Listen: COP27: A critical year for global climate talks

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Vandana Sebastian

Hello, and welcome to the Platts Future Energy podcast from S&P Global Commodity Insights, where today, our focus will be the upcoming COP27 event at Sharm El-Sheikh in Egypt. What's expected at the conference, especially in reference to carbon markets, what market players want from the conference, and what's the progress in the various agreements that were made last year, and finally, whether COP will retain its relevance.

I'm Vandana Sebastian. I'm a Senior Pricing Specialist for Voluntary Carbon Markets at S&P Global Commodity Insights. Today, I'll be talking to Roman Kramarchuk, Head of Future Energy Outlook; and Dan Klein, Head of Future Energy Pathways.

I'm going to begin with you first, Dan, by asking a broad question about whether, in the current political and economic scenario, it's possible for the world to unite around climate and to collaborate on common goals. And also what are the commitments that are needed from various countries to limit global warming to 1.5 degrees by the end of the century?

Dan Klein

There's a real contrast between COP26 last year and the upcoming COP27 this year in that regard. Last year, there was a real sense of optimism around COP and significant progress could be made around international cooperation on climate that could result in faster and steeper decarbonization.

At that time, the world was still deeply impacted by COVID, and emissions were down by about 5% in 2020 relative to prepandemic and were still relatively low in 2021. There was a new administration in the U.S. that brought the U.S. back into the Paris Agreement, the Fit for 55 policies in Europe were announced, and in China, we've made some pledges to stop financing coal-fired power plants. And so there was just sort of that added optimism.

But really shortly after that event, Russia invaded Ukraine, and that upended the world and really brought into question how this could go forward. On top of this geopolitical concern, the global macro economy is on quite tenuous footing and with decided downside risks from all the supply chain issues, high inflation and interest rates.

But that real question of the world can come together is something that had been looming for a while, even before all of this invasion, the world was becoming more multipolar and that sort of was intensifying. There were additional difficulties between China and the United States on a number of issues, simmering tensions between Russia and U.S. and Europe together, and with that invasion of Ukraine, really intensified that trend as the opposition between Russia and the U.S. and Europe will likely force many nations to maybe take sides on that geopolitical and energy grounds, with climate potentially falling on the wayside.

It's pretty clear that the world is not yet on a pathway to that deep decarbonization that everyone seems to want in these agreements, getting to a 2-degree scenario, 1.5-degree scenario or net zero. And even if sort of those OECD nations, so developing nations, get their emissions down to an absolute zero level, emissions from the rest of the world would still need to decline by about 65% from their current levels by 2050 to reach even a 2-degree target.

So there's a clear need to cooperate on a climate, and for richer nations to help poorer nations to decarbonize. And that is added difficulty that the national budgets are stressed and there clearly is a focus on energy security over energy transition at the moment, which makes getting real changes out of COP even more difficult. So it's at a vastly different environment than what it was last year at COP, and it is going to be a much more difficult one to come to these agreements.

Vandana Sebastian

Well, definitely, the geopolitical backdrop is completely different ahead of this COP, but Roman, what about the progress that were made on agreements last year? There were agreements that were reached on coal, on methane and deforestation. Has there been any traction on those agreements since the last COP?

Roman Kramarchuk

Yes. It's interesting because when people think of COP, they think of the official pronouncement at the end of COP, progress on the Paris Rulebook, et cetera. But COP is really a forum for many different venues and for many different initiatives. In addition to the main declarations coming out of Glasgow last year, there were specifically individual initiatives on coal. 23 countries committed to phase out coal-fired power. Dan mentioned Chinese commitments around restricting new coal build. Several major banks committed to stop financing unabated coal-fired power plants.

Very importantly, a coalition of the U.S., Britain, France, Germany and the EU agreed to finance measures that would help South Africa, which is one of the most coal-intensive economies in the world, improve their targets and address their dependency on coal. It was critical that a lot of these announcements were made, the coal announcement was made, and is there a follow-through on this? Dan mentioned sort of the tensions that have been happening.

