COP27 Latest: Kerry Brushes Off Talk of a Thaw in US-China Ties

Jennifer A. Dlouhy, Alastair Marsh, Mirette Magdy and Natasha White
·17 min read
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(Bloomberg) -- US Special Presidential Envoy for Climate Change John Kerry downplayed suggestions that US-China climate negotiations are back on track.

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Kerry said he and Xie Zhenhua “had some informal talks.”

“But we’re not in any formal negotiation at this point,” he said at the Bloomberg Green summit on the sidelines of COP27 in Sharm-el Sheikh.

Kerry described his friendship with Xie, the China climate envoy, as having been forged over years of negotiations and meetings in airports as they traveled round the world. Right now, that relationship is strained by Beijing’s decision to suspend talks on climate following House Speaker Nancy Pelosi’s visit to Taiwan.

“I certainly stand ready to negotiate,” he said. “The climate crisis is not a bilateral issue.”

Kerry spoke the same day as Al Gore, the former US vice president turned climate campaigner, who said any Republican Party efforts to slow the green transition would be at odds with market forces that are ultimately more powerful than politics.

“Markets are making a different decision,” Gore said in an interview with Bloomberg Television’s Francine Lacqua in Egypt on Wednesday. “We’re seeing a massive movement toward more climate friendly policies.”

Markets are “in the early stages of a sustainability revolution,” Gore said, repeating a line he’s used before to describe this point in history. “So whatever politicians in different countries want to opine on, we’re seeing business and investors and markets move towards solutions for the climate crisis.”

Both Gore and Kerry made their remarks on the COP summit’s Finance Day, which is a leaner affair than in Scotland last year after a number of prominent chief executives including BlackRock Inc.’s Larry Fink and Citigroup Inc.’s Jane Fraser opted to stay away. That’s as climate finance faces growing hurdles.

Earlier in the day, Mark Carney, the former Bank of England Governor and co-chair of the world’s biggest climate finance coalition, urged governments to “align financial regulation with net zero” by making net zero transition plans mandatory.

An energy crisis and a changing political landscape in the US are making it harder for banks and investors to turn their backs on fossil fuels. Financial firms are also increasingly nervous of the legal ramifications of joining net-zero alliances, with some in the US claiming that such goals are at odds with fiduciary duties. And in some cases, climate-finance alliances have even been likened to cartels.

Read More: Blackstone, Pimco Sidestep Net-Zero Group Even After Concessions

Those legal risks may intensify, depending on the outcome of midterm elections in the US. But there’s also a legal risk involved in making climate promises that firms don’t live up to.

“Firms should be wary of being caught in the riptide of unrealistic ambitions as it may expose them to both litigation and reputational risks if they don’t meet these commitments,” Sonali Siriwardena, partner and global head of ESG at Simmons & Simmons in London.

(GFANZ is co-chaired by former Bank of England Governor Mark Carney and Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP.)

Read More: 10 things to watch at the COP27 summit

Highlights:

  • Click here to read the highlights from talks on Tuesday

  • China delivers blow to climate with new emissions deadline

  • Satellite spots methane cloud near Iran oil and gas facilities

  • Mark Carney sees ‘wall of opportunity’ for energy investors

  • UN panel calls out ‘greenwashers’ and seeks net-zero regulation

  • EU Lawmakers reach deal on climate goals outside carbon market

  • Click here to get read about Bloomberg Green at COP27

Here are the latest developments. All times Egypt.

US, EU Will Pledge to Cut Methane Emissions from Fossil Fuel Production (7:14 pm)

The US, EU and other countries will announce as early as tomorrow their plan to encourage fossil-fuel importers and exporters to curb their methane emissions as part of the Global Methane Pledge, a collective goal to cut releases of the gas by 30% by the end of the decade.

The declaration, seen by Bloomberg, says countries should take efforts to stem leaks of methane -- which is 80 times more powerful than carbon dioxide over 20 years -- across the value chain. That includes the elimination of routine flaring as well as better measurement and verification of methane discharges.

The US Environmental Protection Agency is preparing to advance the next iteration of its plan to cap methane leaks, amid growing calls to clamp down on flaring at oil wells.

