The United Nations COP27 climate summit beginning in Sharm el-Sheikh, Egypt on November 6 has a long to-do list. The 35,000 delegates and more than 100 heads of state expected to attend will not be able to check everything off over the course of the two-week gathering. And with the global energy crisis triggered by Russia’s war in Ukraine tightening governments’ budgets for climate action, it’s far from clear if countries will follow through on commitments made at last year’s COP summit in Scotland to dramatically increase financing for climate-change mitigation and adaptation.
But despite these headwinds, there remain glimmers of hope for meaningful climate progress at COP27.
The United States and the European Union have accelerated policies to promote clean energy, helping to open up a credible path to reducing greenhouse gas emissions enough to keep global temperature rise below catastrophic levels — a path that seemed more elusive even just a year ago.
There are also meaningful opportunities for progress in the Global South, which includes the large number of countries that are least responsible for carbon emissions but face the greatest harms from climate change. The world’s richest nations have yet to meet commitments to finance these poorer nations’ transitions to a low-carbon future, but there’s potential for progress with efforts to structure clean and just transitions in countries such as South Africa and Indonesia.
At the same time, ground-up decarbonization efforts could accelerate beyond the path set by developed countries. In India, hundreds of millions of people could exchange fossil-fueled two-wheeled and three-wheeled vehicles for battery-electric-powered ones, for example. And throughout sub-Saharan Africa and other parts of the Global South, microgrids powered by solar panels and batteries could bring electricity to hundreds of millions of people who now lack it and supplant dirty centralized energy for the hundreds of millions more who are now served by unreliable grids.
These are some of the factors that Jon Creyts, the new CEO of climate and clean energy think tank RMI, has focused on as he’s been preparing for COP27. Canary Media, which is an independent subsidiary of RMI, sat down with Creyts last week to review the state of play for the upcoming U.N. summit.
A focus on the Global South
First of all, Creyts says he thinks “the significance of the COP being in Egypt right now is huge” — it’s the first time in six years that an African nation has hosted the annual summit. The location brings additional focus to “this widening divide between the Global North and the Global South, and in particular, the capital starvation that’s happening in the Global South right now when it comes to the energy transition.”
One major theme of the talks will be “loss and damage,” U.N. shorthand for discussions about how the wealthy world should compensate poorer countries that have already been hurt by climate disasters. Other big themes, Creyts said, will be “resilience and adaptation” — how to prepare communities for a world changed by climate — and “financial flows and transfers” — meaning who will be paying how much to whom. It’s far from clear what progress might be made on these issues, however.
Rich nations have woefully underdelivered on a 2009 promise to provide $100 billion per year to developing nations for climate mitigation (transitioning from carbon-emitting systems to cleaner forms of energy, transport and land use) and climate adaptation (hardening infrastructure and preparing communities for the floods, droughts, heat waves and sea-level rise driven by climate change). And that $100 billion figure pales in comparison to the estimated range of $140 billion to $300 billion per year that developing nations will face in climate-adaptation costs alone over the coming decade.
Nor have agreements been reached on how rich nations can compensate poorer nations that are trying to recover from the loss and damage already caused by climate change. That’s a bitter pill for the millions of people suffering from catastrophic flooding in Pakistan and Nigeria, harsh droughts in Africa and China, and devastating heat waves across the globe.
This lack of public-sector capital is matched by a lack of private-sector capital flowing to the Global South. Private lenders provide only a tiny fraction of the total funds flowing to climate investments in developing nations.
Meanwhile, multilateral development banks such as the World Bank and International Monetary Fund are under increasing pressure to move more quickly to make loans and grants to combat climate change, Creyts noted.
These trends mirror the broader gap between the global need for investments to combat climate change — at least $3 trillion per year, according to the U.N. Environment Programme — and the roughly $630 billion per year now being invested, according to the IMF. This gap, along with the continuing failure of most countries to meet the carbon-reduction targets they set at the 2015 COP21 in Paris, leaves the world on a path to well exceed the 1.5 to 2 degrees Celsius rise in global temperature that climate scientists agree will spell disaster for the world.
These failures are particularly frustrating given the enormous rewards that acting and investing heavily in climate solutions could yield, Creyts said. “One of the big fallacies about the energy transition is that it’s going to necessarily be an economic drag point,” he said. Rather, the shift to clean energy offers huge economic dividends. “For every million [dollars] that we invest in fossil industry, we get about two and a half jobs,” he said, while “we get almost seven jobs for every million invested in clean energy.”
Energy crisis and energy transition: An uneven playing field
The global energy crisis does offer an opportunity for clean energy to cement its predominance over fossil fuels, Creyts emphasized. The International Energy Agency’s new World Energy Outlook reports that the price shocks of this year have driven governments around the world to seek longer-term energy security by making investments in renewable energy, electric vehicles and other carbon-free resources, leading to forecasts of a plateau in fossil-fuel demand by the mid-2030s.
“I think we now have the momentum and a pathway to get 3 or 4 or 5 billion people to a net-zero economy at or near 2050,” Creyts said. But without major support for developing nations, for another “3, 4 or 5 billion people, we don’t have a pathway right now. And if that’s the case, we have failed fundamentally.”
The world will not be able to decarbonize unless developing nations are offered a path to grow their economies without developing their own fossil-fuel resources. As long as governments and banks continue to invest in fossil fuels, that path will remain elusive.
Creyts pointed to the example of Indonesia, which has enough coal reserves to supply more than 200 times its annual consumption. Indonesia’s government has reported that rich countries haven’t responded to its call for direct investment of the estimated $600 billion it says will be needed to replace its coal generation capacity with renewable energy. Finding ways to drastically reduce the capital required to make that transition will be vital for the country’s coal phaseout to become a reality.
