Where does COP27 leave prospects for Net Zero?

COP27 CN update

Ahead of the conference, the Egyptian presidency declared COP27 would be “implementation COP” - the year intentions to limit global warming to 1.5C would transform into action to achieve it.

However, 2022 has also been a year of soaring energy and food prices, driven by Russia’s invasion of Ukraine and the post-pandemic recovery. This led several countries to revert to the coal-based power which governments had promised to ‘phase down’ at COP26. Amidst global pressures, COP27 could have been the year – in the words of the President of COP26, Alok Sharma – “where we lose 1.5C” entirely.

As governments gathered in Sharm el-Sheikh, perched between the arid mountains of the Sinai Peninsula and the coral-lined beaches of the Red Sea, expectations of what might be achieved were low.

Now, out the other side, COP27 will be remembered for its historic progress on Loss and Damage – an unprecedented international commitment to enshrine fairness in the global response to climate change.  

But beyond this, was there enough progress on cutting the emissions that cause climate change so that Net Zero is achieved by 2050? That remains the all-important goal. After all, no amount of compensation will be sufficient if we miss that objective. 

Getting to Net Zero requires progress to be made on five key enabling conditions – raising awareness and ambition; ensuring a just transition; improving governance to support transparency and accountability; mobilising public and private finance; and unlocking the potential of technology and innovation. 

Here we analyse whether COP27 galvanised action on each of these essential conditions and give our verdict on the level of progress made.

Awareness and ambition

Our verdict on progress: 2/10

The voices of the most vulnerable countries and communities were heard loud and clear at COP27, as they raised awareness of the critical importance of the goal to limit warming to 1.5°C. Last year’s Glasgow Climate Pact requested countries strengthen and resubmit the 2030 targets in their Nationally Determined Contributions (NDCs) by the end of 2022 to match the level of ambition required to limit warming to 1.5°C. 

However, this failed to happen. There has been a shocking lack of ambition in improving pledges to reduce emissions. Only 29 countries resubmitted NDCs by COP27 and only a handful of these made meaningful changes to their 2030 targets. Together, these revised NDCs shave off just an extra 1% from projected 2030 emissions. A recent report from the United Nations Framework Convention on Climate Change showed current NDCs will only cut emissions by 5-10% by 2030 compared to 2019 levels. Emissions need to fall by 45% by 2030 to reach Net Zero by 2050. This leaves us on track for 2.5-2.8 degrees of warming according to the UN’s Emissions Gap Report.

The possibility of keeping global warming below 1.5°C was called into question at COP27. The Global Carbon Budget report, released during the conference, found there is now a 50% chance of exceeding this temperature in the next nine years. Although the final COP27 cover text restates 1.5°C as the goal, the sincerity of governments’ commitment to it has been undermined by their collective failure to close the emissions gap.

This conclusion is reinforced by COP27’s failure to increase the level of global ambition in phasing out fossil fuels, without which Net Zero will not be reached. In the Sharm el-Sheikh Implementation Plan, only coal remains targeted for ‘phasing down’ after attempts by the governments of India, the EU, the UK and others to extend this to oil and gas were blocked by the world’s largest petroleum exporters. With next year’s conference taking place in UAE, it’s hard to see how COP28 will correct this failing.

Just Transition

Our verdict on progress: 6/10

Climate justice was at the forefront of this year’s COP and this topic brought its single greatest achievement. The countries most exposed to the worst impacts of climate change are often those who have done the least to cause it. These vulnerable countries have been calling for over 30 years for wealthy industrialised nations to pay for the losses and damages their hefty carbon footprints have already incurred. A momentous agreement to create a dedicated loss and damage fund was struck in the final hours of negotiations.

The hope is that loss and damage funding will bring critical assistance to the most vulnerable communities. However, there is still a lot to be ironed out. Governments will set up a committee to operationalise the fund and deliver their recommendations at COP28. They will need to decide which nations will contribute to and benefit from the fund, how much countries will pledge and how the money will be used. More fundamentally, loss and damage payments are no substitute for mitigation; without greater efforts to cut emissions, industrialised countries will face demands for damage-related payments which far exceed what they can ever pay. But it is an important step towards fairness in international climate change policy and towards building the trust between the global North and South that will be required to incentivise all nations to keep driving towards Net Zero.

