rather than a business imperative, but the effort of adaptation is worth it, Moritz and Gawel argue. They point out that, globally, $1.8tbn of investment into adaptation efforts could generate $7.1tn in total net benefits by 2030. A dollar spent on adaptation – strengthening flood and wind defences, for example – saves five in reconstruction, they say.
One outcome from COP27 is that companies and investors will find it harder to make green claims that they can’t back up, after the publication of new standards to counter greenwashing by the International Standards Organization and new guidance from the United Nations’ high‑level expert group on the net zero emissions commitments of non-state entities.
The UN group says companies setting 2050 targets also need short-term, interim goals, public and verified reporting and no more investing in fossil fuels or deforestation. They must also not lobby against climate regulations, and they need to sign up to regulatory restrictions rather than voluntary initiatives.
Catherine McKenna, chair of the group, says that while climate change is a threat multiplier, “well-designed efforts to mitigate it can be a solution multiplier, enhancing food and energy security, equity, and affordability”.
What is clear, as COP27’s outcomes are analysed and the agreement acted upon, is that McKenna’s words highlight a central lesson: despite the lack of ambition from governments at COP27, the need for business to press ahead with climate action, and show real leadership, remains clear and pressing.