There's also a bit of attention between the short-run realities and the long-run goals, because what we're seeing is actually coal burn is well above what we had expected it to be like a year or 2 ago. And there's a number of reasons for that, including the extremely high prices on natural gas. So considering that in Glasgow, there was talk of phasing out coal, we're actually seeing coal burn up relative to where we expected and looking to remain strong for a bit.

So that's an interesting tension. It will be interesting to see whether there will be more push for actually getting language on a planned phase out of coal. If you recall last year, there was last-minute flurry about that language, and it was changed to a phase down rather than the phase out. So it will be -- we'll be looking to see whether the momentum on that will change. That's something that will depend in part by countries like India, for sure, which I think we'll touch upon later.

That's on the coal side. I think some of the other side agreements that were mentioned were the global methane pledge to reduce methane emissions 30% by 2030, and reducing flaring as soon as possible. There will be a time to come together and then for countries to kind of do a stocktake aside from the broader stocktake, but actually a stocktake on these individual pieces.

The same thing with the 100 countries that committed to ending deforestation by 2030. Essentially, in Egypt, this will be an opportunity to shine those commitments under the light and show progress, or if we're not seeing progress, really kind of call into question the significance and the value of these commitments.

Vandana Sebastian

Right. And also one segment, which has been desperately waiting for clarity on what's going to happen next is the voluntary carbon market, which we've been covering very actively over the last 1.5 years. The market definitely has lost its pace since the Ukraine innovation and the weaker macroeconomic scenario that followed.

We saw prices pick up in the immediate aftermath of the Ukraine invasion, but they're nowhere near where they were late last year or even earlier this year, and many sources have told us that one reason why this is happening is because the larger energy crisis leaves no room for decarbonization efforts. Corporations are too busy focusing on immediate requirements rather than offsetting. So the question is, can countries come together to accelerate decarbonization efforts? Would you like to answer that, Dan?

Dan Klein

It's a great question. As is often the case, the long-term environmental ambition generally takes the backseat to short-term economic priorities, particularly when there are severe shocks to the system, like what we've seen recently. And not just talking about the fallout from the Russian invasion of Ukraine. High prices for natural gas were already occurring before that invasion happening. Renewables and nuclear have been underperforming for a variety of reasons, and overall, energy demand has been quite inelastic.

And as Roman mentioned, that's led, amongst some other things, to stronger coal-fired generation and use of oil in some places when that was in the place that we were projecting with at last year. But even with this extremely high coal and oil prices, many utilities and even down the line of their rate players have regretted retiring some of those coal and oil-fired generating assets. And so policymakers have looked in all this backdrop, they've really looked to shield their consumers from the impact of that on their retail prices and ultimately what they're paying for energy.

And what happens here is these measures can be really counterproductive to the energy transition. Using the old adage of "the cure for high prices is high prices," but really, when you're thinking about getting rid of fossil fuel, so cure for lowering fossil fuels is having high prices, which can make the use of clean energy solutions more economically attractive. And there's been efforts to kind of shield the consumer from that and kind of getting in the way of some of those investments there.

But the Paris agreement really originally mandated that sort of 5-year cycle of a stocktake, and Roman was mentioning a stocktake earlier. And we're looking at -- this is the year in which we're moving to that annual cycle of that stocktake of their nationally-determined contributions to the Paris Agreement. So it is sort of setting up for a reevaluation of those targets that were made, and there is going to be that pressure from the international community to look at how targets have been set, what the progress has been made, if they need to be adjusted.

But with all that's happened over the past year, it's hard to really feel that there is going to be such progress in that direction. There may be some targets that are going to be incrementally tightened, but with all those budgets strained globally and priority shifting really towards energy transition and some of those other -- those barriers that we talked about earlier about international cooperation, it does seem to be a very difficult ask to get significant progress in that area this year.

Vandana Sebastian

Exactly. Since there are global targets to be met, collaboration among countries is critical. And countries like India and China have been resisting pressure to comply with templates set out by Western nations. India, for example, in a surprise move last year, announced their intention to achieve net zero emissions by 2070. No one was expecting that announcement. They've also updated their NDCs in the month of August this year. They made them more stringent.

