Nationally Determined Contributions
While there may have been some pessimism about the outcome of COP26, this ignores the positive breakthroughs, including on the implementation of Article 6 of the 2015 Paris Agreement which encourages greater international co-operation to reach national targets.
Countries also agreed at COP26 to go away and revisit their Nationally Determined Contributions (NDCs) in time for COP27. The NDCs committed to at COP26 were insufficient to achieve the desired temperature increase limits. Even if they were met in full, which is far from certain, the likely outcome is a disastrous 2.4°C increase by the end of the century. This is enough, according to leading scientific climate authorities such as the Intergovernmental Panel on Climate Change, to leave around half of the world’s population “highly vulnerable” to the negative consequences of climate change. The devastating effects of climate change have already been experienced with the current warming of just over 1°C.
Finance
Such devastation was illustrated recently by the terrible flooding in Pakistan. This strengthened calls for climate justice for poorer, climate-vulnerable nations. Preparatory events in Giza and Kinshasa have seen Egypt’s special representative for COP27, Wael Aboulmagd, openly criticise developed countries for being responsible for the current climate situation and yet still failing to honour the pledge given in COP15 in Copenhagen to provide US$100bn a year by 2020 in climate finance to help poorer countries with resilient adaptations and mitigation. COP27 will focus on the need for the major industrial nations to deliver on this promise.
There are also robust calls for a separate finance facility to address loss and damage. The emblem of COP27 itself poignantly incorporates the Sun of Aten, with rays ending in human hands, symbolising the giving of life and prosperity.
Climate activist litigation
Since COP26 we have seen climate activists grow impatient with the lack of government action. They are getting more sophisticated and there is more litigation around the world, increasingly targeting the private sector, waging campaigns against mining and energy businesses and their insurers in the battle to reduce fossil fuel use.
The now established pattern is activists suing governments for having inadequate net zero strategies first and then, if that is successful, turning their attention to the private sector. Recently, climate activists, including Friends of the Earth and ClientEarth, have been partially successful in a judicial review claim against the UK government, with the court requiring the government to update its Net Zero Strategy to detail and quantify properly how its planned policies will achieve climate targets.
In the UK, the shift to activists bringing claims against corporates has already begun. In March this year, ClientEarth began legal action against the directors of Shell for failing to properly prepare the business for net zero. We remain on the lookout for an uptick in activists bringing claims against UK based corporates.
Energy Charter Treaty
June 2022 saw the end of negotiations on the modernisation of the Energy Charter Treaty, an international agreement on trade and investment in the energy sector. Negotiations to update the treaty ended with the 53 contracting parties arriving at a tentative agreement to bring it closer in line with their climate and clean energy transition goals. However, there remain legitimate concerns that it is too little too late, with some EU countries seeing the only viable option being a complete withdrawal from the treaty. On 21 October, France announced its decision to withdraw, following Poland, Spain, the Netherlands and Germany.
Our expectations for COP27
At the time of writing, fewer than 30 countries have reconsidered their COP26 NDCs. With geopolitical events, including Russia’s invasion of Ukraine and the aftershocks of COVID-19, understandably focusing the minds of world leaders on energy security and inflation, debt and food prices, it may be that the aspirational improvements to global NDCs will not be committed to anytime soon.
Finance will surely be a key issue – developing countries have been vocal in their demand for more and better climate finance, both to address adaptation and loss and damage. As ESG awareness and strategies continue rise up board and national agendas, we must look for the positives. There are opportunities to be had for collaboration that will deliver wider benefits to society worldwide, and insurers, among others, must be ready to play their part.
