The first week of COP 27 in Sharm El-Sheikh was punctuated by Friday’s Global Carbon Budget report that there’s a 50% chance the global temperature increase will surpass 1.5 degrees Celsius by 2030. The conference so far is also notable for including “loss and damage” on the agenda –compensating low-income and emissions countries for climate change impacts—in a historic first. And another unexpected outcome: Calls for remaking the development bank system to respond to climate change. 

Here are other themes our Energy and Sustainability team is watching for:

• The war in Ukraine has upended governments’ priorities and shifted political focus from the climate crisis towards short-term energy security. Challenges posed by spiraling prices for fossil fuels, the fragility of clean energy supply chains and higher interest rates have intensified tensions and deepened mistrust in the international community and will make for difficult conversations at COP.
  
• Adaptation and concerted action to tackle the implementation gap. The most important challenge for governments at COP27 will be to demonstrate a willingness to act together in the UN context and to prove the resilience of multilateral cooperation in times of multiple crises as 2022 emissions increase. The outcome of the first ongoing Global Stocktake will reveal the collective progress and gaps from nations and corporates under the Paris Agreement. 

• Financing low- and middle-income countries’ pathway to net-zero and the question of reparations will dominate negotiations. Despite some progress at COP26, developing nations will demand more support while developed countries see themselves sliding into recession. 

• New interest in African oil and gas reserves exposes an old North-South divide. African countries are expected to double down on their right to exploit their own enormous oil and gas reserves, but finance is steering away from supporting such projects as global demand adapts. At the very least, the push for new investments in fossil fuels on the African continent could become a valuable bargaining chip for African nations when making the case for more financial support. 
• There are some bright spots–and corporates can lead the way. The U.S.’ massive Inflation Reduction Act and the E.U’s continued implementation of its Green Deal show real progress. Corporates can stand out by demonstrating credible implementation plans for their commitments.