The results obtained in November at COP 27 in Egypt were cautiously celebrated in Latin America. Agreements to create a loss and damage fund were seen as a victory, but efforts to set more ambitious emissions mitigation targets have failed.
Join Josh Vence, Argus ’ Business Development Manager for Latin America, and Jacqueline Echevarría, Editor of the Argus Latin America Energy, as they discuss the key developments of the COP 27 conference and the implications for Latin America and the Caribbean.
This podcast episode addresses key topics including:
- Loss and damage
- Mitigation and adaptation plans
- Fossil fuels in final text
- Carbon markets
Learn more about the Argus Latin America Energy service
JV: Hello and welcome to Hablando de Mercado (“Market Talks”) – a series of podcasts presented by Argus on the main events affecting the energy and raw materials industries in Latin America and the rest of the world. My name is Josh Vence, and I am the Business Development Manager at Argus for Latin America. In today’s episode, we will be speaking with Jacqueline Echevarría, Editor of Argus Latin America Energy, about the results obtained at COP 27 held in Egypt last month, and the implications for Latin America. Welcome, Jacqueline!
Jacqueline Echevarría: Hi, Josh. Thank you for the invitation – I am glad to be back!
JV: Early in November, we talked about the possible role of the Latin American countries during the COP in Egypt and their aspirations in the negotiations. A few weeks have passed since the summit ended. What are the main results and how has the Latin American region received the agreement?
Jacqueline Echevarría: The region has received the agreement signed in Sharm el-Sheikh as an insipid victory. On the one hand, there have been many celebrations – the fact that the creation of a loss and damage fund was included in the final text was seen as a victory, considering that it is in fact an issue that developing countries have demanded for over two decades. Regarding that, it was considered a historic agreement. On the other hand, however, there are points in the agreement that were seen as a failure, since a more ambitious emission mitigation plan could not be achieved to reach the goal of 1.5 degrees Celsius.
JV: Let us start with the good news then. Explain to us, what are losses and damages?
Jacqueline Echevarría: The concept of losses and damages refers to the destructive and unavoidable effects of climate change. In this case, we are talking about extreme weather events to which countries cannot adapt and which have a social and economic impact on their regions. These effects are typically suffered by developing countries that are more vulnerable to more frequent extreme weather events, such as the prolonged drought in South America last year, which reduced crop yields affecting the livelihoods of many farmers. Losses and damages also refer to the loss of destroyed infrastructures due to for example floods like the ones we saw in Pakistan. Considering that countries that experience the most severe effects are usually not the largest emitters, the idea behind losses and damages is that developed countries, which are industrialized and are large emitters, should provide funds to address this issue.
JV: How were the negotiations for the agreement regarding this fund?
Jacqueline Echevarría: Not easy at all. Despite being an issue that developing countries, including those in Latin America and the Caribbean, have been promoting for two decades, the discussion on losses and damages was included in this COP for the first time in the history of all COPs, being an issue that gained greater prominence in the negotiations as the summit developed. In recent days, developed countries such as European Union member states and the United Kingdom agreed on a specific loss and damage fund, PROVIDED THAT certain conditions related to obtaining more ambitious mitigation targets could be met to reach 1.5 degrees Celsius under the Paris Agreement. Other countries, however, such as Saudi Arabia, China, Brazil, and countries in the Persian Gulf, did not agree with this condition. Subsequently, the European Union and the United Kingdom, among others, had to soften their conditions in order to obtain an agreement that would not jeopardize the possible creation of a loss and damage fund.
JV: So, what is this fund going to consist of? Who is going to pay for it and who is going to receive the money?
Jacqueline Echevarría: It is a good question, and we may see the first details at the next COP, next year. The agreement at this COP was to create a fund, but it has not yet been implemented. There will be a committee in charge of designing the fund and explaining how it will be implemented. This committee will have representatives from Latin America and the Caribbean. What is clear, however, is that it will still take time until the fund is operational.
JV: During the previous episode on COP, we mentioned that the Latin American countries were going to this summit to secure more financing to implement their adaptation and mitigation programs. Have there been other advances?
