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Vol 63 No 23

Published 17th November 2022


Delegates haggle in Egypt as the planet burns

African leaders argued for the continent's fossil fuels at the UN COP27 summit amid fierce debates over energy access and compensation for climate change

Copyright © Africa Confidential 2022

That the UN's climate summit in Sharm el Sheikh has been popularised as the 'African COP' owes as much to the strong African focus of the negotiations as to the location. Whether on 'loss and damage' – the main new agenda item – fossil fuel extraction or renewable energy projects, African states were front and centre. Other developing regions, particularly Latin America, barely got a mention. Ministers and officials were still haggling over the final communiqué with two days before the summit was due to end on 18 November.

On the range of possible outcomes for the 7-18 November summit, from no change at all to an acrimonious break up between the Global North and South, the summiteers achieved some incremental progress.

The most contentious issue at the summit is the question of climate finance being provided by developed to developing countries, though the centre of attention has moved from climate adaptation funding to 'loss and damage'. In October, European Union environment ministers became the latest to concede that the target to provide US$100 billion in climate aid to developing nations would be missed again, seven years after it was first promised.

In Sharm el Sheikh the new financial pledges for adaptation funds were in the millions, rather than the tens of billions needed. The United States made the largest offer, promising $150 million to help African countries adapt to the effects of climate change.

The African Union played its strongest hand yet, thanks to coordinated lobbying by its regional teams, and won a green light to proceed with fossil fuel exploitation and gained much support for the principle of a 'loss and damage' fund (AC Vol 63 No 22, Climate of scepticism). It also appears likely to join the G20, and the support from the European Union on this point is seen by AU officials as a sign of greater respect from Brussels. The first point was always likely: it was simply not credible for the EU and others to scramble for alternatives to Russian gas in the wake of the war in Ukraine, while also urging African states to 'keep it in the ground'.

Leverage
A draft AU paper initially called for a significant expansion of fossil fuel exploration, and was used as leverage to secure financing for green technologies and carbon credit schemes, and for movement on loss and damage (Dispatches 28/9/22, African leaders warn on climate talks failure at UN General Assembly).

In early November, MEPs on the Joint Parliamentary Assembly with lawmakers from the African, Caribbean and Pacific community backtracked on demands that Uganda and Tanzania should halt plans to develop the East African Crude Oil Pipeline because of the potential environmental damage.

The shift to oil and gas was evidenced by African officials' rhetoric, and the fact that 636 fossil fuel lobbyists registered to the COP27 climate talks, affiliated with some of the world's biggest polluting oil and gas giants, including the likes of Shell, Chevron and BP. This represented an increase of over 25% from COP26, amid complaints from many civil society groups that they had struggled to obtain accreditation.

Several African leaders argued for fossil fuel exploration as a means to end domestic fuel poverty. 'There is a lot of oil and gas companies present at COP because Africa wants to send a message that we are going to develop all of our energy resources for the benefit of our people,' said Namibia's petroleum commissioner, Maggy Shino. 'If you are going to tell us to leave our resources in the ground, then you must be prepared to offer sufficient compensation, but I don't think anyone has yet come out to make such an offer,' she added.

Mauritania's ministry of petroleum, mines and energy told reporters that the country held a signing ceremony with BP on the sidelines of COP27 earlier in the week. African Development Bank President Akinwumi Adesina said that stating the right of African states to exploit their fossil fuel resources should be part of the COP27 communiqué.

But there were also several announcements on moving away from fossil fuels. This included an EU-Egypt Renewable Hydrogen Partnership, and Senegalese President Macky Sall presented plans for a 'high-level' panel to mobilise an expansion in African water investment. South Africa reached agreement with state and private financiers on its $8.5bn 'just energy transition' plan to move from coal to renewable energy. 

Fund demand
While the text prepared by Egypt's COP27 presidency stressed the importance of keeping to the goal of limiting temperature rises to 1.5 Celsius above pre-industrial levels, the biggest move came from the demand by the G77 group of developing countries and China calling for a loss and damage fund, with India and Pakistan leading the campaign. The demand has the support of UN Secretary-General António Guterres.