But at the same time, like you were mentioning earlier, India also led the opposition at COP26 for the wording to be changed from phase out to phase down on the agreement for the phase out of coal-fired power generation. And also in the carbon space, there's been a certain amount of confusion because India has indicated that they are kickstarting a domestic compliance market.

Their Minister for Renewable Energy had indicated that voluntary carbon credit exports will be banned. We saw that immediately impact the market. There was a huge discount for credits from India that emerged in the aftermath of that statement. Later, early October, that statement was clarified and the minister said that there was not going to be a blanket ban, but India would focus first on NDCs, and the left of our credits could be exported. So we saw that discount shrink.

So there's been a lot of back and forth happening on that respect. It's also a country that has shared close ties with Russia that refused to take a stand amid geopolitical tensions. So the question is what is expected from India at COP, and what is the significance of India's position, Roman?

Roman Kramarchuk

I think you've teed off a lot of the key questions. I think when we look at the big 3 of global greenhouse gas emissions and when we think of the big 3, that is China, Europe and the EU, they have always been driving the direction and they account for a significant share of the total emissions. But beyond that, India has always been a key player in climate discussions.

And in many ways, they could be the deciding factor for several key issues in this year's talks. Interesting that throughout the current geopolitical tensions, India is the largest economy, the largest energy consumer and the largest emitter that has stayed more strictly neutral. It's also the world's second-largest emitter of CO2 from coal, and as you mentioned, they were critical to derailing the plans for language around phasing out of coal.

But it's interesting to note when we look at our data of new power plants coming online, the rest of the world, including China, has actually seen a decline in coal's share of new and planned power generating capacity. So in that sense, whatever their needs are, whatever they're building, the rest of the world is building relatively smaller share of coal.

India's share of coal in their new announcements and in their new plants coming online remains relatively high. So that's something to look out for. India is very much dependent upon coal. And unless there is some clear signs or some clear cooperation along -- perhaps along the lines of what South Africa saw in COP26, it will be -- it's worth noting that, that would be a major decision for them to agree to a phase out even while their dependency on coal is so strong.

Vandana, you mentioned the international carbon trade. Historically, Brazil in the past had always been the country that had expressed the most concerns and debated key design elements of Article 6. It's interesting to note, and we will be tracking what India is doing in terms of nations that are looking to limit carbon sales to buyers outside the country.

We're putting together -- actually, we will be issuing a voluntary carbon scorecard in the coming days, where we really track the contributions of various countries and various types of projects to the total supply and demand of the voluntary carbon market. And India is an absolutely key player.

So if we talk about countries like India choosing to limit their participation in the markets, this will have a major impact on the markets, given their relative size in terms of both issuances of credits and in terms of the retirements of credits that are coming from India. We will wait and see. I think India is in a unique position, both geopolitically and also from the position of carbon markets and also from the position of coal. On all 3 elements, I think we're going to look to see what COP27 brings and what India brings to COP27.

Vandana Sebastian

Another aspect that India and other developing nations have been pushing for is that the richer country should undertake a bulk of the climate financing. How likely is that to happen, Dan?

Dan Klein

There's really been a mixed bag about how this financing have developed at COPs in the past. And for a variety of reasons, some of them we've already talked about, it just makes it a little bit more difficult going forward.

There have been several pledges made in this area in the past several years with pretty varying degrees of follow-through. The most prominent of these was a pledge in 2009 of $100 billion per year of climate funding for 5 years starting in 2020. This was pushed back to 2023, and it just kind of shows, again, one of those issues where short-term priorities can trump some of those longer-term decarbonization goals.

In 2021, the U.S. President Biden pledged that the U.S. would double its spending on international climate aid to $11 billion per year. And this would be, again, starting in 2024, a little bit down the road, probably with the idea that the macro economy would be in a little bit better situation and some of the lingering impacts of COVID and some of those other issues would have cleared up by then.

