This article is an on-site version of our Moral Money newsletter. Sign up here to get the newsletter sent straight to your inbox.
Visit our Moral Money hub for all the latest ESG news, opinion and analysis from around the FT
Welcome back. Incredibly, this is the penultimate of our COP27 special editions, reporting from the ground in Sharm el-Sheikh. The past 11 days have passed in a blur of intense debate, steamy temperatures and complaints about the food. And at the time of writing, we still seem worryingly far from a final agreement.
Technically, tomorrow is the last official day of the COP. Realistically, most people here expect the negotiations to spill over well into the weekend. There is stark disagreement on loss and damage finance for developing nations. Delegates are at loggerheads, too, on the language that should be used in relation to fossil fuels, the primary driver of this crisis. India’s suggestion that the final text should commit to a “phase down” of all fossil fuels, not just coal, has been supported by the EU, but strongly opposed by countries such as Saudi Arabia.
For many of us here, it may feel like a relief when COP27 concludes. But it will be a tragedy if it does so without serious results. (Simon Mundy)
COP27 day 10 in brief:
Countries are fighting at COP27 over whether they should continue to aim for the 1.5C target. The US and EU are sticking with the goal but China and a few other countries have so far resisted efforts. Camilla Hodgson’s piece on the G20’s commitment to 1.5C is here.
Too few women are participating in COP27 negotiations, charities, activists and politicians have warned. A BBC analysis found that women make up less than 34 per cent of country negotiating teams at this year’s gathering in Egypt.
The first draft of the Egyptian presidency’s “cover decision” suggests COP27 leaders will not agree to phase down all fossil fuels when the summit ends, Bloomberg reports.
Carbon trading: more sleepless nights ahead
The days have been long in Sharm el-Sheikh for most attending COP27. Still, spare a thought for the negotiators who had to work late into the night yesterday, struggling to make progress in implementing “Article 6”: the part of the Paris Agreement that deals with carbon trading.
The key bits to understand here are paragraphs 6.2 and 6.4. The former allows for trading of emissions outcomes between countries. So if one country is falling behind on its pledges, it could make up the difference by buying credits from an outperformer. Paragraph 6.4 would create an international carbon market, under which project developers could sell credits to countries, companies or individuals.
But seven years on from Paris, progress towards implementing all this remains agonisingly slow — and the discussions here in Sharm have been raising serious concerns in some quarters.
“We’re seeing that a number of bad options — including some that we thought had disappeared — have come back, zombie-like,” Matt Williams, climate lead at the Energy and Climate Intelligence Unit, told me.
One alarming point, Williams said, is that negotiators are debating whether to include “emission avoidance” under paragraph 6.2 — so countries could trade in hypothetical emissions that they’ve avoided, rather than only emission cuts they’ve actually achieved.
There is a troubling push by some countries, he added, around “confidentiality”. A lack of transparency, some observers worry, could undermine faith in the whole initiative. So too could the lack of a serious monitoring and assessment system.
“There’s a huge risk that the review process turns out to be useless,” Catalina Gonda of the Argentine non-profit group Fundación Ambiente y Recursos Naturales told me. She added that there were big concerns around the carbon market set out under paragraph 6.4 — notably that it could allow for “double counting”, with the same project being put by both a country and company towards their net zero goals.
Vaibhav Chaturvedi, a fellow at India’s Council on Energy, Environment and Water, sees this as yet another point of tension between richer and lower income countries. Developing countries such as India, he said, view this field primarily as a means of mobilising climate-related finance, which has been in such short supply. Richer nations, notably in Europe, are focused on using it to cancel out their emissions effectively, and therefore are naturally more concerned about rigorous standards, Chaturvedi said.
“All these countries have their own targets now,” he said. “The question is how they will meet them.” (Simon Mundy)
Quote of the day
“Brazil is back.” Speaking in Sharm el-Sheikh yesterday, President Luiz Inácio Lula da Silva vowed to put his country at the centre of the fight against climate change and called for COP30 to be held in the Amazon rainforest.
Beyond COP27: an insurance payout for coral
Hurricanes are a leading source of coral reef loss in Central America. They damage marine ecosystems, and weaken coral’s ability to act as a natural defence system against storm damage.
Slow-moving Hurricane Lisa that struck off the coast of Belize at the end of last month did not cause any fatalities but did tear through some of its reef — triggering a response that illustrates the role the insurance industry can play in natural disaster relief.
The coral happened to be protected by a policy purchased by the private environmental Mesoamerican Reef Fund, alongside backers including the German government through its development bank KfW, and the Canadian government. It was underwritten by France’s Axa and the German insurer Munich Re.
A $175,000 payout to finance restoration of the reef was triggered once wind speed in the area reached 70 knots (low compared with other hurricanes but high enough to cause flooding and damage to coastal areas).
The payout, made earlier this week, will go towards clean-up and repair co-ordinated by Belize’s fisheries department and the Turneffe Atoll Sustainability Association. Valdemar Andrade, the association’s chief, described the impact as “a mental, economic and environmental shock”.
This type of parametric insurance offers fast predefined payouts, based on trigger events agreed in advance. Policies can be sold to aid agencies or governments as a form of disaster management.
The model bypasses the traditionally long process of making a claim, and its proponents have attracted interest from venture capital investors this year. But this type of payout would usually go towards rebuilding infrastructure rather than natural systems.
Rowan Douglas, head of the climate and resilience hub at the British-US insurance adviser Willis Tower Watson, who helped arrange the insurance, said the payout highlighted the role of insurers in “ecosystem resilience” and conservation financing for losses from shock events as well as for slow onset climate hazards. (Kenza Bryan)
COP27 has exposed the authoritarian ways of Egyptian president Abdel Fattah al-Sisi. Now, western governments have an opportunity to do more to push Egyptian president Sisi on human rights, our editors write.
“If al-Sisi assumed he could use COP27 to strut the global stage and project a varnished version of his leadership to his domestic audience, he has been proven wrong,” they said. “Instead, the ugliest elements of the autocrat’s rule have been thrust into the spotlight as world leaders wrangle over climate change in Sharm el-Sheikh.”
Recommended newsletters for you
Due Diligence — Top stories from the world of corporate finance. Sign up here
Energy Source — Essential energy news, analysis and insider intelligence. Sign up here