In another important development on achieving a just transition, timed to coincide with COP27, the Just Energy Transition Partnership (JET-P) was announced at the G20 summit in Bali. This will mobilise $20bn over the next 3-5 years to help Indonesia decarbonise. Indonesia is a heavy user of coal, and this announcement sets in motion the country’s COP26 commitment to phase-out coal. JET-Ps use a mixture of public and private finance to accelerate the shift to clean energy while supporting the communities and workers affected. The fact that the JET-P model, first piloted in South Africa at COP26, can be replicated in a new context, sends a strong positive message that just and equitable transitions towards Nero Zero are possible.


Our verdict on progress: 5/10

COPs can produce valuable outcomes beyond the strict confines of the inter-governmental negotiations. At COP27 this was true for Net Zero governance, with a flurry of new initiatives to introduce greater monitoring for targets set by nations, cities, businesses and financial institutions. Developments included Al Gore’s AI-based independent emissions inventory, which purports to expose “cheating” in reporting, and a UK taskforce proposing a ‘gold standard’ for Net Zero transition plans.  

The need for centralised standards around Net Zero pledges and a crackdown on greenwashing was a frequent call at COP27. As well as a huge gap between the 1.5°C temperature target and national pledges, the Net Zero Tracker found a widespread “deficit of credibility” among city, region and corporate Net Zero pledges. 

However, while there is a risk that a multitude of governance initiatives could result in a fragmented sense of what Net Zero means, what emerged at COP27 was a set of essential criteria for Net Zero targets and pathways, underpinned by integrity and radical transparency. The report by Antonio Guterres’ High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities and the ISO’s Guidelines came together to present a definitive set of criteria for Net Zero targets, aligned with SBTi best practice, that will help to call time on greenwashing. 

Our analysis shows that on each of the 10 recommendations, set out by the UN Group, all were aligned with ISO Guidelines and the SBTi Net Zero Standard.

Another important aspect of the UN High Level Group’s conclusions is that regulation is needed to enforce these standards and hold organisations to account. Data from Net Zero Tracker reveals just how far we need to go: only half of companies and cities committed to Net Zero have interim targets, and less than 40% of companies explicitly include their full value chain within the scope of their targets. There remains widespread misunderstanding of the important differences between carbon neutrality and Net Zero on the ground at COP27, demonstrating the criteria for Net Zero have not yet filtered down. For governance mechanisms to have any bite, they need to leave the pages of reports and guidelines and be put into practice. At the side-lines of COP27, there was evidence of growing momentum behind calls to regulate voluntary initiatives to secure greater accountability and transparency around Net Zero target setting.


Our verdict on progress: 3/10

The Sharm el-Sheikh Implementation plan puts the scale of finance needed to deliver on Net Zero at between $4-6 trillion annually. But COP27 made very little progress in plugging the enormous gap between what’s needed and what’s on the table. In particular, developed countries failed once again to provide the $100bn of annual climate finance for 2020 that was originally promised in 2009. Not only does this damage the ability of emerging economies to transition away from polluting coal, oil and gas, it puts the international political will that is essential to delivering on Net Zero on thin ice. 

But if more cash was not forthcoming, the Sharm el-Sheikh Implementation plan did at least call for a ‘transformation of the financial system’ and reform of multilateral development banks (MDBs) to deliver the level of climate finance needed. MDBs’ role came under scrutiny at COP27, largely through an initiative proposed by the Prime Minister of Barbados, Mia Mottley. At present, MDBs provide climate finance through loans which carry high interest repayment rates which many developing countries cannot afford. Mottley’s Bridgetown Agenda would make use of the IMF’s Special Drawing Rights mechanism to unlock $650bn of low interest climate finance. This could, in theory, incentivise supplementary private financial investment to the order of $2 trillion, going some way to meeting the scale of finance required. 

While the Bridgetown Agenda failed to get over the line at COP27, the consensus reached on the need to transform the financial system and reform MDBs demonstrates that governments are alive to the need for vast structural change to solve the climate crisis. So, as it gains momentum, this might not be the last word on the Bridgetown Agenda.