And at COP26 last year, an agreement was struck to double adaptation finance to $40 billion by 2025. So support from wealthier nations to developing nations on climate finance has become even more vital with some of those issues that we talked about earlier and the need for that. Coming out of the pandemic, we saw more of that permanent economic loss from developing nations than in sort of the developed economies as richer nations can stimulate their economies, and the national budgets of some of these developing nations simply can't do that.

So as a result, that pandemic incurred a far greater amount of that permanent economic loss in those countries than what they would -- path they would have been on if there were to be no pandemic. So with the nations around the world providing a variety of support for their own citizens coming out of this tough economic crisis, it's again one of those, another factor, where it's just going to be a greater challenge to get strong commitment and follow through to some of those nations.

And going back to some of those issues that Roman was talking about, it's coming into COP, making these pledges, grabbing the headlines with some of those pledges can be really encouraging, but following through on these things, tracking where the dollars are flowing to is something that kind of can fall by the wayside when there are other priorities that are taking prominence.

Vandana Sebastian

Very true. And also amidst all these differences among nations, will COP actually retain its relevance, Roman?

Roman Kramarchuk

Actually, Vandana, if I could just also just follow up on something that Dan had mentioned. It's interesting because this has also been a year of extraordinary climate damage and climate events. This is -- we've had major flooding in places like Bangladesh, Pakistan and India, drought in China, weather events around the world. So there is -- if anything, there is an increased sense of the need to address some of the loss and damage.

And one of the things to note is on the European Parliament side, they recently adopted a resolution calling on the EU to essentially put more resources into countries most affected by climate change. This is, in some ways, going to be the glue that kind of brings the likelihood of more progress together if there are more such commitments. Now it will be interesting to see whether that EU resolution to address loss and damage and to essentially act as bridge builders between the developing and the least developed countries, whether that actually plays out.

But certainly, this EU Parliament resolution is a step in that direction. I guess the question that you were asking about the relevance of COP, that to me is one of the key questions this year. And talking to various people and just considering what we're seeing, this is a very different COP. I mean we have the Paris Rulebook essentially completed. We have also -- the interesting thing to note is that there are a lot of national level initiatives around carbon, around decarbonization. Those are being done almost outside of the borders and outside of the framework of COP.

If you think about the Inflation Reduction Act in the United States, it's a very strong piece of domestic industrial policy. Notably, there is nothing in the Inflation Reduction Act that commits any money to international climate finance to either loss damage or mitigation. So no contributions from the Inflation Reduction Act on that side.

If you look at the way the Inflation Reduction Act is structured, it's done all through domestic tax credits. There's no mention of carbon prices. There's no mention of carbon trading. So a lot of the sort of the key frameworks, the way COP has been designed to try to encourage and to set up frameworks for reducing emissions are kind of -- have not been incorporated into some of these industrial policies.

It's also interesting to note that the G20 is meeting the second week of COP. And typically, that second week is very focused on getting to the agreement on getting to -- on hammering out some of the most challenging issues. But part of me is wondering whether some of the key issues, given all of the industrial policy relevance for climate, whether some of those key issues will actually be taking place at the G20 conference more so than at the COP.

Whether that sort of fragmentation that Dan mentioned earlier, the fact that countries are going more on their own, is not necessarily meaning that there's not progress on climate. It's just that this progress on climate is happening more in the context of national decisions as opposed to global frameworks.

Vandana Sebastian

Right. This has been a very interesting discussion. There are a lot of hopes pinned on COP27, many critical decisions to be taken, many earlier decisions to be further fine-tuned, Various governments world over will have to figure out a way to put their differences aside and come together because, of course, our planet still remains at risk and the 1.5-degree goal is more critical now than it ever has been.

But thank you very much for joining me in this conversation, and thank you to our listeners for tuning in. This Future Energy podcast episode was produced by Felix Fernandez in London. You can stay ahead of the evolution of energy and navigate the pathways to a low-carbon global economy with the Platts Atlas of Energy Transition: your map to the sustainable commodity markets of the future. Explore the atlas by visiting spglobal.com/atlas.

