This month, the developed and developing economies would once again come together at Sharm el-Sheikh, Egypt, for COP27. Coincidentally, it is taking place at a quite dismal time when the global geo-economic landscape is looking increasingly disintegrated.
While on one hand the recent turmoil between Ukraine and Russia have send the whole world into a tizzy, on the other hand the soaring global energy costs, among others, have led to high inflation, and extension or reopening of coal-fired power plants again, particularly in Europe. Ironically, this despite they being at odds with their fight against greenhouse gases for years.
The generic deliberations at COP27 around the threat climate changes causes through rampant cyclones, unseasonal rainfall and temperature changes, acute food insecurity, amongst many others, is a fact people are aware of. COP27 to be relevant requires exhibiting tangible actions. The forum should agree that the haves must help the have-nots, rather than continuing to pass the buck. Climate change has no borders.
Given these semantics, it is vital for COP27 to spend more than three-quarters of their discussion at Sharm el-Sheikh on access to climate finance, which is the key to reducing climate change. It is important for COP27 to deliberate threadbare wherein the developed economies agree to extend untied loans to economies for building mechanisms to mitigate or adapt to climate change.
Less developed countries and small island economies are vulnerable to climate change, making them more prone to such financial crisis. According to data, more than 70 per cent of climate finance is still being provided as loans, which are of commercial nature.
Tech solutions
COP27 hopefully would also help identify opportunities for climate solutions investments. In recent years, a lot of work in innovative technologies is being done by companies, big and small, in renewable and alternative energy sources. It is important for various climate finance institutions to support such solution providers to share their technology where they need them most. In fact, the developed economies should exhibit solidarity and share technologies for the greater good.
Trade is also intrinsically linked to climate change and should ideally find a discussions space at COP27. Effort should be made towards classifying ‘environmental goods’ which so traded could seek refund of duties to an extent defined or full, as the case maybe, to the importers who are using those goods towards mitigating climate change. This essentially would mean that such ‘environmental goods’ would qualify for reimbursement of duties paid, subject to them being used/utilised in the value chain for a product that is environmentally friendly.
At Glasgow in 2021, the International Financial Reporting Standards (IFRS) announced the creation of the International Sustainability Standards Board (ISSB) which would look at ESG reporting standards. COP27 hopefully will be able to move ahead in this space.
Lastly, the need to meet physically every year perhaps raises eyebrows for an institution like UNFCC which is looking at climate change. In fact, more than a hundred possible aircraft from more than 150 economies across the globe makes their way to and from Sharm el-Sheikh to participate in an event which would discuss measures towards reducing climate change — ironically emitting significant carbon dioxide. To over-compensate the climate damage caused by holding a physical event, it is important to show tangible outcomes that over-compensate.
To reiterate, are all equally vulnerable to climate change. Therefore, it is important that COP27 sets aside the rhetoric, and works towards implementing financial covenants which would take care of the well-being and livelihood of the community.
The writer is an economist with India Exim Bank. Views expressed are personal