By: Liz Bowen and Justin Lindemann
Image (above) of attendees at the COP27 Opening Ceremony on November 7, 2022 (Adapted from: UNclimatechange, Flickr)
There were a plethora of historic announcements made at COP27 and with the global climate event now wrapped up, commitments enter the phase of action. Looking forward, a significant number of these commitments could have substantial implications for the domestic and international clean energy industries.
The Conference of the Parties
Since 1995, Heads of State, climate activists, NGOs, civil society representatives, and many other stakeholders have met at the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change. The COP is the supreme decision-making body in which 193 states party to the Convention are represented. Each year, parties come together to review the implementation of the Convention and various legal instruments adopted by the COP, after which decisions are made to further promote the Convention’s tenets. This year, COP27 was officially held in Sharm el-Sheikh, Egypt from November 6 to November 18.
Image (above) of the COP27 Blue Zone, Cairo Room, Area E (Credit: Liz Bowen)
COP27 Snapshot
The focus of COP27 was moving from the negotiations and planning of COP26 in Glasgow, UK, to implementation. The Presidential vision statement from President Abdel Fattah El-Sisi for this year’s COP underlines the importance of moving “rapidly towards full, timely, inclusive, and at-scale action on the ground.” The two-week event was organized into thematic days from the role of climate financing to the importance of a just energy transition through renewables, smart grids, energy efficiency and storage, amongst others.
The event opened on November 7 with an impassioned speech by UN Secretary-General António Guterres, voicing that, “Humanity has a choice: cooperate or perish.” He called for all G20 countries to accelerate the energy transition; tax the windfall profits of fossil fuel firms; and to form a climate solidarity pact under which countries would take additional steps to reduce emissions, stop the dependency on fossil fuels, ensure sustainable energy for all, and see wealthier nations and global financial groups provide assistance for developing countries.
International Clean Energy and Technology at the COP
Several key COP clean energy and technology initiatives were launched during the two-week conference. As this was the African COP, Africa Just and Affordable Energy Transition Initiative (AJAETI) was set into motion with multiple 2027 goals and objectives, such as offering technical and policy support for facilitating affordable energy for at least 300 million people in the continent; providing accessible and clean cooking fuels and technologies; and increasing renewable electricity generation by 25%. According to the Africa Energy Outlook 2022 from the International Energy Agency, Africa makes up nearly one‐fifth of the world’s population today and accounts for less than 3% of the world’s energy‐related carbon dioxide (CO2) emissions to date, with the lowest emissions per capita of any region. Elsewhere, the Rocky Mountain Institute and Lion’s Head Global Partners partnered and launched the $150 million Caribbean Climate Smart Fund for investment in energy projects across the region. The Climate Smart Fund will help enhance the Caribbean’s climate resiliency, stabilize electricity prices, and increase energy security.
In addition to the regional program introductions, there were also significant international clean energy programs announced. The launch of the Planning for Climate Commission, a new global initiative focused on rapid planning and approval for renewable and green hydrogen deployment, was a monumental highlight. Notable groups involved in the joint initiative include the Global Solar Council, Global Wind Energy Council, Green Hydrogen Organization, and the International Hydropower Association. The Global Renewables Alliance was unveiled as well, representing renewable energy and technology sectors, such as wind, solar, green hydrogen, energy storage, geothermal, and hydropower. The Alliance is a never-before-seen organization comprised of several different sectors, built to ensure an accelerated energy transition by representing their collective efforts on advocacy, education, market intelligence, and data and engagement to international energy, economic, and environmental institutions.
U.S. at the COP
As for the U.S., there were plenty of announcements made in the field of climate action, from zero-emission transportation to clean energy. Some announcements are in the diplomacy category, while others are centered around domestic policy.
Image (above) of Special Presidential Envoy for Climate John Kerry speaking at a ministerial roundtable for climate finance on November 9, 2022 (Adapted from: UNclimatechange, Flickr)
Special Presidential Envoy for Climate John Kerry, alongside the U.S. Department of the Treasury and South African President Cyril Ramaphosa, declared their endorsement of the South Africa Just Energy Transition Partnership (JETP) Investment Plan. The plan identifies South Africa’s clean energy, electric vehicle, and green hydrogen investment priorities, and lays out an extensive strategy for a build out of clean energy infrastructure.
