[co-author: Kerry Mackenzie]
Today marks the second day that climate leaders convene in Sharm el Sheikh, Egypt, for the 27th Conference of the Parties (COP 27) of the United Nations Framework Convention on Climate Change (UNFCCC). Building on Akin Gump’s previous coverage on the topic, this post provides updates on key issues business leaders should track to keep up-to-date on climate policy developments:
Topic One: Climate Finance. Earlier coverage of COP 27 by Akin Gump highlighted how developing countries will use these climate meetings to advocate for funding for loss and damage and adaptation projects. Advocacy by developing countries intensified as COP 27 began, and was rewarded when developed countries agreed for the first time to put the issue of loss and damage on the formal agenda for the event. Although the United States and the European Union (EU), two main holdouts on loss and damage finance talks in the past, have acquiesced to having conversations about the subject at the summit, they have been “skittish” about announcing specific plans for funding a loss and damage program. Meanwhile, more countries will join Denmark in funding their own loss and damage programs: today, Belgium pledged €2.5 million for loss and damage projects in Mozambique.
Developing nations are also reinforcing their call for money from developed countries for climate adaptation projects. Chair of the African Union (AU) Macky Sall and Prime Minister of Barbados Mia Mottley were among the leading early voices making this request. A particular pain point for developing countries continues to be that developing countries have still not fully delivered on their $100 billion climate finance pledge meant to fund adaptation in low-income nations. Experts say that the $100 billion goal was “carefully crafted” to be “deliberately vague,” meaning that countries have under-delivered without much consequence.
Topic Two: Green Transportation. The COP 27 Presidency has identified sustainable transport—especially low or zero-emissions vehicles and green shipping corridors—as a high-priority industry for COP 27, holding a COP 27 Solutions Day to highlight how green transport can play a role in reducing the effects of climate change.
Among the most important initiatives in this sector is the Green Shipping Challenge, led by the United States and Norway, which encourages entities along the shipping supply chain to announce concrete steps at COP 27 regarding how they will put the shipping sector on a pathway toward full decarbonization no later than 2050. The United States is also leading a Collective 2030 Zero-Emissions Vehicle Goal, directing participating countries to announce plans at COP 27 for reaching a collective goal of 50 percent of vehicles on the road being Zero-Emission Vehicles (ZEVs) by 2030. This complements the EU’s Fit for 55 Initiative, in which European leaders agreed to reduce greenhouse gas (GHG) emissions from cars and vans by no less than 50 percent by 2030 compared to 2021 levels.
Topic Three: Methane Emissions Reduction. Numerous countries attending COP 27 are looking to reduce methane emissions as a way to keep GHG levels at 1.5 to 2 degrees Celsius over preindustrial levels. Before COP 26, the United States and the EU launched the Global Methane Pledge to address methane emission rates. Participants in the Pledge, of which there are currently over a hundred, agree to reduce global methane emissions by at least 30 percent from 2020 levels by 2030 as well as bolster the integrity of their GHG emissions reporting mechanisms.
At COP 27, countries participating in the Pledge are expected to reveal their plans for cutting methane emissions. Preempting the publication of countries’ Pledge plans, the International Monetary Fund (IMF) recently released a report on methane emission reduction that recommended, among other things, a $70 methane fee among large economies. The IMF report, when taken together with the Pledge, signals that countries are preparing to make announcements regarding methane reduction that could impact the energy market.
Topic Four: Integrity in Carbon Market Mechanisms. At COP 26, nations finalized the Paris Rulebook, which includes detailed guidance on the implementation plans and structure for the market and non-market mechanisms in Article 6. At COP 27, nations are expected to begin carrying out plans for an international carbon market cooperation and the new UN crediting mechanism, with an emphasis on assuring its integrity. This comes after several entities have announced or strengthened their carbon markets this year: the London Stock Exchange (LSE) launched its own approach to Voluntary Carbon Markets, the EU continues to work hard to finalize regulatory updates for its Emissions Trading System (EU ETS) and recently the United States Department of the Treasury announced that it is exploring its role in the oversight of a voluntary carbon market, as these mechanisms become more commonplace for U.S. business.
We will continue to provide up-to-date coverage on COP 27 across the next two weeks the meetings are convened. Climate change practice co-lead Ken Markowitz, Alex Harrison and Chris Treanor are participating at COP 27 on behalf of Akin Gump and its clients and can provide skilled counsel on the issues featured in this post. For more information on COP 27, visit the UNFCC’s COP 27 landing page.
