The 25th annual Conference of the Parties (COP25) global climate negotiations in Madrid kicked off with a reality check. UN Secretary-General António Guterres stated “the point of no return is no longer over the horizon. It is in sight and hurtling towards us…” This was followed by a series of harrowing reports (Oxfam , Save the Children, Intergovernmental Panel on Climate Change and the World Meteorological Organization) highlighting the climate emergency and urgent need for fast and bold actions.

What were the expectations?

The COP25 aimed to achieve the following outcomes:

  • Strengthening and raising climate ambitions: With 2020 at the doorstep – when all Parties to the Paris Agreement are expected to raise climate ambition in their new and revised nationally-determined contributions (NDCs) — the 2019 COP aimed to set the stage for next year.
  • Address Article 6 covering carbon markets: The COP25 aimed to conclude work on the Paris Agreement’s Article 6 – an outstanding issue in the ‘Katowice rulebook – which includes internationally transferable mitigation outcomes (ITMOs), a market mechanism, and non-market approaches.
  • Review of the Warsaw International Mechanism (WIM) for Loss and Damage: This COP reviewed performance of the WIM to tangibly respond to climate change impacts and support those most affected vulnerable developing countries.
  • Take work forward in several areas: Crucial climate action work to be taken forward at this COP include work on finance, the transparency of climate action, forests and agriculture, technology, capacity building, indigenous peoples, cities, ocean and gender.

 So how did it go? The main take-away by many experts is that while governments, corporates, and other stakeholders at COP25 made incremental progress on several key themes within the ongoing climate finance discourse, much is still to be delivered.

In terms of national commitments, there was some good news: Ireland announced joining the Carbon Neutrality Coalition (CNC) – an alliance of around 29 countries committed to reaching carbon neutrality by 2050 in line with the Paris Agreement. The European Commission presented the European Green Deal, which will make the EU the world’s first climate-neutral continent by 2050, (even though Poland opted out). Also ahead of COP, the UK government announced it will double its international climate finance to at least £11.6 billion between 2021-2025. All these are steps in right direction to raise ambitions at the national level.

However, at the same time other developed countries, including Australia, Singapore, Japan, and the United States were either missing in action, obstructed negotiations, or had no intent to enhance/update their NDCs. Many concerns were raised on progress of developed countries towards the achievement of the USD 100 billion goal per year by 2020 to support developing nations in addressing climate change. Big emitters like China and India stressed that the delivery of finance and support promised by developed countries would be required before enhancing their current targets. This came despite a stark warning that even if every nation meets its Paris Agreement pledges the planet will still warm by about 2.8 °C by the end of the century (Climate Action Tracker).

While countries lagged in raising ambitions, COP25 saw increased initiatives from corporations, businesses, and finance institutions. For example, over 60 film studios, unions, and other members of creative industries launched the ‘Creative Industries Pact on Climate Change,.’ UK’s energy company Drax also announced its ambition to become carbon negative by 2030. The ‘Coalition for the Energy Efficiency of Buildings (CEEB)’ was also launched to develop the market for financing net-zero carbon and climate-resilient buildings in the UK by accelerating the pace of financial innovation and scale-up. CPI’s Global Innovation Lab for Climate Finance announced its instruments crossed USD 2 billion in finance for sustainable development. The “Coalition of Finance Ministers for Climate Action,” a group of 51 finance ministers, outlined their “Santiago Action Plan” which aims to “bring considerations of climate change into the mainstream decision-making about economic and financial policies.”

However, negotiations on Article 6 around establishing new rules to govern the controversial new global carbon market failed with no outcome. Parties were at loggerheads related to corresponding adjustments (i.e. when one country sells emissions reductions to another, it must adjust its ledger accordingly to avoid double counting) and carry over of unsold carbon credits from the Clean Development Mechanism (CDM), established under the 1997 Kyoto Protocol, among other issues. These discussions will now continue in 2020.

On the Warsaw Institutional Mechanism (WIM) for Loss and Damage, the key demand was to establish a new financial facility to channel new and additional loss and damage finance to countries facing climate emergency. However, the final agreement was far weaker than expected and had no reference to any developed country obligations on finance. However, Parties agreed to setting a ‘Santiago network’ in 2020 to catalyze technical support; developed countries to scale up finance; and the Green Climate Fund to provide financial support.

COP25 was designated as ‘Blue COP’ by Chile to increase awareness of the impact of climate change on ocean and mainstream the potential of ocean-based solutions into NDCs to implement the Paris Agreement. To support this, Chile launched a Platform of Science Based Ocean Solutions (PSBOS) to bring together key methodologies and tools to co-design climate-ocean actions strategies and help incorporate oceans into countries’ NDCs (39 countries have already committed to do this).

Nature-based solutions were also central at COP25, and featured in several discussions as one of the most promising solutions to mitigate climate change, protect biodiversity, and increase resilience. These include innovative financial approaches to conserve and restore ecosystems which are being piloted around the world (like the Lab instrument RISCO).

A rare win story at COP25 was the unanimous adoption of a new five year ‘Gender Action Plan’ (GAP) – successfully building on the first GAP agreed at COP20 in Lima – which intends to support the implementation and scaling up of gender-related decisions as well as human rights, just transition, and indigenous people’s challenges in the UNFCCC process. However, more work is warranted to clearly define indicators and targets for measuring and monitoring its implementation.

Discussion also centered on how blended finance has the potential to scale investments needed and how public capital can effectively leverage private investments. CPI’s work estimates that eight high-potential countries in Sub-Saharan Africa and South and East Asia alone offer more than USD 360 billion in blended finance investment potential in clean energy by 2030. Stakeholders provided different perspectives, for example: that successful projects should blend finance but also ideas and technologies; that public finance needs to de-risk investments and promote additionality, financial sustainability and accountability; that the private sector is often unable to take first loss risk despite sufficient capital; that small investment ticket size and financial regulations further constrain equity investments; and that partnerships and collaborations are crucial in the early stage of a blended finance deal.

As cities account for 70% of greenhouse gas emissions and provide diversified investment opportunities across sectors, the decarbonisation of urban areas continues to be a hot topic at COP. Local governments denounced the lack of financial, human, and technical resources to turn ideas into bankable projects. DFIs and other investors instead mentioned the lack of creditworthiness and bankability of projects as the main constraint, together with small investment sizes, missing regulatory frameworks linking investment plans and national policies, need for blended finance and support for project preparation advisory and capacity building. Consensus is shifting beyond a project by project approach towards a portfolio approach and targeting systemic transformation through the whole value chain.

For the first time, we saw protests by young campaigners taking place inside the COP25 venue with more than 200 Observers who had their badges removed, preventing them from returning to the talks. They were expressing a rising sense of disappointment with the slow progress of the negotiations, which is in marked contrast to the urgency of the science.

So what to look out for in 2020?

The next Bonn intersessional meeting (June 2020) is expected to address – and possibly conclude – some of the discussions that ended in impasse at this COP,  allowing the next COP26 in Glasgow (9-19 November 2020) to at least start on the right foot.

2020 will be a critical year as nations look to resubmit their NDCs, with observers and experts calling for raised ambition and greater action. In other words, given the overall disappointing negotiations at COP25, it is SOS time – scale, outcomes, and speed.

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