Outside the confines of the negotiation room, other novel mechanisms to attempt to deliver climate finance were also announced at COP27. US Climate Envoy John Kerry’s carbon offset programme – the Energy Transition Accelerator – promised to mobilise up to $139 billion for the energy transition in developing economies ahead of 2030. However, details were thin on the ground and the research underpinning the claims suggested that such large sums could only be delivered if participating companies were allowed to use the offsets to meet their interim scope 3 (value chain) targets. Understandably, this was challenged by many at COP who feared it would divert attention away from emissions reductions. But if the Energy Transition Accelerator is instead used to persuade companies to invest beyond their value chains, rather than meet their own targets as recommended by SBTi, it could be a welcome innovation to mobilise private climate finance towards achieving Net Zero. 

Technology and innovation

Our verdict on progress: 4/10

The IEA World Outlook 2022 found that renewables will need to overtake fossil fuels in the global energy supply by 2030 to limit warming to 1.5C. Despite this, the Sharm el-Sheikh Implementation Plan advocated vaguely for “low emission and renewable energy”. This weaker language was seen as a loophole ushering in new oil and gas exploration as a solution to the climate crisis. A victory, many concluded, for the fossil fuel lobbyists present at COP, of which there were 25% more this year than in Glasgow.

Fortunately, announcements beyond the negotiating room went some way towards making up for the momentum lacking in the formal text. Under the Breakthrough Agenda, governments representing over half of global GDP committed to a 12-month action plan to accelerate decarbonisation by bringing down the cost of low-carbon technologies in five key areas: power, road transport, steel, hydrogen and agriculture. These actions – including a Net Zero power playbook to share best practices and research and development into alternative proteins – represent an encouraging collaborative effort to tackle hard to abate sectors.

However, as the potential of overshooting 1.5C degrees increased, thanks to lacklustre commitments on fossil fuels, another technological area will need to be prioritised: greenhouse gas removals. Further investment is needed to develop and commercialise technology to permanently remove emissions from the atmosphere at the scale needed to close the gap to Net Zero. This must be coupled with strict standards to ensure that the technologies pursued remove emissions safely and permanently and are not used simply as an excuse to keep polluting. We have some way left to go on this matter: the recommendations of a supervisory body set up to create guardrails around the definition and use of carbon removals were sent back to the drawing board during COP27.

Conclusion: what’s next for Net Zero?

Although the long overdue creation of a Loss and Damage fund is an undoubtable success story from the COP27 negotiations, it was accompanied by a woeful lack of ambition towards reducing emissions. As a result, limiting global temperature rise to no more than 1.5C through Net Zero is just teetering on the edge of what’s still possible. 

There are reasons to remain optimistic, however. Brazil’s president-elect, Lula da Silva, whose win in October’s elections signified a huge victory for the climate, vowed at COP27 to reverse deforestation in the Amazon. The world’s two largest emitters, the US and China, restarted talks on climate change during the G20 in Bali last week. The US also became the first national government to require its suppliers to set science-based emissions reductions targets, trailblazing the power of public procurement in mitigation efforts. In the business community, a statement from the We Mean Business Coalition made corporate dedication to 1.5C as a limit, not a target, very clear. 

And beyond COP, the USA’s Inflation Reduction Act and China’s Five Year Plan on Renewable Energy Development represent huge commitments from the world’s biggest emitters that will help to further accelerate the falling cost of renewable energy. 

These are encouraging steps. Although the window we now have for reaching 1.5C is narrowing, it does not mean we should throw in the towel – every fraction of a degree makes a difference, and the closer we stick to 1.5C, the more lives will be saved.

Ahead of COP28, we need to see all countries updating their NDCs to align with the Paris Agreement and implementing policies that reflect the speed and scale of action required. The Loss and Damage fund, and the reform of the financial system promised in the Sharm el-Sheikh Implementation Plan, both need to be operationalised. There must also be new regulations to police transparency and accountability of Net Zero claims, and rapid investment through the Breakthrough Agenda to bring down the cost of low-carbon technologies in hard to abate sectors.

Quite the to-do list, but as Catherine McKenna, chair of the UN High Level Expert Group, reminded leaders at Sharm el-Sheikh, tackling climate change may be the “hardest thing we have to do” but it is undoubtedly “the best thing we can do”.

Discover more about the Carbon Trust Net Zero Intelligence Unit