COP27 Part 1 - Some good news on money

The big step forward, a Loss and Damage Fund 

This COP agreed that richer countries which caused the climate emergency should pay money to poorer countries having to cope with climate damage they didn't cause. This sounds obvious, but it’s a major victory and something to give thanks for, because not only is this the first time a COP has agreed anything about Loss & Damage, it’s the first time they’ve even formally had it on the agenda. Industrialised countries had always been keen to avoid it, despite many calls for it, but this year pressure from climate vulnerable countries got it included. 

We didn’t really expect this agreement and it came at the end of the COP. There’s a lot of hard work to do throughout next year to agree who will pay for it, how much they’ll pay, who it will fund and how it will work. The EU led the way, the US, UK, Australia and others joined in. These countries - all major historic emitters and still big emitters now - want China and the Gulf states to pay in and not to get payouts. China is now the country with the biggest emissions and quite a big emitter per citizen (bigger than the EU, smaller than the US) but is still classified as a developing country at COP, because the definitions were made in 1992. The Gulf states are smaller emitters in total but huge emitters per citizen. Expect a series of battles before and at COP28.

One suggestion is raising money from a levy on international aviation and international shipping, which would be welcome because neither of them are doing much to decarbonise and could do with a push - though of course the transition will need to be fair to workers too. Or perhaps a levy on fossil fuel production. Will the fund only provide grants, or some loans - that can be used again if they’re repaid, but are hard to repay for countries hit hard by climate change and quite likely to be experiencing debt crisis? Will it be user-friendly to apply to, will it be transparent to civil society, how will it ensure funds reach the front lines, and will it include investment in good green jobs for young people? 

Around $340 million was announced for Loss and Damage funding at or soon before COP, from Austria, Belgium, Canada, Denmark, the EU, France, Germany, Ireland, New Zealand, Scotland, Switzerland, and the UK, but not all of it is new money and only some is for the new fund. We had a good meeting with Scotland’s First Minister Nicola Sturgeon before she announced £5 million for the new fund.

No further forward on the $100 billion 

But there was nothing new on the old promise of $100 billion a year of climate finance from wealthy countries to climate-vulnerable ones, every year from 2020-25, to help pay for adapting to climate change and for cutting emissions and finding clean ways to prosper. This was first promised in 2009, the promise has been repeated many times since, but so far, only part of the money has been delivered. Too little of that has gone to the poorest countries, too little has been for adaptation (which is vital but not usually directly profitable), and too much has been loans not grants. All we got was a repeat of last year's promise to hit $100 billion in 2023, and more apologies for the delay. This lack of delivery makes it hard to trust any of the other promises wealthy countries make, and that makes all the negotiations harder. 

There was no progress on agreeing climate finance from2026-2030 either, that's due to be agreed at COP29 in 2024. 

Jessica Bwali, Tearfund, Zambia: 'Every day that rich countries refuse to pay their bill, communities around the world are paying a very real price in homes destroyed and lives lost.’

A small step forward, pushing Multilateral Development Banks

COP agreed that the World Bank, the African Development Bank, and the other regional development banks should scale up their climate funding and make it simpler to access. Their job is to lend money to developing countries at below market rates, usually with plenty of conditions attached. 

The International Monetary Fund creates money for countries - called Special Drawing Rights - and there’s a proposal for them to have a new round of Special Drawing Rights for the climate emergency, as they did for Covid. This could be a significant amount and could get decided at their Spring Meeting in April, or may take longer.

Pressure to get the world’s financial flows out of fossil fuels and deforestation and into tackling climate change grew last COP and this COP, encouragingly, led by Prime Minister Mia Mottley of Barbados. COP agreed that “a transformation of the financial system and its structures” is needed, and it certainly is, because the numbers are huge - reaching developing countries’ climate goals for 2030 will cost $5.6 trillion.

Another small step, the second coal deal

A few countries have a lot of very polluting coal power plants they can’t afford to replace, and last COP several wealthy countries agreed to fund South Africa to build clean renewable energy and storage and start shutting down their coal power stations. They called it a Just Energy Transition Partnership, and this year the second one was announced. This one is $20 billion for Indonesia, and the first one for South Africa is $8.5 billion. These first two deals aren’t enough to replace all the coal power in either country, but they are a lot of money. 

As usual we’ll need to check the details carefully when they’re released. How much is grants - South Africa’s was mostly loans which will be tough to repay - will they be transparent so we can see the money is spent as it’s meant to be, will there be a just transition for coal power workers, will the new green jobs be good jobs? More deals are likely, with Vietnam and Bangladesh next in the pipeline.