Transparency at COP27: Five key outcomes

Before COP27 we published this blogpost outlining 5 key processes related to transparency to follow.  This blogpost reflects on the key outcomes.

1.    The voluntary review of adaptation (and loss and damage) information: agreed!

As we reported in our pre-COP27 blog, under current transparency rules, there is no provision for technical review of information submitted on adaptation (and loss and damage). Key on the COP-27 transparency agenda was a request by developing countries to permit voluntary review of such information. Developed countries were not keen to have such information undergo review. 

At COP27, Parties decided that countries may voluntarily submit information on adaptation (and loss and damage) for technical expert review.

One outstanding item was whether countries should be allowed to submit only one subsection of the adaptation section (crucially, one of the subsections is about loss and damage) for review. In Sharm-el Sheik, countries landed on the compromise text that if a country submits this section for review, all information in it will be reviewed, but certain sections can be identified for extra attention by the reviewers.

The hope is that including adaptation information in the review process will help to improve adaptation reporting capacities. As noted by an attendee at a COP27 #Together4transparency event, the focus of reporting capacity is often on emissions and mitigation. Similarly, earlier TRANSGOV work (link and link) has shown how capacity building programmes tend to focus less on adaptation. Whether this new provision to allow for voluntary review of adaptation information will help to improve adaptation reporting capacities remains to be seen.  

Read the adopted decision text on this matter.

2.    Carbon markets: confidentiality and double counting

As we reported in our pre-COP27 blog, reporting on use of market mechanisms (Article 6) was a key item on the agenda. Article 6.2 allows countries to bilaterally or multilaterally trade emission reduction credits and then report on these trades, with this information undergoing review before being made public. However, countries can mark certain information as ‘confidential’. At COP27, Parties were to decide the scope of this confidentiality provision. 

2.1 Confidentiality

Confidentiality provisions under article 6.2 were up for debate till the very last minutes of COP27.

The decision text on article 6.2 allows countries to identify certain information as confidential, thus not publicly available. However, countries should then justify why the information is confidential. Technical reviewers can still review the information and shall publish inconsistencies found, but in a manner that does not compromise confidentiality of the information.

The SBSTA will continue to further discuss modalities of review of confidential information at the next session. Countries can submit their views on this matter before the next June intersessional.

The fear is that evoking confidentiality may hide emission reduction credits of questionable integrity.

2.2 Double counting

Another key issue that emerged, under article 6.4, was loopholes that would allow the selling of emission reductions twice (or even more). Despite detailed rules for GHG inventories, such trades could give a false sense of emission reduction achievements.

COP26 decided that host countries, where projects generating credits are based, should make ‘corresponding adjustments’ when selling credits to other countries. However, this only applies to ‘authorized’ credits. At COP27, a key question was what to do with unauthorized credits. COP27 ultimately termed these credits ‘mitigation contributions’, based on the philosophy that buying these credits  should be seen as a form of (international) financing of emission reductions that will count towards the NDC target of the host country, rather than offsetting the buyer’s own emission reductions.  However, the system is not watertight and buyers may in practice still count the credits towards their own climate goals.

Tricky issues related to emissions avoided and emission removals will be discussed at future sessions.

3.    Unresolved: outstanding matters under the Pre-Paris transparency regime

As we reported in our pre-COP27 blog, Parties were to consider ‘compilation and synthesis’ reports prepared by the UNFCCC secretariat that synthesized the performance of developed (annex I) countries, as reflected in their transparency reports. This is valuable source of information about such performance.

As expected, however, the COP decided to defer consideration of the Annex I BR synthesis report to the next session. The reason? Russia reports emissions from Crimea. Ukraine and allies thus oppose giving such a synthesis report any formal consideration. This is unfortunate because these reports contained valuable politically salient information on how developed countries performed on their 2020 mitigation and climate finance targets, as we explain in detail in our pre-COP27 blog.

Looking forward, under the Enhanced Transparency Framework (ETF), the UNFCCC secretariat is mandated to write a synthesis report of Biennial Transparency Reports (BTRs) (18/CMA.1 paragraph 6(a)). This may lead to further negotiations— either before or in response to the first synthesis report. One question is whether the report should be disaggregated by developed and developing countries.

4.    A triangle? Transparency, finance and loss & damage

As we reported in our pre-COP27 blog, perhaps one of the most prominent and contentious expectations for COP27 was to address financing for loss and damage. 

A key outcome of COP27 is the establishment of a fund to respond to loss and damage.

A close reading of the decision text shows that parties established new funding arrangements (plural) and that one component of this is a new loss and damage fund.

It remains to be determined what the funding arrangements landscape will look like, and what role the newly established fund will play vis-à-vis other funding arrangements. One question we are interested in is how parametric insurance enabled by novel forms of satellite-enabled data relates to this, and whether such insurance-based instruments may crowd out public finance via the fund.

It is worth noting that the decision text does not mention that funding should be public and grant-based, despite calls for this by developing countries.