“Through our collective efforts, we aim to reduce warming by 0.1C by mid-century by accelerating methane and flaring reduction in the oil and gas sector,” the document states. “As among the world’s largest importers and exporters of fossil energy resources, we commit to taking immediate action to reduce the greenhouse gas emissions associated with fossil energy production and consumption, particularly to reduce methane emissions.”

UK’s Sunak Firmly Committed to Climate and Green Finance, Minister Says (6:14 pm)

UK Prime Minister Rishi Sunak is firmly committed to scaling up climate finance and meeting net-zero commitments, according to James Cartlidge, Exchequer Secretary to the Treasury. Britain announced late Tuesday that its export credit agency would be the first to pause debt service payments for low-income countries and small island developing states when they are hit by climate catastrophes, such as hurricanes and floods.

“What we are doing in terms of adaptation finance shows we’re still leading the way,” Cartlidge said in an interview. “Sunak has shown he’s committed to net zero.”

Banks face getting “hammered” on coal finance, Menon says (5:40 pm)

Banks are nervous of providing finance to enable the early phase-out of coal -- a necessary pillar of the energy transition -- because they fear a caustic response from civil society, said Ravi Menon, managing director of the Monetary Authority of Singapore. Banks know it is “the right thing to do” but they need cover, he said.

“Coal is very controversial: You’re going to get hammered by your stakeholders and NGOs and so on,” said Menon. “So we need to raise the level of understanding” and “convince the NGOs and those who are arguing for the immediate suspension of coal that, look, we will get there, but this has to be done in a responsible way to help the communities meet that condition”

UAE’s Biggest Clean-Energy Firm to Look at Deals in US, Europe (4:00 pm)

The United Arab Emirates’ biggest renewable-energy company will make acquisitions and sell bonds as part of a plan to more than double its operations this decade and help the country achieve a net-zero target.

Masdar is interested in acquisitions of power firms in places such as the US and Europe, Chief Executive Officer Mohamed al Ramahi said in an interview at the COP27 climate summit.

“Our ambition is big,” al Ramahi said. “We will consider all possibilities when it comes to financial strategy. Green bonds, specifically, are something we might consider.”

EU Says Final COP27 Conclusions Must Mobilize Finance for 1.5C Goal (3:23 pm)

Any final deal reached at COP27 should contain a clear reference to the need to mobilize all finance toward the 1.5C goal, said Jacob Werksman, the EU’s lead negotiator. The EU failed to win an agenda item on this issue on Sunday. He said there’s “every expectation” that the Egyptian Presidency will try to come forward with a so-called cover decision, similar to last year’s arrangement in Glasgow.

“We need to look at how we can create changes in the world’s financial system making sure that all flows from the public and private sector are increasing in line with the Paris Agreement,” Werksman said. “The outcomes of that particular theme will have to be captured in the cover decision,” he said.

Countries Hit by Climate on Track to Get Built-In Debt Relief (2:30 pm)

The International Capital Market Association unveiled new language for debt instruments that would enable countries hit by climate change and natural disaster to defer payments.

So-called climate-resilient debt clauses have already been used in a small number of privately financed bond issuances and loans, ICMA said. A working group chaired by the UK Treasury and including the International Monetary Fund and World Bank has now created a standardized term sheet for broader use.

IAEA Expects ‘Much Higher’ Nuclear Role to Avert Climate Change (1:28 pm)

Emissions-free nuclear power will account for a “much higher” share of global electricity generation over the next decade, though it might not reach the 20% target that International Atomic Energy Agency Director General Rafael Mariano Grossi said is needed to ensure climate goals.

“Nuclear is not a magic bullet,” Grossi said Wednesday on a panel at the COP27 climate meeting in Sharm El-Sheikh, Egypt. “But without it, everything else will be extremely complicated.”

Atomic reactors currently generate about a tenth of the world’s power, but in many western countries old reactors are being shut down without new models coming on line. The first task is to keep more old reactors operating as long as they can be safely operated, according to Grossi.

“The unsung hero in the fight against global warming is long-term operation,” he said, adding that countries also need to boost investments in new infrastructure, including small-modular reactors. “Keeping nuclear in the equation is going to give us the energy, the solution to the climate problem.”

