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Carbon market and climate finance should be main themes of COP27

This week the 27th edition of the Conference of the Parties (COP) will begin, organized by the United Nations (UN) and which seeks to discuss solutions and plans for the main global climate challenges. This year, the event takes place between November 6th and 18th in Sharm El Sheikh, Egypt.

The edition is part of the negotiations between the 197 signatory countries of the United Nations Framework Convention on Climate Change (UNFCCC)which enables the annual preparation of COPs since 1995.

At the conference, countries meet with the aim of debating the reduction of emission of polluting gases in the atmosphere, based on the most recent scientific data that monitor the current and future impacts of global warming. Therefore, many proposals discussed are related to changes in economic models and policies to reduce environmental impacts.

In 2021, the conference made progress in important ways to limit global warming to 1.5°C. O CNN Brasil Business anticipates the main topics related to the economy that should be on the agenda in 2022 and recalls the solutions agreed in the previous edition.

What to expect from COP27

In a report, XP points out that this edition of the COP should highlight issues such as climate finance, carbon market and geopolitical obstacles.

On climate finance, the agenda turns to the goal of US$ 100 billion in financing to developing nations, which has not yet been met and could be hampered by the current geopolitical context.

According to the report, the lack of transfers has fueled the credibility gap and hampered the ability of these countries to plan new climate action.

Marcella Ungaretti, head of ESG Research at XP, says funding should be discussed primarily “for mitigation, adaptation and loss and damage”.

“What is now needed at COP27 are clear funding targets for mitigation, adaptation and loss and damage, which should be complemented by a delivery plan from developed countries to increase the transparency and accessibility of financed amounts, this being a key theme ”.

In addition, definitions on the carbon credit market are also expected, another topic that was highlighted in 2021 and should remain in this edition. One of the greatest achievements of COP26 was the creation of ground rules to define how carbon credits can help countries meet their climate change mitigation plans.

While in Glasgow the negotiators agreed with the principles, now, in Egypt, it is expected that a regulation of this market and its mechanisms will be defined.

Finally, the changes and consequences caused so far by the conflict between Russia and Ukraine in Eastern Europe will be part of the conversations at the conference, since many of the plans of European countries focused on the climate agenda must suffer stoppages or an increase in deadlines for completion. .

“The complex geopolitical climate may seem like an impediment to progress at COP27, but we also see it as an opportunity for new collaboration. This year, countries will have a new opportunity to show their climate progress, as well as make new commitments for the common good, and we intend to closely monitor developments”, says Ungaretti.

Vinícius Vieira, professor of international relations at Fundação Getúlio Vargas (FGV), has a less optimistic assessment of the capacity and perspective of collaboration between European countries in this reduction.

“Our main concern is what is happening in Europe. It will be at the beginning of the coldest season and with difficulties to obtain energy due to the war. The questions [ambientais] are in the background, since the main thing is to resolve the political situation. Europe has a green agenda, but now, with [de vida] higher and Russia blocking the transfer of commodities and energy, it loses strength in the short term”, he said.

Vieira cites the example of Germany, where Chancellor Olaf Scholz has ordered ministers to prepare to keep all three of the country’s remaining nuclear plants in operation until mid-April to stave off a potential energy crisis.

Brazilian focus

In the opinion of experts, this year a large part of the Brazilian agenda should focus on the carbon credit market and the contributions of agribusiness to mitigating climate change.

According to ESPM international relations professor Leonardo Trevisan, at the national level, Brazil must project itself with a view to the global carbon credit market. A study by ICC Brasil, an arm of the International Chamber of Commerce in the country, showed that the carbon market can bring revenues of up to US$ 100 billion to the country.

“This market can generate around US$ 100 billion. Brazil has around 65% of renewable energy, many companies and banks are interested, even because the ESG agenda is on the rise”.

In the external scenario, Trevisan mentions that one of the main themes that should appear concerns the change in the energy modal of European countries affected by the war in Ukraine.

According to the expert, the conflict and the cutting off of gas and fuel supplies by Russia to European Union countries caused many territories in the bloc to put a “foot on the brake” on changes to a more sustainable energy matrix.

Agribusiness, being one of the main sectors responsible for Brazil’s Gross Domestic Product (GDP), will also be widely debated.

In mid-October, the CNA (Confederação da Agricultura e Pecuária do Brasil) delivered to the Brazilian government a document highlighting the five essential themes for the country to present at the 27th United Nations Conference on Climate Change (COP-27) .

The CNA highlights the “complex mission of promoting the adoption of measures that allow reducing greenhouse gas (GHG) emissions, in line with the challenges and needs of each country illustrated by their nationally determined contributions (NDC), and favoring adaptation measures that allow each country to reduce the impacts of climate extremes”.

The topics listed in the document are:

  • New quantified climate finance target;
  • Mechanisms focused on adaptation;
  • Adoption of the action plan for agriculture, resulting from the Koronivia negotiations;
  • Operationalization of carbon market mechanisms;
  • General recommendations to Brazilian negotiators.

For Vinícius Vieira, it is essential that agribusiness be at the forefront in the debate on alternatives to achieve greater sustainability, however, the specialist recalls that to develop solutions of this type it is necessary to invest in technology. Since this type of investment is considered risky, the expert explains that the geopolitical context hinders this type of initiative, as investors prefer more conservative stocks.

“In general terms, the entity indicates that agribusiness plays a fundamental role in the climate issue. But they state that funding is needed and to have more advanced technologies we need venture capital and the world is in a delicate situation to have this venture capital and finance projects focused on mitigating climate change.”

In addition, in general, experts comment that Brazil should position itself as a preferred nation for international investments, given the conditions it has to produce energy in a green and sustainable way.

COP26 Results

Last year, the conference brought together some 197 world leaders and achieved some important results. The first of these was the commitment of developed countries to fulfill the pledge of US$ 100 billion annually in climate finance to developing countries most affected by the climate crisis.

In addition, the emblematic Article 6 of the Paris Agreement was approved, defining the creation of basic guidelines for trade between countries and private agents in the regulated carbon market, although there are still important points to be closed.

Finally, the event culminated in the elaboration of the 1st international climate pact that references fossil fuels and addresses limits to the use of coal, in which countries agreed to “gradually reduce” its use and “gradually eliminate” fuel subsidies. fossils.

Although China, India and the United States are the world’s biggest coal emitters, the three countries have not joined the alliance. Coal supplies more than 1/3 of the energy consumed worldwide and is the biggest contributor to climate change.

Source: CNN Brasil

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