COP27 began in Egypt over the weekend, as about 200 nations meet to supposedly agree on climate policy. The Conference of the Parties of the UNFCCC, or COP27, is the 27th United Nations Climate Change conference and this year is being held in the luxury resort town of Sharm El Sheikh, Egypt. Global greenhouse gas emissions have increased since last year’s Glasgow climate conference, exceeding their pre-pandemic levels. A recently released United Nations report shows global emissions on track to increase by 10.6 percent by 2030 compared with 2010 levels. According to the Paris Climate Agreement of 2015, those emissions need to drop 43 percent by then for temperatures to be 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial levels. For the first time since climate talks began, delegates at the U.N. climate summit have agreed to discuss compensating poor nations for damage that may be linked to global warming, placing the topic on the agenda. The loss and damage funding is to be paid by the world’s largest emitters for ecological reparations to developing countries. One study estimates that funding for loss and damage could run up to $580 billion a year by 2030. This is noteworthy since the U.S. Senate has never bound the United States to the agreement, as is customary in a treaty establishing obligations upon signatories.
Developing countries want wealthier nations to help finance their transitions from fossil fuels. To date, wealthy nations have fallen short of their promises on transition funding and they have not agreed to new funding beyond what they already provide. They failed on a promise to provide $100 billion per year by 2020 to help developing countries cut carbon dioxide emissions. In 2009, developed countries promised that by 2020 they would transfer $100 billion per year to vulnerable countries. In 2020, they provided $83.3 billion – falling $16.7 billion short of the target, according to the Organization for Economic Co-operation and Development. Recently, two small countries have offered funding. Denmark committed 100 million Danish crowns ($13 million), and Scotland pledged £2 million ($2.28 million).
South Africa, for example, wants wealthy countries, along with international development banks, to pay over 400 billion rand ($26.6 billion) to transform its power system out of coal. At COP26, the U.S., Germany, France, the U.K. and the EU said they would mobilize $8.5 billion over the next three to five years to help South Africa quit coal by replacing coal plants with renewable energy and finding new livelihoods for mining communities. Note that the pledge is not enough money to even transition one country — South Africa —out of coal and into renewable energy. South Africa is the fifth largest coal producer in the world.
The International Energy Agency indicated that just two of the 55 components needed for the world to reach net-zero emissions by 2050 are on pace to be achieved. Those two are electric-vehicle deployment and switching to LED lighting. Factors such as shutting down coal plants and capturing carbon dioxide from the atmosphere are lagging behind.
New Ideas and Issues Abound
The United States is focusing on a new plan for carbon credits, which the Biden administration is hoping to announce at the summit meeting. John Kerry, President Biden’s climate envoy, is supposedly gathering support for a system in which governments would earn credits for cutting their power sector’s emissions, which companies could then buy to offset their own output. In many ways, it resembles the “Cap and Trade” bill promoted by Congressmen Henry Waxman and Ed Markey in 2010. Kerry’s plan lacks key details, however. Also, centering the plan on credits is contentious, because they do not always result in a reduction of emissions. Despite that, credits have grown in popularity as a way for companies and governments to incentivize reducing carbon output.
Corporate commitments to addressing climate change also appear uncertain. Mark Carney, the former governor of the Bank of England who now leads the Glasgow Financial Alliance for Net Zero, indicated that the group’s members were no longer required to follow a U.N. initiative to phase out fossil fuels. Members of the coalition, which have a combined $150 trillion in assets, raised antitrust concerns. Bank of America and JPMorgan Chase, for example, are worried that they could be sued for following global decarbonization pacts. There has been no major climate-related litigation on antitrust grounds thus far, but a number of regulators and officials are exploring it and it has all the hallmarks of collusion in restraint of trade.
Senators including Tom Cotton and Chuck Grassley have sent letters to 51 major law firms warning them of potential antitrust violations for advising clients on environmental, social and governance (ESG) issues. The letter advises the law firms that they and their clients should preserve documents relevant to the clients’ ESG practices in preparation for Congress’s oversight of antitrust violations due to ESG collusion. The letter stated: “The ESG movement attempts to weaponize corporations to reshape society in ways that Americans would never endorse at the ballot box. Of particular concern is the collusive effort to restrict the supply of coal, oil, and gas, which is driving up energy costs across the globe and empowering America’s adversaries abroad.”
The billionaire Mike Bloomberg, a special U.N. envoy on climate change, is focused on reducing coal use. He announced a new international initiative to help 25 developing countries in Africa, Asia, and Latin America phase out coal by 2040 with some wealthier countries ending coal use by 2030. (Bloomberg provided more than $500 million to help green groups phase out coal use in the United States.) Bloomberg’s initiative would include devising business plans, national policies and technical resources to increase the use of renewable energy, but it does not include a new financial commitment.
The alliance of governments — under a partnership with Bloomberg Philanthropies and Sustainable Finance For All, a United Nations body — intend to concentrate on countries where energy demand is projected to grow, and where renewable energy potential is plentiful. Attracting private-sector dollars for wind, solar and other renewable power has been a challenge, particularly in developing countries. Indonesia, for example, is the third-largest coal producer after China and India, and its energy plan foresees coal providing a quarter of its power mix by 2050. Shutting down its 118 coal plants could cost $37 billion, according to a recent report. Many nations in Africa have enormous wind and solar resources but because of potential risks, financing costs may be higher.
Nearly 200 countries are meeting in Egypt as part of COP27 to discuss ways and finances to reduce their greenhouse gas emissions, which are growing globally. European countries have turned to coal as a means to fuel their economies and to keep their residents warm this winter as Russia has drastically reduced its exports of natural gas to them as a means of retaliation against sanctions imposed due to its invasion of Ukraine. Other countries such as China and India have enormous coal potential and use and do not intend to reduce that consumption any time soon as they grow their economies and, in the case of India, electrify its country.
Developing countries want wealthier countries to pay for their transition to renewable energy as reparations for their industrialization. New ideas are coming from John Kerry and Mike Bloomberg for emissions reductions, but the global situation is such that any true and lasting developments are unlikely. U.S. taxpayers should be aware that new obligations may be agreed to at the conference which would seek to raise their tax and energy bills in pursuit of the U.N.’s COP27.