Vandana Sebastian

Hello, and welcome to the Platts Future Energy podcast from S&P Global Commodity Insights, where today, our focus will be the upcoming COP27 event at Sharm El-Sheikh in Egypt. What's expected at the conference, especially in reference to carbon markets, what market players want from the conference, and what's the progress in the various agreements that were made last year, and finally, whether COP will retain its relevance.

I'm Vandana Sebastian. I'm a Senior Pricing Specialist for Voluntary Carbon Markets at S&P Global Commodity Insights. Today, I'll be talking to Roman Kramarchuk, Head of Future Energy Outlook; and Dan Klein, Head of Future Energy Pathways.

I'm going to begin with you first, Dan, by asking a broad question about whether, in the current political and economic scenario, it's possible for the world to unite around climate and to collaborate on common goals. And also what are the commitments that are needed from various countries to limit global warming to 1.5 degrees by the end of the century?

Dan Klein

There's a real contrast between COP26 last year and the upcoming COP27 this year in that regard. Last year, there was a real sense of optimism around COP and significant progress could be made around international cooperation on climate that could result in faster and steeper decarbonization.

At that time, the world was still deeply impacted by COVID, and emissions were down by about 5% in 2020 relative to prepandemic and were still relatively low in 2021. There was a new administration in the U.S. that brought the U.S. back into the Paris Agreement, the Fit for 55 policies in Europe were announced, and in China, we've made some pledges to stop financing coal-fired power plants. And so there was just sort of that added optimism.

But really shortly after that event, Russia invaded Ukraine, and that upended the world and really brought into question how this could go forward. On top of this geopolitical concern, the global macro economy is on quite tenuous footing and with decided downside risks from all the supply chain issues, high inflation and interest rates.

But that real question of the world can come together is something that had been looming for a while, even before all of this invasion, the world was becoming more multipolar and that sort of was intensifying. There were additional difficulties between China and the United States on a number of issues, simmering tensions between Russia and U.S. and Europe together, and with that invasion of Ukraine, really intensified that trend as the opposition between Russia and the U.S. and Europe will likely force many nations to maybe take sides on that geopolitical and energy grounds, with climate potentially falling on the wayside.

It's pretty clear that the world is not yet on a pathway to that deep decarbonization that everyone seems to want in these agreements, getting to a 2-degree scenario, 1.5-degree scenario or net zero. And even if sort of those OECD nations, so developing nations, get their emissions down to an absolute zero level, emissions from the rest of the world would still need to decline by about 65% from their current levels by 2050 to reach even a 2-degree target.

So there's a clear need to cooperate on a climate, and for richer nations to help poorer nations to decarbonize. And that is added difficulty that the national budgets are stressed and there clearly is a focus on energy security over energy transition at the moment, which makes getting real changes out of COP even more difficult. So it's at a vastly different environment than what it was last year at COP, and it is going to be a much more difficult one to come to these agreements.

Vandana Sebastian

Well, definitely, the geopolitical backdrop is completely different ahead of this COP, but Roman, what about the progress that were made on agreements last year? There were agreements that were reached on coal, on methane and deforestation. Has there been any traction on those agreements since the last COP?

Roman Kramarchuk

Yes. It's interesting because when people think of COP, they think of the official pronouncement at the end of COP, progress on the Paris Rulebook, et cetera. But COP is really a forum for many different venues and for many different initiatives. In addition to the main declarations coming out of Glasgow last year, there were specifically individual initiatives on coal. 23 countries committed to phase out coal-fired power. Dan mentioned Chinese commitments around restricting new coal build. Several major banks committed to stop financing unabated coal-fired power plants.

Very importantly, a coalition of the U.S., Britain, France, Germany and the EU agreed to finance measures that would help South Africa, which is one of the most coal-intensive economies in the world, improve their targets and address their dependency on coal. It was critical that a lot of these announcements were made, the coal announcement was made, and is there a follow-through on this? Dan mentioned sort of the tensions that have been happening.