Kerry also announced the Energy Transition Accelerator (ETA), a public-private partnership with The Rockefeller Foundation and the Bezos Earth Fund, to build private capital that would rapidly construct clean energy generation in developing nations to mitigate climate change. With the ETA expected to function through 2030 – possibly to 2035 – the federal government and the philanthropic partners have plans to consult governments, experts, private sector actors, and civil society to help launch the program. There have already been a number of Global South states that have expressed interest in the ETA’s support, with Chile and Nigeria being amongst the first. Private sector representatives from Bank of America, Microsoft, and PepsiCo, to name a few, are also interested in assisting the ETA. The transition program will operate at national or subnational levels, and will produce verifiable emission reductions alongside saleable carbon credits.
The U.S., in partnership with Norway, also launched the Green Shipping Challenge to encourage national governments, port systems, and private corporations to speedily transition the shipping sector into a greener future. Through the Green Shipping Challenge, there have already been more than 40 initiatives announced by stakeholders on a number of issues pertaining to ship vessel innovation and expanding the use of zero-emission fuels like green hydrogen, amongst others. These initiatives include facilitating green shipping corridors with the Republic of Korea, Canada, and the UK, developing a domestic maritime decarbonization strategy, and launching a Green Shipping Corridors Initiation Project to support studies for green shipping corridors in developing regions. These projects align with the efforts stipulated in the Inflation Reduction Act (IRA), which allotted $3 billion for zero-emission port infrastructure and $700 million for resiliency and efficiency upgrades of the countries' port systems.
Another noteworthy public-private partnership was announced by the U.S. Department of State and the Clean Energy Buyers Alliance (CEBA) – the establishment of a Secretariat for the Clean Energy Demand Initiative (CEDI) and the progress of CEDI on climate action. CEDI was launched during COP26 in Glasgow, UK, at which an estimated 75 companies pledged to work with more than a dozen countries. The State Department's Bureau of Energy Resources and CEBA will lead the Secretariat to advance clean energy policies and necessary investments through public-private partnership. “Corporate energy customers have played an influential role in the clean energy transition by procuring over 57 gigawatts of clean energy in the U.S. alone. We are thrilled to co-lead the Secretariat with the U.S. Department of State to truly scale corporate demand for clean energy globally and accelerate decarbonization,” said Miranda Ballentine, CEO of the Clean Energy Buyers Alliance.
Image (right) of Secretary of Energy, Jennifer Granholm (right), with Ceres' Chief Economist and Senior Advisor for Just and Inclusive Economics, Amit Bando (left), discussing the IRA, energy, and a just transition for the We Mean Business Coalition (Credit: Liz Bowen)
U.S. Secretary of Energy Jennifer Granholm was also at the event and touted the IRA’s power to increase investments in storage, solar, and offshore wind through tax credits, reducing the cost of clean energy for people. Granholm stated that “our motto is ‘deploy, deploy, deploy’” and “it’s the ‘season of implementation.” She noted the challenges with implementation, including workforce, bureaucracy, and supply chain, “but 70-80% of jobs created through IRA will not require a college degree.” The U.S. is trying to encourage private spending in clean energy domestically in order to fulfill its decarbonization commitments, and its Nationally Determined Contributions (NDCs).
Climate Financing at the COP
One of the biggest themes of COP27 overall was climate financing, most importantly the Global North providing financial assistance for the Global South and other developing regions struggling with the onslaught of flooding, extreme storms, energy shortages, and other climate resiliency issues. The African continent was spotlighted in many of these discussions, in part due to the location of the conference. New to the formal agenda this year was the topic of “loss and damage”, which refers to the costs incurred from climate-fueled impacts and issues. This discussion is back-dropped by the recent performance of the Green Climate Fund for mitigation and adaptation projects, organized by The Republic of Korea, with a target of $100 billion by 2020. Wealthier nations failed to provide susceptible global communities with enough financial support for mitigation and adaptation through this fund – having recently fallen about $20 billion short of their pledge.
