Is COP27 our one stop climate shop?
COP27 and the role of private sector participants on the ground | 11 November 2022
The 27th United Nations Conference of the Parties (COP27) is now underway in Sharm el-Sheikh, Egypt.
Last year’s conference, held in Glasgow, focused intently on lifting individual nations’ emissions reduction goals, and bedding down the framework and rules governing a global carbon market. Whilst emissions reduction targets will need to continue to be increased iteratively, the move from mere pledges and commitments through to on-the-ground implementation is now a major focus for this year’s conference.
Historically, most of the agreements reached at COP have been between respective government leaders. Negotiators from all over the world continue to work diligently in progressing technical issues around how carbon credits will be accounted for and transferred internationally, how government accountability will be ensured through transparent reporting, and how governments will authorise any use of carbon units towards another country’s national targets. These are all important aspects for the establishment of a truly global, interconnected and well-functioning carbon market. If all of this works, the cost of reaching net zero emissions could be reduced by an estimated AU$385 billion (US$250 billion) per year by 2030.
We know that these items take time to be agreed upon, and even more time to be implemented. This year the conference has been affectionately dubbed the Implementation Summit by the Egyptian Government, which presides over the conference this year is eager to see commitments transferred into action on the ground. Inevitably, this creates a key opportunity for private sector action, which tends to move significantly more rapidly than the public sector.
This signifies a marked shift: after 3-plus years of strategically slow government negotiations regarding the rules of the carbon market, the impetus is increasingly on the private sector to create solutions to challenges posed by our changing climate.
Already we have seen fourteen of the world’s largest food conglomerates commit to halting deforestation in palm oil, soy and beef production by 2025. This complements the global deforestation pledge from COP26 – held in 2021 – where 140 countries signed their commitment but which has so far been criticised for failing to deliver concrete action. The move from government promises to private sector action provides for relief and hope in an otherwise sobering context.
This year, Andrew ‘Twiggy’ Forrest’s Minderoo Foundation and Fortescue Metals Group each have their own pavilions at the conference. This may seem like a trivial point, but the shift in interest from industry heavyweights is indicative of a stark contrast to COP 25 – held in 2019 in Madrid – where youth activists were drawing the main spotlight and attracting the attention of the press. Forrest remarks, “We’re here to show solutions… If negotiations with leaders ignore fully commercial solutions to global warming then they’re not leaders.”
TEM’s own Alexander Lewis and board member Justin Punch are on the ground across the two weeks, directly connecting other business leaders to some of Australia’s unique emissions abatement opportunities. This includes unlocking critical capital to channel investment into land-based emissions reduction and sequestration projects, such as the important traditional work undertaken by Rangers in the Kimberley region of Northern Australia. Another growing area of interest is in the sequestration and conservation opportunities across the Pacific. TEM’s work in restoring coastal ecosystems across Papua New Guinea (PNG) will also be highlighted at the conference at the Australian pavilion.
Bringing the work and stories of groups including Arnhem Land Fire Abatement Northern Territory (ALFA NT) and local PNG communities to the COP audience is an incredible opportunity, and not only for TEM to position as Asia Pacific’s leading carbon offset provider and project developer. It is an opportunity to share invaluable knowledge and experience with others across private and public sectors. Knowledge about Australia’s carbon market policy suite, learnings from private sector engagement in the market, technical and regulatory challenges and opportunities, and much more.
These cross-jurisdictional learnings are crucial for carbon markets to be scaled and interconnected beyond national borders. Japan’s GX League, Singapore’s carbon tax scheme, China’s emissions trading scheme, and New Zealand’s own potential voluntary carbon market are all key partnership opportunities for Australian businesses. Not to mention the critical work to be undertaken to build capacity and expertise across Pacific countries, which TEM is supporting through the Indo Pacific Carbon Offsets Scheme.
Over the coming two weeks, in between advocating for credible and robust rules on global carbon markets while showcasing TEM’s inspiring work in Australia and the Pacific, Alexander Lewis and the TEM Wholesale team will be providing snippets from on the ground at COP27. Their focus? Identifying and leveraging impactful solutions for private sector engagement in the global decarbonisation revolution.
Alexander Lewis, TEM’s Chief Commercial Officer is on the ground in Sharm el-Sheikh in as part of the Carbon Market Institute’s Delegation.
Georgia Cox is keeping a keen eye on developments at the Conference while bringing insights to the forefront of our followers.
COP27 Summary of Days 1-2 | 10 November 2022
It is anticipated that more than 40,000 people, including over 120 world leaders, will crowd the conference rooms and exhibition halls of COP27 in Sharm el-Sheikh Egypt, over the next two weeks. The first two days of the conference have confidently set an energising scene of activity from private, public, non-government and civil society.
The general vibe in Sharm el-Sheikh is one of an empowering need for change charged by emotion and urgency. There is no discounting the overwhelming unity for a greater good felt by being a part of this dynamic opportunity for our future.
The exhibition halls reflect an amplified energy with a necessary chaos. Each sweeping corridor seems it is hosting its own stage as an underlying urgency to reach agreements, conclude global frameworks, and finalise trades increases each day.
A clear distinction from last year’s COP26 in Glasgow where it was largely considered a ‘make or break’ in the finalisation of the framework governing a global carbon market (referred to as ‘Article 6’), this year’s conference is already allowing an increase in focus on multi-lateral agreements that will catalyse more climate action. COP27 is, after all, affectionately dubbed the ‘Implementation Summit’.
The negotiations on Article 6 practicalities include how countries can ensure transparency of international credit transfers, how to create accurate carbon accounting systems, and which types of carbon projects will be looked upon more ‘favourably’ continue to form an increasingly important focus at this COP.