Similar challenges face African governments that are responding to fossil-fuel shortages with demands that they be free to invest in exploiting their relatively untapped reserves of natural gas to serve European markets. Without progress in providing the hundreds of billions of dollars African nations need for climate mitigation and adaptation, those demands will be hard to ignore.
“This should be a moment of great democratization of access, of freedom from resource constraints,” Creyts said. “The idea of a two-speed world — a world where those that can least afford to manage the negative consequences of climate change are the ones that are not getting the kind of access to the resources to address it — doesn’t make any sense.”
Filling the financing gaps
RMI is focusing much of its attention on helping developing nations build capacity to design climate mitigation and adaptation programs that can draw their fair share of international capital.
“We’re thinking about ways to grow leadership capacity so that countries and communities throughout the Global South can choose the pathway that makes the most sense for them,” Creyts said. That work includes programs such as the Climate Finance Access Network and the Energy Transition Academy, which support individuals and organizations in developing nations.
RMI is also working on novel structures to enable financing for the myriad climate investments needed around the world, Creyts said. “We’re very much focused on the financial acupuncture points for how we get that capital to flow in different ways,” he said. “How do we help multilateral institutions shift and change their roles here overall?”
One aspect of that work involves finding viable models for blended finance, a mix of public and private investment where governments and multilateral development banks can reduce the risks of lending to encourage greater private-sector engagement.
Today, every dollar in World Bank funding for projects in the Global South yields less than one additional dollar in follow-on financing, he said. “It should be $10 of private capital for every $1 of public capital, with a focus on creating blended capacity here so that we get a multiplier effect. And that’s simply not happening on the basis of how the projects are selected by the World Bank and others.”
This concern is shared by John Kerry, the special presidential climate envoy for the Biden administration, who has been increasingly strident in calling on the nations that fund the World Bank and IMF to pressure these institutions to increase climate funding.
“We’re looking at how to significantly increase the leverage and the amount of money that the banks are able to deploy to meet development needs, and to help…developing countries that are trying to do the right thing,” Kerry said during a press conference at the Breakthrough Energy Summit in Seattle last month. “Most people think that the World Bank today needs to be taking some risks. They can’t be operating by the same standard as a typical commercial bank.”
One way to reduce this reluctance on the part of multilateral development banks is to design and implement a few vanguard projects that can serve as precedent, Creyts suggested. “Once the pattern is established and there are reference projects to be executed against, it becomes more straightforward for financing to happen.” One example is the Global Energy Alliance for People and Planet, which pledged last year to help finance the transition from coal and other fossil fuels to clean energy with $1.5 billion in philanthropic funding and $9 billion from international development institutions, with the aim of mobilizing up to $100 billion in follow-on private investment.
There may be limits to private-sector appetite for climate investments at this scale, however. Recent data shows that blended finance has been falling over the past year as the global energy crisis has crimped available capital. “We need to take a much more cautious approach in terms of projecting how much it can fill the gap,” Rachel Simon, climate and development policy coordinator for nonprofit group Climate Action Network Europe, said in a pre-COP27 press conference this week.
A major proving point for international climate finance at COP27 is expected to come in negotiations over the future of the Just Energy Transition Partnership, a pledge made at last year’s COP by France, Germany, the U.K., the U.S. and the EU to channel $8.5 billion to aid South Africa in speeding its shift from coal to clean energy. While both South Africa and Indonesia have secured $500 million apiece from the World Bank–affiliated Climate Investment Funds to shift from coal to renewables, the total investment required will be far greater than that.
Building the energy transition from the ground up
Africa, where an estimated 600 million people live without access to electricity, could be ground zero for another form of energy transition, Creyts said: microgrids that take advantage of low-cost distributed solar power and batteries to deliver cleaner and more reliable power at a lower cost than building central power plants and grid infrastructure.
“Many microgrids that are built [with renewables] can be not just more cost-competitive, but also provide greater resiliency and support for local economies,” he said. That view is backed up by studies by the World Bank that found that nearly half a billion people around the world could be cost-effectively served by minigrids and microgrids by 2030.
Microgrids are also a job-creator, Creyts said — if the investments in workforce development can be made alongside microgrid financing. For Nigeria to build the amount of solar needed to reach its Paris clean energy targets, the country will need to grow its number of solar installers from about 800 today to about 25,000 in the next few years, he noted. “The idea of building up that leadership capacity to allow or to support a transition happening of that magnitude is just enormous.”
Another example of ground-up transformation is the Shoonya campaign, he said. The partnership between RMI and India’s government think tank NITI Aayog, named after the word for “zero” in Sanskrit, has created a labeling and marketing regime for electric two-wheeled and three-wheeled vehicles. Small vehicles outnumber four-wheeled cars on India’s roads, and the campaign’s aim is to promote the cleanliness of electric versions.
“In the first few months of this year,” small electric vehicles “delivered over 50 million packages or people” across India, Creyts said. India wants 80 percent of all small vehicles on the roads to be electric by 2030. To make that happen, the small businesses and solo owner-drivers that provide most of the country’s delivery and taxi services will want to be able to earn a premium price for their service, which is what the Shoonya label is designed to encourage.
This bottom-up transformation offers an alternative to the idea that all innovation must flow from wealthier countries to less wealthy ones, Creyts said. In other words, it’s a way to reverse the 20th-century structure of rich nations dominating technological advances and resulting profits. While big-picture issues of global financing gaps and climate inequities will dominate the debate at COP27, these kinds of efforts indicate how small-scale improvements, multiplied across millions, can make a difference.