Several European countries also pledged support for a new loss and damage fund, including European Commission President, Ursula von der Leyen. Interest in a new loss and damage fund even made its way into the final days of the COP through the establishment of a funding facility at the United Nations – as part of the event's final implementation plan. A number of European nations also announced millions in pledges for loss and damages, some having promised funds for specific Global South nations. Outside of Europe, New Zealand announced $12 million in funds, and China’s climate envoy Xie Zhenhua announced support for some sort of loss and damage compensation, but is against contributing cash.
Germany went further and launched the development of a “Global Shield against Climate Risks”, a program that will group activities in the realm of climate risk insurance and prevention. The program will see the Group of Seven (G7) work in tandem with the Vulnerable 20 Group (V20) – an association of states that are threatened the most by climate change. The program was launched on November 14, 2022, with Germany already contributing $170 million. The African Climate Risk Facility (ACRF), another insurance-based program, was also announced, in which over 85 insurers in Africa pledged to provide $14 billion for the continent’s most climate susceptible communities.
Image (above; from left to right) of Ms. Jennifer Granholm, Secretary of Energy of the United States; H.E. Hon. Olivier Mwenze Mukaleug, Minister of Electricity of the Democratic Republic of Congo; Dr. Yasmine Fouad, Minister of Environment of the Arabic Republic of Egypt; Dr. Amani Abou-Zeid, Commissioner for Infrastructure and Energy at the African Union; Ms. Kadri Simseug, European Commissioner of Energy; Stefano Innocenzi, Global Vice President of Sustainable Energy Systems at Siemens; Mr. Tim Gould, Chief Energy Economist at the IEA; at the “Delivering Clean Energy at a Time of Global Crisis - Energy Security and Climate Change” session on November 14, 2022 (Credit: Liz Bowen)
Late Night(s) at the COP
In the last day of COP27, what was meant to be a day of plenaries to decide on this year’s Climate Pact – known as the Sharm el-Sheikh Implementation Plan –, turned out to be an all-nighter stretching into the weekend. After much disagreement and deliberation between developed and developing nations alike, the results of the African COP boiled down to a number of final decisions and unanswered questions. Firstly, the plan made no changes to the Glasgow Climate Pact’s position to hold onto the 1.5 degrees Celsius goal, and did not go further than labeling coal as a problem. Nations at COP27 eventually agreed to a phase down (reduction in fossil fuel usage) over a phase out (elimination of all fossil fuels) approach.
Moreover, conference parties agreed to form a new loss and damage finance facility at the United Nations. Pakistan, the leader of the G77 bloc of developing countries at those negotiations, highlighted the recent catastrophic flooding in their country in the discussions, and was satisfied with the fund’s establishment at the COP. The funding from this facility is meant to help the most vulnerable communities, with funding to come from existing monetary infrastructure and the open-ended addition of “innovative sources”. Countries agreed on setting up the Santiago Network to help with technical assistance regarding addressing and mitigating loss and damage. Nevertheless, the fund is at this point an empty pot, with COP28 left to decide the details regarding what countries pay into the fund and how vulnerable countries will benefit.
The Sharm el-Sheik Implementation Plan acknowledges that climate change “exacerbates” the global energy crisis, and highlights that the impacts are worse for developing countries. This is because climate change drives an increase in extreme weather and temperature increases, which increases the demand for cooling and heating that drives up the use of power. The implementation plan emphasizes the need for low-emission and renewable energy, just energy transition partnerships, as well as other cooperative measures to rapidly reduce global greenhouse gas emissions. It also recognizes the unprecedented role of the current global energy crisis to underline “the urgency to rapidly transform energy systems to be more secure, reliable, and resilient…” and achieve a diversified clean energy mix. Nations also agreed that in order to deliver financing for reaching a low-carbon economy, it “will require a transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors.” No specifics were given on whether the IMF or the World Bank would need to provide the stated climate financing, but the plan calls on shareholders of multilateral development banks (MDB) and international financial institutions to reform practices and priorities, and for MDBs to contribute and ensure “higher financial efficiency” to accelerate the impact of a low carbon economy and help drive innovation.
