Blog: Observations From The COP27 Halfway Point – Financial Services – United States – Mondaq

United States:

Observations From The COP27 Halfway Point

17 November 2022

Mayer Brown

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We are half way through COP27, so (disregarding the
intersessionals that will take place during 2023), the negotiations
will “soon” start to focus on Dubai, the venue for next
year’s COP28 summit. Who knows how much progress will be made
before then. One point to note is that COP27 is more of an
“implementation” COP, rather than one with a more
grandiose task, such as ramping up climate ambition.

To continue on that point, there do seem to be signs of
recognition that the 1.5 degrees Celsius “goal” of the
Paris Agreement may be unachievable, and that perhaps focus should
instead be on preventing further increases in global temperatures
more generally (as opposed to meeting specific temperature
goals).

Finance continues to be the focus in a multitude of forums.
Common themes include gaps in fulfilment of existing pledges and
the need for concessional finance (i.e. a loan is not climate
finance if it is regular lending). There continues to be
discussions about the definition of “climate finance”.
Calls for the establishment of a finance facility for loss and
damage (see our previous blog here) remain an ongoing theme. Although not
within the formal COP negotiations (and not strictly about
mobilising finance, but more about its theoretical availability),
Mark Carney, the former Bank of England governor, was keen to
announce on “Finance Day” that $130 trillion of capital
under management is now available to limit global warming. Carney
rightly went on to emphasise the requirement to “plug it
in”, which remains a herculean task.

As to carbon markets, though the broad principles governing
market mechanisms were agreed last year at COP26, there remains
quite a bit of technical work to be done. Current discussions
include the types of projects can qualify for credits. Time is of
the essence – by next year “old” CDM projects will
need to transfer to the “new” Paris Agreement mechanism.
As to country-to-country transfers of emissions reductions
(ITMOs), discussions about the nature of the
registry for transfers are ongoing.

In terms of leadership “from the top”, some have
expressed surprise that so many leaders have attended COP this year
(although in the UK, we have seen that non-attendance makes for a
good opportunity for a dressing down by the media and civil
society, so leaders may view attendance as the path of least
resistance). The U.S. President, though, made a “late”
entrance, and sought to assure other nations that the U.S. is back
as a leader of the climate movement. However, it can be hard to
reconcile hailing hundreds of billions of Dollars of subsidies for
renewables under the Inflation Reduction Act on the one hand, with
releasing strategic crude reserves and encouraging petrol
production on the other hand. Such is the nature of geopolitics in
2022 and such is the challenge of promoting sustainability in the
middle of one of the most challenging energy crises that we have
faced in many years.

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