The consensus about COP27 was one of disappointment.

The sense of anti-climax has thrown into even sharper focus the huge challenges which governments are facing right now as they grapple with climate change and the energy transition. Next year could be pivotal. Here are 10 of the biggest strategic issues which policymakers and other key stakeholders must face over the next 12 months.

 

1. Loss and Damage. The agreement to establish a fund was undoubtedly a breakthrough. But the hard work has only just begun. The story of support on climate from the Global North to the Global South has been one of unfulfilled promises; it’s therefore only natural that the latter should be asking penetrating questions about the detailed arrangements for an L&D fund, above all where the sources of funding will come from.

 

2. US/China. Can the resumption of dialogue between the US and China on climate change announced in Sharm el-Sheikh be translated in the new year into meaningful co-operation? The Paris Climate Agreement of 2015 was founded on a prior agreement between the G20 that it was in their mutual interests to collaborate on international climate action. President Biden, with the Inflation Reduction Act under his belt and a better than expected performance in the US mid-term elections will feel an emboldened authority. Chinese leadership, still smarting about heightened American interest in Taiwan, took a back seat at COP27. The US, which may or may not be spearheaded by John Kerry, will want China’s stance to change in 2023 (notwithstanding the effect of the protests now taking place in China).

 

3. Fossil Fuel Phase-out. The failure to build on the Glasgow language of “coal phase-down” was a come-down for climate progressives – and a reality check about the power of the pro-fossil lobby in the UNFCCC talks. With the UAE hosting COP in December next year, the spotlight on what the science is telling us – that the need to accelerate a managed phase-out of oil, gas and coal production if we are to limit global warming to 1.5C – will be even stronger on the supply-side agenda. The question will be whether the pressure for international co-operation and action against fossil fuel expansion, which has created some welcome political space, becomes irresistible.

 

4. European Energy Crisis. The supply-side agenda reads directly across to the ongoing headache for EU policymakers. Striking the right balance between in the short-term, maintaining gas supply for their populations (and mitigating the price crisis) and in medium to longer-term, accelerating the decarbonization of the European economy. This tension will remain front and centre politically for member state governments and the European Commission. Getting through one winter may not be enough; but lock-in to LNG contracts and new build fossil infrastructure will not be the actions of a climate leader (US Government – please also take note.)

 

5. Just Energy Transition Partnerships (JET-P). The $8 billion Western donor South Africa JET-P announced at COP26 received widespread criticism, despite its size and climate objectives. The energy transition partnership with Indonesia announced in Sharm el-Sheikh was more favourably received: not only because it is a major scale-up, topping out at mobilising $20 billion; but because it looks a stronger blend of public and private finance. Will more partnerships be announced next year, and will the model continue to improve and be seen to start to deliver? One question for developing country governments, to enable them to take more ownership, is whether they might prefer to develop their own JET-P model.

 

6. Global Stocktake (GST). One of the other reasons why COP28 may become an inflection point is that it will be the culmination of the GST, the collective assessment about whether NDCs are doing enough to bring down emissions to stick to 1.5C. A significant shortfall (the UNEP “emissions gap” made even more tangible) could be the trigger for a step-change in global ambition – a tipping point for policymakers (where the G20, under India’s chairmanship, can be pivotal) in the realization that business as usual is a one-way ticket to climate chaos.

 

7. The 1.5C Target. Sharm el-Sheikh was the first COP really to witness substantial questioning of the viability of the 1.5C target. It was therefore encouraging to see the parties (bolstered by the language agreed by the G20 in Bali) agree to maintain the goal. But, next year may still see more influential stakeholders begin to question this and argue that 1.5C on mitigation policy alone is looking increasingly out of touch – thus bringing the role of negative emissions technologies (NETs) and land use more into the equation.

 

8. Institutional Financial Reform. One of the few bright spots to emerge from COP27 was a sense that the Bretton Woods institutions may not be fit for purpose if sufficient public and private finance is going to be mobilized urgently and sufficiently to address the climate emergency. Barbadian Prime Minister Mia Mottley’s Bridgetown Agenda – designed to overhaul the global financial system by uniting action on climate and development – may therefore be an idea whose time has come. With the UN Secretary-General’s support, and heavyweight political interest from the American and German Governments, it will be worth watching whether this issue can be seized upon.

 

9. Private Finance. The Glasgow Financial Alliance for Net-Zero (GFANZ) was launched to much fanfare at COP26. Its voice was more muted in Sharm el-Sheikh, despite the progress it has made on developing a framework for net-zero transition plans for financial institutions and companies. There is scepticism about GFANZ’s ability to incentivize financial institutions to diversify away from fossil fuel investment. The UN High Level Expert Group (HLEG) on Net-Zero shone a light on this issue with a high-calibre set of detailed recommendations for non-state actors: so will the HLEG become the benchmark, and push GFANZ and its members into more progressive action in 2023?

 

10. COP Process. The new UNFCCC Executive Director Simon Stiell said in Sharm el-Sheikh that the existing arrangements may need a shake-up if they are to become more transparent and shed the bloated nature which these annual summits have assumed. It’s hard to argue that the biggest challenge of the 21^st century deserves a more effective international policymaking structure than what is in place right now.

 

This is a daunting list of challenges. Significant progress on at least half of them would constitute a major outcome when judgements come to be made at the end of next year. What is clear is that a state of inertia – a continuation of status quo policies, at the conclusion of a year when global emissions will probably reach an all-time high – cannot be acceptable.

 

Putin’s ongoing war in Ukraine may cause some vested interests to seek refuge in the canard that more oil, gas and production means greater energy security. Whereas even the British Prime Minister has recognized low-cost renewables are increasingly pointing the pathway to real energy security, alongside a low-carbon economy. The moving parts listed above are large and complex; but full acceptance of these political and economic realities can be the foundation-stones for the decades climate and energy policy agenda.