There's also a bit of attention between the short-run realities and the long-run goals, because what we're seeing is actually coal burn is well above what we had expected it to be like a year or 2 ago. And there's a number of reasons for that, including the extremely high prices on natural gas. So considering that in Glasgow, there was talk of phasing out coal, we're actually seeing coal burn up relative to where we expected and looking to remain strong for a bit.

So that's an interesting tension. It will be interesting to see whether there will be more push for actually getting language on a planned phase out of coal. If you recall last year, there was last-minute flurry about that language, and it was changed to a phase down rather than the phase out. So it will be -- we'll be looking to see whether the momentum on that will change. That's something that will depend in part by countries like India, for sure, which I think we'll touch upon later.

That's on the coal side. I think some of the other side agreements that were mentioned were the global methane pledge to reduce methane emissions 30% by 2030, and reducing flaring as soon as possible. There will be a time to come together and then for countries to kind of do a stocktake aside from the broader stocktake, but actually a stocktake on these individual pieces.

The same thing with the 100 countries that committed to ending deforestation by 2030. Essentially, in Egypt, this will be an opportunity to shine those commitments under the light and show progress, or if we're not seeing progress, really kind of call into question the significance and the value of these commitments.

Vandana Sebastian

Right. And also one segment, which has been desperately waiting for clarity on what's going to happen next is the voluntary carbon market, which we've been covering very actively over the last 1.5 years. The market definitely has lost its pace since the Ukraine innovation and the weaker macroeconomic scenario that followed.

We saw prices pick up in the immediate aftermath of the Ukraine invasion, but they're nowhere near where they were late last year or even earlier this year, and many sources have told us that one reason why this is happening is because the larger energy crisis leaves no room for decarbonization efforts. Corporations are too busy focusing on immediate requirements rather than offsetting. So the question is, can countries come together to accelerate decarbonization efforts? Would you like to answer that, Dan?

Dan Klein

It's a great question. As is often the case, the long-term environmental ambition generally takes the backseat to short-term economic priorities, particularly when there are severe shocks to the system, like what we've seen recently. And not just talking about the fallout from the Russian invasion of Ukraine. High prices for natural gas were already occurring before that invasion happening. Renewables and nuclear have been underperforming for a variety of reasons, and overall, energy demand has been quite inelastic.

And as Roman mentioned, that's led, amongst some other things, to stronger coal-fired generation and use of oil in some places when that was in the place that we were projecting with at last year. But even with this extremely high coal and oil prices, many utilities and even down the line of their rate players have regretted retiring some of those coal and oil-fired generating assets. And so policymakers have looked in all this backdrop, they've really looked to shield their consumers from the impact of that on their retail prices and ultimately what they're paying for energy.

And what happens here is these measures can be really counterproductive to the energy transition. Using the old adage of "the cure for high prices is high prices," but really, when you're thinking about getting rid of fossil fuel, so cure for lowering fossil fuels is having high prices, which can make the use of clean energy solutions more economically attractive. And there's been efforts to kind of shield the consumer from that and kind of getting in the way of some of those investments there.

But the Paris agreement really originally mandated that sort of 5-year cycle of a stocktake, and Roman was mentioning a stocktake earlier. And we're looking at -- this is the year in which we're moving to that annual cycle of that stocktake of their nationally-determined contributions to the Paris Agreement. So it is sort of setting up for a reevaluation of those targets that were made, and there is going to be that pressure from the international community to look at how targets have been set, what the progress has been made, if they need to be adjusted.

But with all that's happened over the past year, it's hard to really feel that there is going to be such progress in that direction. There may be some targets that are going to be incrementally tightened, but with all those budgets strained globally and priority shifting really towards energy transition and some of those other -- those barriers that we talked about earlier about international cooperation, it does seem to be a very difficult ask to get significant progress in that area this year.

Vandana Sebastian

Exactly. Since there are global targets to be met, collaboration among countries is critical. And countries like India and China have been resisting pressure to comply with templates set out by Western nations. India, for example, in a surprise move last year, announced their intention to achieve net zero emissions by 2070. No one was expecting that announcement. They've also updated their NDCs in the month of August this year. They made them more stringent.

