COP27 concludes with a significant “loss and damage” funding agreement

Mayank Chhaya-

Mayank Chayya

Even as the 27th United Nations Climate Change Conference or COP27 concluded today with a breakthrough agreement to provide “loss and damage” funding for countries hit hard by climate disasters, it comes against the backdrop of the $100 trillion plus global economy requiring between $4 and 6 trillion a year to transform into a low-carbon economy.

Given the complexity of the negotiations and profoundly conflicting individual country interests and requirements, it is remarkable that COP27 delivered an agreement reaffirming the commitment to limit global temperature rise to 1.5 degrees Celsius.

“This outcome moves us forward,” said Simon Stiell, UN Climate Change Executive Secretary. “We have determined a way forward on a decades-long conversation on funding for loss and damage – deliberating over how we address the impacts on communities whose lives and livelihoods have been ruined by the very worst impacts of climate change.”

Perhaps the most important outcome of COP27 is that governments agreed to establish new funding arrangements in addition to a dedicated fund to help developing countries deal with the loss and damage caused by the climate emergency.

One specific outcome is the establishment of a ‘transitional committee’ to make recommendations on how to operationalize both the new funding arrangements and the fund at COP28 next year. The first meeting of the transitional committee is expected to take place before the end of March 2023.

“Parties also agreed on the institutional arrangements to operationalize the Santiago Network for Loss and Damage, to catalyze technical assistance to developing countries that are particularly vulnerable to the adverse effects of climate change,” a U.N. release said.

New pledges, totaling more than USD 230 million, were made to the Adaptation Fund at COP27. These pledges will help many more vulnerable communities adapt to climate change through concrete adaptation solutions, the release said.

It is remarkable how heavily dependent the world will be on funding as it grapples with and works to come out of the climate emergency. It is estimated that the global economy, which is now valued at a little over $100 trillion will require between $4 and 6 trillion a year for several years as it shifts to a low-carbon economy. As formidable as the amount is, what makes it even more so is that fact that even the goal of developed country jointly mobilizing $100 billion per year by 2020 has not yet been met.

The amount of money needed requires the world to pull resources from a diverse variety of sources including from the developed world, multilateral development banks and international financial institutions. That is what makes the transformation into a low-carbon economy so demanding and continuing to exploit fossil fuels so tempting.

“In this text we have been given reassurances that there is no room for backsliding,” said Stiell. “It gives the key political signals that indicate the phasedown of all fossil fuels is happening.”

The use of the term “phasedown” is in response to what countries such as India and China demanded in preference over “phaseout” of fossil fuels. The close to $20 trillion Chinese economy, about $3.5 trillion Indian economy, $1.8 trillion Brazilian economy, $1.3 trillion Indonesian economy, $1.3 trillion Mexican economy and a host of other several hundred-billion-dollar economies around the world all want a phasedown rather than a phaseout as desired by the developed world.

“We have a series of milestones ahead. We must pull together, with resolve, through all processes, may they be national, regional, or others such as the G20. Every single milestone matters and builds momentum,” said Stiell. “The next step for change is just around the corner, with the United Arab Emirates’ stewardship of the First Global Stocktake. For the very first time we will take stock of the implementation of the Paris Agreement. It will independently evaluate the progress we have made and if our goals are adequate. It will inform what everybody, every single day, everywhere in the world, needs to do, to avert the climate crisis.”

The U.N. release said, “Stiell reminded delegates in the closing plenary that the world is in a critical decade for climate action. A stark report from UN Climate Change underpinned his remarks, as well as discussions throughout the two-week conference. According to the report, implementation of current pledges by national governments put the world on track for a 2.5°C warmer world by the end of the century. The UN’s Intergovernmental Panel on Climate Change indicates that greenhouse gas emissions must decline 45% by 2030 to limit global warming to 1.5°C.”

COP27 President Sameh Shoukry said: “The work that we’ve managed to do here in the past two weeks, and the results we have together achieved, are a testament to our collective will, as a community of nations, to voice a clear message that rings loudly today, here in this room and around the world: that multilateral diplomacy still works…. despite the difficulties and challenges of our times, the divergence of views, level of ambition or apprehension, we remain committed to the fight against climate change…. we rose to the occasion, upheld our responsibilities and undertook the important decisive political decisions that millions around the world expect from us.”

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