COP27: Egypt hopes for major progress on energy commitments at climate summit

The role of gas as a transition fuel, efforts to phase out coal use and decarbonizing the oil, gas and steel industries will feature prominently on the UN Climate Change Conference agenda, which starts in Egypt on Nov. 6.

Concrete progress on decarbonizing energy systems will be critical to the implementation of climate plans at COP27 in Sharm el-Sheikh, the conference president's special representative Wael Aboulmagd told S&P Global Commodity Insights in an interview Nov. 3.

Egypt's presidency of COP will focus strongly on implementation, along with finance, adaptation and loss and damage. But Aboulmagd emphasized that further work on mitigation was needed at the conference.

"Mitigation is the core," he said. "Energy is the lifeline of human development and progress and prosperity and it has to be made available."

While Egypt's presidency of the climate conference was emphasizing the role of adaptation in the talks, this was not at the expense of any other aspect, he added.

Transition fuels

Foremost among the energy issues under consideration is the role of gas as a transition fuel, which Aboulmagd said was becoming gradually accepted.

"It doesn't mean that it should continue indefinitely, but really, it is a transition phase where you need to continue to produce energy while you're developing your renewables infrastructure," he said.

A differentiated approach was needed for each country to identify a realistic path that balanced access to energy with decarbonization imperatives.

Developing countries, "which have contributed near to nothing ever to global warming or climate change" should not be expected to "immediately cease production or exploration," he added.

However, Aboulmagd noted that an adversarial approach pitting the demands of economically developed countries to decarbonize against developing countries' growth ambitions was not constructive.

Egypt, he said, was genuinely committed to a less adversarial approach. A collaborative approach was the only way to succeed in the long term, he added.

The Just Energy Transition Partnerships which fostered the deal to wean South Africa off coal were good models that addressed real world issues in a practical way, Aboulmagd said. Further such deals were hoped for at COP27, he noted.

A decarbonization day on Nov. 11 would address reducing emissions from the oil and gas, steel, fertilizer and cement sectors, he said.

Methane pledge

The global methane pledge launched at COP26 in Glasgow aims to reduce global methane emissions by at least 30% from 2020 levels by 2030.

Over 100 countries have signed the pledge, but accountability was key to achieving the reductions promised, Aboulmagd said.

"This is something that we are calling for regarding all pledges, not just this pledge," he said. "Because it's fine to show good intention and get the headline. But if there's no follow-up, it becomes empty words and people start losing confidence in the entire of the process."

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Egypt joined the methane pledge in the summer, with a focus on reducing emissions from the oil and gas sector.

Challenging financial landscape

However, the global financial landscape was not ideal, he said, and meagre financial commitments from wealthier countries for funding projects in the developing world fell well short of what was needed.

There was a need to attract trillions of dollars in financing, he said. Bankable models in the energy sector were well established.

A large-scale solar project in Egypt was being delivered entirely by private finance, he noted. However, funds for adaptation did not follow the same model, and large grants would be needed, Aboulmagd said.

Adding to national debt of poorer countries as global interest rates are rising was not sustainable, he said.

Hydrogen hopes

The Egyptian ambassador said to expect announcements around major renewable hydrogen initiatives over the course of the conference, including an international platform for green hydrogen and a significant project in the country.

Europe aims to import large volumes of renewable hydrogen to meet its energy transition ambitions, along with domestic production of the energy carrier.

Platts, part of S&P Global Commodity Insights, assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur17.76/kg ($17.38/kg) Nov. 2 (Netherlands, including capex), based on month-ahead power prices. Costs for production in the Middle East, meanwhile, were assessed at $3.55/kg in Oman on Nov. 3.

VCM technical work

Further technical work was needed on voluntary carbon markets, following key parts of Article 6 of the Paris rulebook that were concluded at COP26 in Glasgow.

VCMs alone were not sufficient to address emissions, but played a vital role, Aboulmagd said.

Platts assessed CORSIA-eligible carbon credits at $3.35/mt Nov. 2, down from a peak of over $8/mt in November 2021.

Aboulmagd acknowledged that the geopolitical environment was challenging, with US-China tensions high and Russia's war in Ukraine disrupting energy and commodity flows in Europe and beyond.

The European energy crisis that has followed has seen a rush to secure gas supplies pushing up demand elsewhere for more polluting fossil fuels such as coal.

However, Aboulmagd urged countries to put aside differences at the conference.

"It has to be a watershed moment where the world rises above differences that exist outside of the realm of climate change to come together to address what is perhaps the most universally acknowledged threat to humanity."

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