But at the same time, like you were mentioning earlier, India also led the opposition at COP26 for the wording to be changed from phase out to phase down on the agreement for the phase out of coal-fired power generation. And also in the carbon space, there's been a certain amount of confusion because India has indicated that they are kickstarting a domestic compliance market.

Their Minister for Renewable Energy had indicated that voluntary carbon credit exports will be banned. We saw that immediately impact the market. There was a huge discount for credits from India that emerged in the aftermath of that statement. Later, early October, that statement was clarified and the minister said that there was not going to be a blanket ban, but India would focus first on NDCs, and the left of our credits could be exported. So we saw that discount shrink.

So there's been a lot of back and forth happening on that respect. It's also a country that has shared close ties with Russia that refused to take a stand amid geopolitical tensions. So the question is what is expected from India at COP, and what is the significance of India's position, Roman?

Roman Kramarchuk

I think you've teed off a lot of the key questions. I think when we look at the big 3 of global greenhouse gas emissions and when we think of the big 3, that is China, Europe and the EU, they have always been driving the direction and they account for a significant share of the total emissions. But beyond that, India has always been a key player in climate discussions.

And in many ways, they could be the deciding factor for several key issues in this year's talks. Interesting that throughout the current geopolitical tensions, India is the largest economy, the largest energy consumer and the largest emitter that has stayed more strictly neutral. It's also the world's second-largest emitter of CO2 from coal, and as you mentioned, they were critical to derailing the plans for language around phasing out of coal.

But it's interesting to note when we look at our data of new power plants coming online, the rest of the world, including China, has actually seen a decline in coal's share of new and planned power generating capacity. So in that sense, whatever their needs are, whatever they're building, the rest of the world is building relatively smaller share of coal.

India's share of coal in their new announcements and in their new plants coming online remains relatively high. So that's something to look out for. India is very much dependent upon coal. And unless there is some clear signs or some clear cooperation along -- perhaps along the lines of what South Africa saw in COP26, it will be -- it's worth noting that, that would be a major decision for them to agree to a phase out even while their dependency on coal is so strong.

Vandana, you mentioned the international carbon trade. Historically, Brazil in the past had always been the country that had expressed the most concerns and debated key design elements of Article 6. It's interesting to note, and we will be tracking what India is doing in terms of nations that are looking to limit carbon sales to buyers outside the country.

We're putting together -- actually, we will be issuing a voluntary carbon scorecard in the coming days, where we really track the contributions of various countries and various types of projects to the total supply and demand of the voluntary carbon market. And India is an absolutely key player.

So if we talk about countries like India choosing to limit their participation in the markets, this will have a major impact on the markets, given their relative size in terms of both issuances of credits and in terms of the retirements of credits that are coming from India. We will wait and see. I think India is in a unique position, both geopolitically and also from the position of carbon markets and also from the position of coal. On all 3 elements, I think we're going to look to see what COP27 brings and what India brings to COP27.

Vandana Sebastian

Another aspect that India and other developing nations have been pushing for is that the richer country should undertake a bulk of the climate financing. How likely is that to happen, Dan?

Dan Klein

There's really been a mixed bag about how this financing have developed at COPs in the past. And for a variety of reasons, some of them we've already talked about, it just makes it a little bit more difficult going forward.

There have been several pledges made in this area in the past several years with pretty varying degrees of follow-through. The most prominent of these was a pledge in 2009 of $100 billion per year of climate funding for 5 years starting in 2020. This was pushed back to 2023, and it just kind of shows, again, one of those issues where short-term priorities can trump some of those longer-term decarbonization goals.

In 2021, the U.S. President Biden pledged that the U.S. would double its spending on international climate aid to $11 billion per year. And this would be, again, starting in 2024, a little bit down the road, probably with the idea that the macro economy would be in a little bit better situation and some of the lingering impacts of COVID and some of those other issues would have cleared up by then.

