COP27: COP27 Midterm Observations – Financial Services

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We are halfway through COP27, so (disregarding the intersessions that will take place in 2023) negotiations will “soon” begin to focus on Dubai, the venue for next year’s COP28 summit. Who knows how much progress will be made by then. A point to note is that COP27 is more of an “implementation” COP, rather than a COP with a grander task, such as ramping up climate ambition.

To follow up on this point, there seem to be signs of recognition that the 1.5 degree Celsius “target” of the Paris agreement may be unachievable, and that perhaps the focus should instead be placed on preventing further increases in global temperatures more generally (as opposed to meeting specific temperature goals).

Finance continues to be the focus of a multitude of forums. Common themes include gaps in delivering on existing pledges and the need for concessional finance (i.e. a loan is not climate finance if it is a regular loan). Discussions on the definition of “climate finance” continue. Calls for a loss and damage financing facility (see our previous blog) remain a recurring theme. Although not within the framework of the formal COP negotiations (and not strictly on the mobilization of finance, but more on its theoretical availability), Mark Carney, the former Governor of the Bank of England, was keen to announce on “Finance Day” that 130 billion dollars of capital under management are now available to limit global warming. Carney rightly went on to emphasize the requirement to “plug it in”, which remains a herculean task.

As for carbon markets, while the main principles governing market mechanisms were agreed last year at COP26, there is still a lot of technical work to be done. Ongoing discussions include the types of projects eligible for credits. Time is running out – by next year the ‘old’ CDM projects will have to be transferred to the ‘new’ Paris Agreement mechanism. With regard to country-to-country transfers of emission reductions (ITMO), discussions on the nature of the transfer register continue.

In terms of leadership ‘from above’, some expressed surprise that so many leaders attended the COP this year (although in the UK we have seen that absence provides a good opportunity for a bashing by the media and civil society, so that leaders can see participation as the path of least resistance.The US president, however, made a “late” entry and sought to assure other nations that the United States- United are back as the leader of the climate movement being hard to reconcile on the one hand, hailing hundreds of billions of dollars in renewable energy subsidies under the Cut Inflation Act, with releasing strategic crude reserves and encourage oil production. Such is the nature of geopolitics in 2022 and such is the challenge of promoting sustainable development in the midst of one of the world’s most difficult energy crises. islands with which we have been confronted for many years.

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This article by Mayer Brown provides information and commentary on interesting legal issues and developments. The foregoing is not a complete treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action regarding the matters discussed here.

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