The draft text highlighted a clear divide, with two options for the outcome of the 'process', which could last until 2024. The first option is a new funding arrangement, 'as agreed at Cop 27… to be operationalised no later than by Cop 29', while the second option proposes 'a mosaic of funding arrangements for responding to loss and damage'. The demand of Simon Stiell, UN Climate Change Executive Secretary, that the loss and damage financing facility be up and running with funds to start flowing no later than 2024, appears unrealistic.

Agreement on who finances loss and damage funding is light years away, especially since there is no full definition on 'what a facility is or what shape it might take', US Special Envoy for Climate John Kerry said on 12 November. European Commission Vice-President Frans Timmermans said in late October that the EU could be a 'bridge builder' on financing for loss and damage, but few EU ministers would support increased public funding for loss and damage. Rob Jetten, the Dutch energy minister, conceded that the first step is to recognise there is a loss and damage issue.

Arrangements for funding in the draft text include a wide range of options, but not private funding, though a mixture of public and private funds is probably the only option that would fly in the EU and US. US and EU officials argued that until it is clear what shape it would take, a new fund cannot be established. 'The US and many other countries will not establish some sort of a legal structure that is tied to conversation on liability. That is just not happening,' Kerry said.

In the meantime, the international community is starting at a very low base to deal with costs that run into the hundreds of billions. Only a handful of countries, including Denmark and Scotland, have made financial commitments to loss and damage funding, and these are essentially symbolic. A report called The Cost of Delay, published in June by the Loss and Damage Collaboration group of researchers from 55 vulnerable countries, estimated their combined climate-linked losses over the last 20 years at about $525bn, or about a fifth of their collective GDP.

Indian officials argued that funding should be in the form of grants, not loans. There is also concern among African negotiators that wealthy states could be allowed to channel official development assistance as loss and damage funding, even when it is not related to climate projects. 'It seems that many rich countries including the United States, think that getting the agenda item here are at COP27 is the win. That is not an outcome, that is not a win,' said Rachel Cleetus, from the Union of Concerned Scientists.

 

THE BRIDGETOWN ROAD TO CLIMATE FINANCE

The acceptance of 'loss and damage' funding as a key component of climate finance along with resources for mitigation and adaptation measures was a big political shift at the UN COP27 Climate conference from 6-18 November and it was accompanied by calls for the overhaul of the scope and size of the financial institutions needed to provide the cash.

The 'Bridgetown initiative' launched by Barbados' Prime Minister Mia Mottley and her climate envoy Avinish Persaud set a new roadmap on climate finance to mobilise the US$1 trillion a year in external finance that climate scientists say will be needed by 2030 for emerging markets and developing countries (EMDCs) other than China.

The blueprint builds on the Independent High-Level Expert Group on Climate Finance co-chaired by Vera Songwe, former executive secretary of the UN Economic Commission for Africa, and Nicholas Stern, former senior advisor on development to the British government, which argued that the failure to meet the $100 billion commitment for climate adaptation finance has been largely due to the inadequate growth in official concessional finance and private sector innovation.

Instead of trying to persuade governments, developing finance institutions and the private sector to find the cash, Mottley's central argument is that the use of the International Monetary Fund's special drawing rights (SDRs) reserve currency for climate finance should be significantly expanded via the Resilience and Sustainability Trust established in the Fund, and make it easier to redirect SDRs.

The precedent set by the $650 billion worth of SDRs issued last year to support the global Covid-19 pandemic recovery could be replicated and used to create an International Financing Facility for climate at the global and regional levels.

Sitting alongside the IMF facility would be a directive for development banks to issue $1 trillion a year in low-cost loans and, more speculatively, for a global levy on oil companies to pay for reconstruction projects in developing countries.

It may sound like a shopping-list of wishful thinking – particularly as wealthy countries offer millions rather than billions in financial aid – but the package has the advantage of making little impression on stretched national budgets. It has also secured some support from France's President Emmanuel Macron, IMF managing director Kristalina Georgieva and, albeit more qualified, from United States climate envoy John Kerry and World Bank President David Malpass. Less likely to get a hearing is the Expert Group's demand that official development assistance (ODA) for climate should be doubled by 2025 from its 2019 level, from $30 billion to $60 billion.



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