And at COP26 last year, an agreement was struck to double adaptation finance to $40 billion by 2025. So support from wealthier nations to developing nations on climate finance has become even more vital with some of those issues that we talked about earlier and the need for that. Coming out of the pandemic, we saw more of that permanent economic loss from developing nations than in sort of the developed economies as richer nations can stimulate their economies, and the national budgets of some of these developing nations simply can't do that.

So as a result, that pandemic incurred a far greater amount of that permanent economic loss in those countries than what they would -- path they would have been on if there were to be no pandemic. So with the nations around the world providing a variety of support for their own citizens coming out of this tough economic crisis, it's again one of those, another factor, where it's just going to be a greater challenge to get strong commitment and follow through to some of those nations.

And going back to some of those issues that Roman was talking about, it's coming into COP, making these pledges, grabbing the headlines with some of those pledges can be really encouraging, but following through on these things, tracking where the dollars are flowing to is something that kind of can fall by the wayside when there are other priorities that are taking prominence.

Vandana Sebastian

Very true. And also amidst all these differences among nations, will COP actually retain its relevance, Roman?

Roman Kramarchuk

Actually, Vandana, if I could just also just follow up on something that Dan had mentioned. It's interesting because this has also been a year of extraordinary climate damage and climate events. This is -- we've had major flooding in places like Bangladesh, Pakistan and India, drought in China, weather events around the world. So there is -- if anything, there is an increased sense of the need to address some of the loss and damage.

And one of the things to note is on the European Parliament side, they recently adopted a resolution calling on the EU to essentially put more resources into countries most affected by climate change. This is, in some ways, going to be the glue that kind of brings the likelihood of more progress together if there are more such commitments. Now it will be interesting to see whether that EU resolution to address loss and damage and to essentially act as bridge builders between the developing and the least developed countries, whether that actually plays out.

But certainly, this EU Parliament resolution is a step in that direction. I guess the question that you were asking about the relevance of COP, that to me is one of the key questions this year. And talking to various people and just considering what we're seeing, this is a very different COP. I mean we have the Paris Rulebook essentially completed. We have also -- the interesting thing to note is that there are a lot of national level initiatives around carbon, around decarbonization. Those are being done almost outside of the borders and outside of the framework of COP.

If you think about the Inflation Reduction Act in the United States, it's a very strong piece of domestic industrial policy. Notably, there is nothing in the Inflation Reduction Act that commits any money to international climate finance to either loss damage or mitigation. So no contributions from the Inflation Reduction Act on that side.

If you look at the way the Inflation Reduction Act is structured, it's done all through domestic tax credits. There's no mention of carbon prices. There's no mention of carbon trading. So a lot of the sort of the key frameworks, the way COP has been designed to try to encourage and to set up frameworks for reducing emissions are kind of -- have not been incorporated into some of these industrial policies.

It's also interesting to note that the G20 is meeting the second week of COP. And typically, that second week is very focused on getting to the agreement on getting to -- on hammering out some of the most challenging issues. But part of me is wondering whether some of the key issues, given all of the industrial policy relevance for climate, whether some of those key issues will actually be taking place at the G20 conference more so than at the COP.

Whether that sort of fragmentation that Dan mentioned earlier, the fact that countries are going more on their own, is not necessarily meaning that there's not progress on climate. It's just that this progress on climate is happening more in the context of national decisions as opposed to global frameworks.

Vandana Sebastian

Right. This has been a very interesting discussion. There are a lot of hopes pinned on COP27, many critical decisions to be taken, many earlier decisions to be further fine-tuned, Various governments world over will have to figure out a way to put their differences aside and come together because, of course, our planet still remains at risk and the 1.5-degree goal is more critical now than it ever has been.

But thank you very much for joining me in this conversation, and thank you to our listeners for tuning in. This Future Energy podcast episode was produced by Felix Fernandez in London. You can stay ahead of the evolution of energy and navigate the pathways to a low-carbon global economy with the Platts Atlas of Energy Transition: your map to the sustainable commodity markets of the future. Explore the atlas by visiting spglobal.com/atlas.