Jacqueline Echevarría: Another fact for which this COP was also of particular importance for the Latin American region was not due to the urgent call to mobilize climate finance for emerging market and developing economies, such as Latin America, which face a higher cost of capital and high levels of debt. This is reflected in the final agreement, as it invites shareholders of the multilateral development banks and international financial institutions to reform themselves to face the financial challenge posed by the climate crisis. The agreement also calls for the “deployment of a full set of instruments, from grants to guarantees and non-debt instruments while considering the debt burden” of these countries.
JV: Let us move on to the not-so-good news, which refers to the mitigation of emissions. What was agreed? Or what was not?
Jacqueline Echevarría: As I told you before, Josh, the section on mitigation and adaptation was the great disappointment of this COP, since more ambitious goals were not achieved to reinforce the commitment to limit the planet’s temperature to 1.5 degrees Celsius. It should be noted that, during the negotiations, Latin American countries such as Chile or Colombia joined the request of developed countries such as the EU, the United Kingdom and the United States to include in the text a progressive reduction of fossil fuels, particularly fossil fuels that are inefficient or are generated without using any technology such as carbon capture storage, which serves to mitigate their emissions. At the end of the negotiations, the final text was almost a carbon copy of the text obtained at COP 26, last year in Glasgow. In this text, the countries committed to accelerate their efforts to phase out energy obtained from coal and eliminate inefficient subsidies for fossil fuels. Furthermore, under pressure from oil- and gas-producing countries, the agreement included the concept of increasing investment in “low-emission energy,” as well as renewables as a tool to help reduce emissions. Many critics believe that this opens doors to new investments in other fossil fuels such as gas.
JV: So, unfortunately, there was no progress in this section. But tell me, what was the progress in terms of carbon markets, in Article 6?
Jacqueline Echevarría: It was definitely the last of the less controversial topics. It was probably also one of the less prominent ones, but unfortunately much progress was achieved either. Talks this year focused on Article 6.4 and 6.2 of the Paris Agreement. Article 6.4 is expected to be similar to the Kyoto Protocol’s Clean Development Mechanism, which establishes a mechanism for trading greenhouse gas emission reductions between countries under UN supervision. In turn, Article 6.2 establishes the guidelines for the trade of what are referred to as Internationally Transferred Mitigation Units, or ITMOS, which are credits that countries count to reach their NDCs and that could be exchanged between two countries. Many of these decisions, however, have unfortunately been delayed until COP 28, to be held next year in Dubai.
JV: Considering everything you have explained, what do you think are the repercussions for Latin America and how would you rate its presence at this COP?
Jacqueline Echevarría: The agreement to create a loss and damage fund is definitely good news for Latin America, and especially for the Caribbean islands, since they are the most vulnerable regions to climate change. It should be noted that this milestone achieved at the COP27 was the product of intense insistence and campaigning by developing countries. As far as Latin America and the Caribbean is concerned, we saw harmony and unity among the countries when it came to achieving this objective. The Prime Minister of Barbados gave a rather convincing speech in which she called out Northern countries for trying to tutor the South on climate change. The speeches by Gustavo Petro, President of Colombia, and Nicolás Maduro, President of Venezuela, followed the same path, also calling for a reform of the multilateral financial institutions.
As for mitigation – the feeling in the region is that it is time to put a date on the end of the use of fossil fuels. As I mentioned before, Colombia and Chile joined the negotiations with this idea, and although it has not been achieved with a more ambitious agreement in this area, the fact that more than 80 countries supported it shows that this is not going to be the last time we will be hearing about a progressive reduction of all fossil fuels. This should serve as a warning to those Latin American countries that are major oil producers, as this issue will most likely return at future COPs due to the urgent need to fully decarbonize and mitigate emissions.
It is also worth noting that, in addition to the agreement obtained, the countries in Latin America and the Caribbean signed different bilateral or multilateral agreements with other countries to promote the development of mitigation and adaptation plans, as well as to protect the Amazon. In this item, the future President of Brazil, Luis Inácio Lula da Silva, who was at the COP27 in the second week of the event, said that he was going to propose Brazil as the next destination for COP 30 in 2025.
JV: Well, we’ll see how the region advances in its efforts to reduce emissions. Thank you very much, Jacqueline, for joining us. And to everyone, Happy Holidays.
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