Image (above) of the closing plenary session that took place on November 18, 2022 (Adapted from: UNclimatechange, Flickr)
U.S. and Global Energy Implications
In conjunction with the announcements regarding loss and damages at the global climate event, the push for increased climate financing and mitigation is critical as well, according to nations attending COP27. Mitigation measures, including clean energy solutions, reduce the build-up of loss and damages from an increase in extreme weather events, global temperatures and rising sea levels, amongst other impacts. This is because clean energy alternatives and mitigation would lower the amount of greenhouse gas emissions that we put in the atmosphere and help stabilize our planetary environments, decreasing the rising extremes (droughts, wildfires, flooding, heat waves, etc.) that people have and are continuing to face and thus the cost as well. The speed and progress of climate change mitigation – whether globally or domestically – influences the costs associated with current and future climate impacts that have already left many communities without access to resources like energy for heat and power. Plus, with growing costs comes increased stress on national, state, and local economies that need to utilize more funds to prepare for and fix the damages left by each climate disaster. According to Swiss Re, one of the globe’s largest insurance providers to other insurance companies, the cumulative impacts of climate change could lead to a $23 trillion reduction of annual global economic output by 2050. Just domestically, the U.S. Office of Management and Budget (OMB) found that climate change could cost the U.S. federal budget almost $2 trillion annually by the end of the century. As illustrated, COP27 showcased a number of aforementioned pledges and commitments with the intention of mitigation and expanding clean energy in order to reduce such future cost impacts.
Furthermore, as the Sharm el-Sheik Implementation Plan points out, the current energy crisis originating in Russia and Ukraine has been felt all across the globe, and has left a number of nations with the difficulty of rising energy prices. In the United States, the price of electricity has already increased by 8% from 2021 for residential customers, while gas bills across the country will increase this winter, according to the U.S. Energy Information Administration (EIA). The EIA forecasts that wholesale electricity prices at major power trading hubs will be about 20-60% higher on average this winter, with New England predicted to have the highest price increase due to gas constraints, reduced fuel inventory, and liquified natural gas (LNG) shipment issues. Central Maine Power in Maine is currently involved in a rate increase case of its own, which is still pending. Massachusetts' Eversource recently had its rate increase approved, resulting in residential customers starting 2023 with a $3.00 rate rise. Several utilities outside New England – including in California, Illinois, Michigan, North Dakota, Ohio, and Texas, amongst others – are also involved in rate increase cases that are currently still pending.
The U.S. has already been following the guidance of the Sharm el-Sheikh Implementation Plan and is expected to add about 74% of utility-scale wind, solar, and battery storage capacity to the domestic power grid this year – solar making up 46% of the nation’s new generation in 2022. Additionally, DSIRE Insight tracking has shown that a number of states and utilities are already leading the way for cleaner energy usage. For example, the Mississippi Public Service Commission recently approved Entergy Mississippi's new Green Tariff. Known as the RenewABLE Community Option RCO-1, the new option gives commercial, industrial, and governmental customers the chance to receive the benefits of renewable generation when they lack the ability or choose to not install their own solar systems. Georgia Power Company filed its Clean and Renewable Energy Subscription (CARES) program that – if approved – would provide commercial and industrial customers the option to support renewable energy development in the state, by enabling them to subscribe to a share of renewable facility production procured through the company's request for proposal (RFP) process. The company wants to procure a cumulative 2.1 GW through its 2023 and 2025 RFPs. In addition, the New York Public Service Commission advanced four major wind farm projects in upstate New York. The projects would provide a combined sum of almost 574 MW, and moves the Empire State closer to its goal of achieving 9 GW of wind energy by 2035. These are just some of the advancements that individual states and utilities have recently made.
(Credit: U.S. Energy Information Administration, Preliminary Monthly Electric Generator Inventory, October 2021)
Meanwhile, the world is set to add almost 2.4 TW of renewable electricity capacity in the next five years; equal to China’s entire installed capacity today and almost as much as the last 20 years of additions, according to the IEA. China will have a 1.1 TW (~46% of total) share of that additional capacity. Nevertheless, the stipulations made at the climate conference push countries to do even more to reach their climate goals.
Overall, there were a plethora of major announcements made at COP27 and with the global climate event now wrapped up, commitments enter the phase of action. Looking forward, the COP’s variety pack of promises could have significant implications for the domestic and international clean energy industries, which have already shown progress.
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