Although the decision text does not mention insurance either, it does mention the ‘Global Shield’ (an approach piloted by Germany and a host of private actors outside the auspices of the UNFCCC to address loss and damage through insurance schemes), as well as the need for ‘speed’ in reacting to instances of loss and damage. These elements provide avenues for the promotion of insurance—enabled through new forms of radical satellite-enabled transparency— as key to loss and damage financing. TRANSGOV will continue to follow this topic closely.

5.    A (mis)match? Transparency and ambition

As we reported in our pre-COP27 blog, the last year has seen the launch of the ‘work programme to urgently scale up mitigation ambition and implementation in this critical decade’. Transparency is presented as the backbone of ambitious climate action under the Paris Agreement and a key source of information about country performance. Will the mitigation work programme draw on transparency reports? Or will the two remain politically detached?

The decision text on the mitigation work programme does not mention Biennial Transparency Reports as a source of input. Instead, the only clear input to the work programme is to be targeted submissions by parties and non-party stakeholders. The transparency system thus remains detached from this important new agenda item that is explicitly designed to address the raising of collective ambition.

This seems to be a trend rather than an anomaly. For example, the Glasgow Climate Pact does not make any reference to findings from country transparency (BR or BUR) reports. Instead, information emphasized here is the forward-looking findings from the NDC synthesis report. The fact that these findings are not in line with the Paris Agreement’s 1.5-degree target is cited as the main reason for the need to double down on mitigation efforts. It is surprising however that no reference is made to actual findings from Parties’ transparency reports that cover implementation of targets.

It seems that the transparency arrangements and ambition-related negotiations remain politically detached. TRANSGOV will continue to follow this topic closely.  

6.    Other matters

While participating in COP27, two additional transparency-related matters caught our attention. First, the obscure but consequential agenda item on ‘bunker fuels’- that is, aviation and shipping; and second, the buzz around getting ready for the ETF.

6.1 (Not) Counting emissions from international aviation and shipping

Hidden under ‘methodological items under the convention’, we find the agenda item on bunker fuels. Bunker fuels are defined as all fuels sold for international aviation and shipping.

The UNFCCC has a clear explainer on this:

“The IPCC Guidelines for the preparation of greenhouse gas (GHG) inventories, the UNFCCC reporting guidelines on annual inventories for Parties included in Annex I to the Convention (Decision 24/CP.19), and the Modalities, procedures and guidelines for the transparency framework for action and support referred to in Article 13 of the Paris Agreement (Decision 18/CMA.1) outline that emissions from international aviation and maritime transport (also known as international bunker fuel emissions) should be calculated as part of the national GHG inventories of Parties, but should be excluded from national totals and reported separately.

These emissions are not subject to the limitation and reduction commitments of Annex I Parties under the Convention and the Kyoto Protocol due to the fact that they are not accounted in national totals.”

Source: https://unfccc.int/topics/mitigation/workstreams/emissions-from-international-transport-bunker-fuels

In simple terms, this means that emissions from international shipping and aviation do not count towards any country’s emissions.

This is reason for concern because these emissions are on the rise:

Rather than counting these emissions in the inventories, the UNFCCC is ‘in dialogue’ with ICAO and IMO to keep tabs on how these organizations aim to reduce emissions and how they are counted. At COP27, these organizations gave a presentation and they provided answers to some but not all questions.

6.2 Getting ready for the ETF

The Sharm el-Sheik Implementation Plan contains a dedicated section on transparency. This short section recalls the deadline for submission of the first BTR and urges parties to make necessary preparations to meet this deadline. It further recognizes the need for increased support to developing countries for implementing the ETF.

During COP27, the UNFCCC secretariat organized 25 events under the banner #Together4Transparency. The event series is to celebrate past achievements and “pave the way for the full implementation of the Enhanced Transparency Framework (ETF) of the Paris Agreement”.

The event series included various organizations that provide capacity building support. As mentioned by one speaker, “there is support out there”. It seems that donor countries are relatively willing to spend resources on ensuring that developing countries meet the Paris Agreement’s transparency obligations.

One session was titled “Benefits and tools for implementing the Enhanced Transparency Framework”.

The UNFCCC secretariat presented a list of benefits that may result from participating in the UNFCCC transparency arrangements.

TRANSGOV will do further empirical research to analyze what the consequences of participation in transparency arrangements are in practice, particularly in relation to climate action. We will do this also through in-depth country case studies.

Conclusion

Transparency did not make headlines at this COP-27. However, transparency related fights flared up in various other negotiations, including climate finance, mitigation ambition and market mechanisms. This said, the overall picture that emerges is that of an isolated transparency framework. There are few institutional linkages between the transparency framework and other politically contentious negotiation processes aimed at ramping up ambition, like the mitigation work programme or the discussions on the new collective quantified goal on climate finance. Even as this is so, efforts to get as many developing countries up to speed with  UNFCCC and ETF reporting requirements continue unabated.