Over the coming two weeks, Alexander Lewis and the TEM Wholesale team will be closely tracking these aspects and carefully translating and considering their implications for our clients and stakeholders.
In the meantime, while those technical discussions bubble away somewhat in the background, we can already report on a number of positive developments and initiatives that pave the way for a successful summit.
A key development in the last 48 hours has been the release of a report by the United Nations’ High Level Expert Group on Net Zero Emissions Commitments of Non-State Entities. This highly anticipated report has received wide initial approval from esteemed authorities in the carbon market sector.
This report includes recommendations to ensure that corporates are accurately and appropriately disclosing their carbon neutrality and net zero claims — accountability is key. It recommends that all net zero claims are supported by short to medium and long-term science-based targets across all emissions scopes and that they contain detailed transition plans to support them. Company capital must also be aligned with net zero pathways, ensuring that financed emissions, such as finance provided to fund fossil fuel developments, are not disguised by companies that otherwise promote the sustainability of their business operations.
These steps build the necessary momentum to stamp out greenwashing on a global scale. It will complement the work currently underway of the Australian Competition and Consumer Commission (ACCC) and its international counterparts to achieve similar objectives.
Importantly, the Expert Group recommends that corporates “balance out the rest of their annual unabated emissions by purchasing high-integrity carbon credits”, but that those credits should not be counted towards interim emissions targets. The importance – indeed necessity – of consultation with Indigenous Peoples and local communities is also highlighted as a critical feature of a high integrity carbon projects found integral through TEM’s Cool Fire projects in partnership with Arnhem Land Fire Abatement ALFA.
Aligned with suggestions from the Voluntary Carbon Markets Integrity Initiative (VCMI) earlier this year, the Expert Group also calls for corporates to disclose whether credits they purchase are also counted towards the relevant country’s national climate targets (known as Nationally Determined Contributions ‘NDCs’). This is an important and rapidly evolving development and will place pressure on the Australian and other governments to formalise a position on the treatment of corporate offsets in national emissions accounts.
All of this will organically evolve in the weeks and months following the COP. In the meantime, governments and private sector actors are paving ahead with addressing a critical challenge that is protecting the world’s forests. Twenty-five countries representing over a third of the world’s forestry have established a Forests and Climate Leaders Partnership to scale up protection and enhancement of forests. Australia is one of them, which means our country will be supporting the mobilisation of billions of dollars in additional finance over the coming years to tackle deforestation.
This is partnered with a private sector pact amongst 13 of the world’s largest food conglomerates to halt deforestation in palm oil, soy and beef production by 2025. This momentum is historic, particularly given the additional context of the recent change in government in Brazil which is estimated to allow for the reversal of deforestation in the country by 89% by 2030.
The layering of government cooperation with private sector initiatives is indicative of the ‘layers’ of is not purely a conference for diplomats to negotiate complex texts as is often understood to be the case. Government officials mostly fill the ‘inner blue zone’ of the Sharm el-Sheikh International Convention Center, and the broader blue zone includes both government and private sector actors and NGO representatives. This is where the feel is more of an exhibition and trade hall, where deals are affected and business partnerships formed, more so than a UN conference.
Among the COP, a protest is taking place in a civilised and constructive form. It comes in the form of debate around ‘Loss and Damage’ – which relates to financial compensation paid from polluting countries to countries that are highly vulnerable to the impacts of climate change. It is a sobering point of discussion, but a necessary one, and this COP marks the first UN conference where loss and damage has been firmly on the agenda for official discussion.
Some research suggests climate-linked losses could reach over AU$930 billion per year by 2030. After only three days of the conference, Austria, Germany, Scotland, Belgium, Germany and Denmark have all committed millions to help fund the loss and damage finance mechanism. The target is US$1.3 trillion, each year. New Zealand has also announced a $20 million climate fund to go towards loss and damage in developing countries, particularly Pacific islands.
This is accompanied by waves of public funding being channeled into climate adaptation. The UK and the Netherlands have increased funding for climate adaptation to in the scale of billions of euros and pounds; and a group of 58 vulnerable countries and seven wealthy nations have launched a new Global Shield Initiative to channel additional support to improve access to insurance against climate risk.
In a similar vein, an International Drought Resilience Alliance has been launched to scale up innovation, technology transfer and mobilisation of critical resources. Over 30 countries have joined the alliance so far. It is not known whether Australia is one of them.
Australia has joined the Green Shipping Challenge, and is expected to sign an agreement with Singapore to establish green shipping corridors between the two nations. Others including the UK, US, Norway and Netherlands have also joined together to accelerate green shipping corridors.
This comes as Australia’s new Climate Change Ambassador Kristin Tilley has articulated an intention to integrate climate action into foreign and trade policies. This is a very welcome development – strengthening trade ties with countries in the region like Singapore requires concerted alignment with climate-related policies.
In the midst of a truly global and often overwhelming conference, a little slice of home is found in the ‘Australian pavilion’, located in the blue zone. This is the first time Australia has held its own space at COP, a space for private and government actors to come together to discuss challenges, create solutions, and forge important ties to continue catalysing collaborative action.
It is here that Alexander made his call to action: “…that everyone at this conference, everyone in this industry impacts the scale of investment in nature based solutions – whether you realise it or not – that’s the private sector, the Government agencies, the universities the NGOs, the services firms and analysts – the way you conduct business, the quality of the information you produce, the partnerships you make, the design and implementation of the policy, the decisions made will either lead to a landscape that attracts investment and behaviour change, at scale, or it won’t.”
TEM is proud to be partaking in this global event, and showcasing the high impact, high quality work we do day in, day out.