The COP27 special — Issue #29
Here we go. #COP27 has started.
How hopeful should one feel? #27 is the first COP (Conference of the Parties of the UNFCC) to be held in the wake of undeniably climate impacts. Between extreme weather events like the summer heatwave in India; the flood in Pakistan; the mighty rivers that ran dry in the US (Mississippi), China (Yangtze) and Europe (Rhine), the drought in Kenya that claimed thousands of wildlife, and the wildfires in Siberia, the earth has supplied proof that it’s moving closer to the tipping points climate scientists had been warning us about.
In response, after some wrangling, Loss and Damage has found its way to the agenda – and joined the demands for climate adaptation and mitigation. Also on the agenda is the urgent need for Homo Sapiens to rapidly move away from fossil fuels (aka, no new fossil fuel developments).
Can we get there? As November settles in, the world continues to grapple with the fallout from Russia’s invasion of Ukraine (energy shocks + food shocks); the trade war between the US and China is intensifying; countries vying to capture the industries of the future are investing in their manufacturing sectors; as the supplies of Gas and Coal dip, the world is also seeing fresh addition of production capacity. This newsletter has discussed all of these in the past.
Given such pressures, how much climate finance will the global north part be with? At the same time, however, most countries in the global south are hurtling towards a future where the costs of recovering from climate change will consume most of their developmental budgets.
While on this, you need to hear the speech Maldives’ Muhamad Naushad made this August:
“The Maldives—I can tell you, and I am sure this is the same in many other countries, including many Indian Ocean Island countries—spend more than 25% of the budget on debt repayment and another 30% on adaptation. So, no money is left after paying the civil servants and looking after maintenance, fuel, and medicine. We have no money left, so we cannot move out from our difficulties and find a prosperous life.”
In response, poorer countries want sovereign debt to be recast as climate finance. As this article says: “Debt swaps mean that instead of making payments to creditors on outstanding loans, debtor countries can use that money in local currency to invest in climate projects under terms agreed with creditors.
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This is where questions about state capacity rear their head again. Last week, the Financial Times published a very interesting report on Pakistan’s unwieldy debt arrangements. “We’ve been looking at the fine print of Pakistan’s foreign currency bonds,” say its authors. “Initially, we were interested in the Sukuk bonds since we’ve never seen a sovereign Sukuk restructured. But we stumbled across a plain vanilla sovereign bond that strikes us as anything but vanilla. Pakistan’s 2024 dollar bond — issued in 2014 — has at least two odd characteristics that could spell trouble in a restructuring.” (The article might be paywalled. If it’s, search for its headline: “Pakistan’s deeply funky bonds”).
In the run-up to COP27, poorer countries have floated some other ideas. Brazil, Indonesia and DRC (Congo) want to create an OPEC for forests. As the Guardian reported: “The alliance could see the rainforest countries make joint proposals on carbon markets and finance, a longtime sticking point at UN climate and biodiversity talks, as part of an effort to encourage developed countries to fund their conservation, which is key to limiting global heating to 1.5C (2.7F) above pre-industrial levels.”
They are not the only ones. Indonesia wants to create an OPEC for battery metals. This is partly to control prices and partly to drive the country’s own industrialisation. “It has banned nickel ore exports since 2020 in a bid to grow a domestic processing industry,” the Financial Times reported. “Jakarta is planning taxes on exports of intermediate nickel products, with the goal of encouraging the development of a full electric vehicle supply chain.” It’s not the only one. As the FT reported, the “lithium triangle” of Chile, Argentina and Bolivia has previously touted a similar group to control the global supply and pricing of the metal.
These ideas cannot be faulted. At this time, as this Bloomberg report about Copper shows, the global rare mineral supply chain entirely resembles those of other minerals like iron. Those saw a lot of extraction – but with little gain for the national economy. Through greater control, countries like Indonesia are trying to retain a bigger share of the opportunity. This year saw the launch of, as the FT reported, “Indonesia’s first two domestically produced EVs, by South Korea’s Hyundai and China’s Wuling Motors.”
Things look a tad cheerier when we look beyond COP. We know how Russia’s Ukraine war has refashioned the world’s energy map. Europe has sourced Gas from all over the world + encouraged the south to produce more Gas. The East has fallen back on Coal.
In all, since COP26, after all those pitched battles on whether the final draft of the summit’s agreement should include a pledge to “phase out” or “phase down” coal, the world has added more Coal. A more appropriate phrase, as Bloomberg reporters noted, would have been “phase-up”.
In tandem, shares of miners like Glencore have soared this year. Oilcos have reaped billions off trading – and rerouting supplies. A bunch of investors have argued ESG is a bad idea.
All this, however, might be a short-term blip. Deeper processes are underway as well. Russia’s invasion of Ukraine has accelerated the global energy transition. We see that in the west – here is GM as an instance. We see that in India. And we see that in countries like Puerto Rico – it is moving to distributed energy grids.
The thing to remember in all this? Climate change cannot be stopped solely by changing the world’s energy architecture. We also have to, as David Attenborough wrote, rewild the earth (to boost planetary resilience); fight poverty + boost gender empowerment + improve healthcare (to halt population growth); move from consumerism towards sustainability.
Climate reports for a future date
The news report linked above -- about GM – is interesting.
The company has signed up with a few renewable energy providers to go green. Similar work has started in India as well. Earlier this year, Adani tied up with Greenko for Pumped Storage backup for its industrial complex.
In the coming year, we have to take a closer look at Pumped Storage. As the details of a new pumped storage project show, these come with their own ecological footprints. “The pump storage hydro-electric project plans to have 3×300 megawatt generators and 2×150 megawatt generators with the potential to generate 1,592 million units of energy annually. Of the 409.64 hectares of land required for the project, 502.04 hectares of forest land and 107.6 hectares of non-forest land.”
Climate Long-Reads
1. On Delhi's trash towers: “The waste piles have deepened the environmental and health crises in Delhi, a city of 20 million people that anyway frequently ranks as the most polluted city in the world. The three sites occupy several acres of scarce and costly public land worth Rs 10,000 crore, according to conservative estimates mentioned in court orders.” (India Today)
2. On HSBC’s charade of sustainable finance: “In east Africa, an engineering company is preparing to start work on the construction of an environmentally devastating oil pipeline that threatens to derail vital targets set out in the Paris Agreement. And in the north of India, one of the world’s largest cement companies – which last year emitted more CO2 than Greece – has applied to clear a large swathe of forest less than a kilometre away from a wildlife sanctuary. All these companies’ operations have not only been facilitated by HSBC – which claims it is “helping to lead the transition to a more sustainable world” – but have benefited from deals that the bank has labelled sustainable finance.” (Source Material)
3. Down To Earth has a special issue on Loss and Damage.
4. Resource nationalism in the third world – where states are weak and people are desperate. The case of Somalia’s tuna fisheries. (The Wire). Also see this report on India’s fisherfolks.
5. Continuing with what this newsletter said above re: the architecture of climate finance, you have to read this Guardian long-read on the IMF.
6. On Guam, there is no birdsong. Contemplating the emptiness of extinction. (Guardian. Or, as Yes Minister once called it, the Grauniad)
Climate Books of the Week
You want to understand this time of power grids (in this age of energy transition) and the geopolitical wars we live in? Check out these four books.
1. Shorting the Grid, on electricity grids
2. Chip War, on geopolitics around semiconductors
3. Volt Rush, on geopolitics around rare minerals
4. California Burning, on power utilities