Grids Need Better Resiliency as More EVs Plug In, Edison CEO Says (12:45 pm)

Edison International CEO Pedro Pizarro said electric vehicles are “a big part of the solution,” to climate change, even as southern California residents were asked to refrain from charging their EVs during heat waves this year.

Electricity demand surged to record highs during a period of extremely high temperatures in the state. “There has been an increase in those kind of events,” Pizarro said in an interview with Bloomberg TV at COP27, adding that they were “better prepared” than the heat wave in 2020.

Southern California Edison, a subsidiary of Edison International, supplies electricity for much of southern California. Pizarro said the focus going forward should be “making the grid more resilient.”

Gore Is ‘Optimistic’ Xi, Biden Will Restart Climate Dialogue (12:40 pm)

Former US Vice President Al Gore said he’s “optimistic” US President Joe Biden and Chinese President Xi Jinping will resume discussions about climate action at the G20 talks in Bali next week. “I’m optimistic that, in the wake of the Communist Party Congress, now China will get back into a cooperative relationship with all the countries that are trying to solve this climate crisis,” he said in a Bloomberg TV interview.

“China’s being hit by it worse than almost any country,” he said. “The Yangtze is at its lowest level ever. It’s really having an impact on the Chinese economy and some fear on the stability of China -- and that’s what the Chinese Communist Party pays closest attention to, so I hope that they will reengage with the world community.”

China Climate Envoy Xie Says He Met With John Kerry at COP27 (12:01 pm)

China Climate Envoy Xie Zhenhua says he met with John Kerry, US special climate envoy, for unofficial talks, during the COP27 climate summit in Egypt on Wednesday.

The meeting is a potential sign that relations are warming despite a formal suspension of bilateral negotiations on the issue earlier this year.

Beijing announced it was halting negotiations with the US over climate and several other issues in August, after US House Speaker Nancy Pelosi visited Taiwan, the self-governing island over which China claims sovereignty.

HSBC’s Quinn Tells Egypt Not to Be ‘Discouraged’ by Green Bond Cost (11:55 am)

HSBC CEO Noel Quinn responded to comments from Egypt’s finance minister, Mohamed Maait, that his country had to pay more to issue green debt than regular bonds. “Don’t be discouraged,” said Quinn, whose bank was one of the arrangers of the issuance.

Costs will go down with “familiarity” and with the establishment of global disclosure methodologies, he said. “When you put the label green next to a bond everyone wants reassurance,” he said.

NinetyOne CEO Says Emerging Markets in a Strong Position (11:40 am)

Emerging markets are in a strong position, according to Hendrik du Toit, CEO and founder of NinetyOne Plc. They stand to benefit from political and economic uncertainty in the developed world, which could cause a shift in available climate finance, he said in an interview with Bloomberg Television on Wednesday.

There’s also a “very exciting and relatively low risk opportunity in the debt that finances the energy transition,” he said. This is because most companies that need to transition are carbon heavy but cashflow strong, offering reasonably well-priced debt and the opportunity to play a positive role. “Transition debt is where we think the action will be,” du Toit said.

IEA Says OPEC+ Oil Cut is Hurting Emerging Markets (11:20 am)

Last month’s decision by OPEC+ to reduce oil production was “definitely not helpful,” according to the International Energy Agency, which advises rich countries.

“It is causing inflation and economic weakness, especially in developing economies,” Executive Director Fatih Birol said to Bloomberg TV. Energy-importing countries in Africa, Asia and Latin America will suffer, he said.

Europe’s managed to refill its natural gas storage sites for this winter, but next year will be tougher, Birol said. That’s because the continent may have to make do without any supplies from Russia and because demand in China could pick up as it eases coronavirus restrictions.

While the world needs to invest more in renewables, it must continue investing in fossil fuels to enhance energy security, he said.

Germany, France Sign Deal to Give South Africa $604 Million in Climate Finance (11:15 am)

South Africa’s government signed loan agreements with French and German public development banks to support its efforts to shift from coal toward cleaner energy sources.

Agence Française de Développement and Kreditanstalt für Wiederaufbau extended concessional loans of €300 million ($302 million) each to the South African government as part of an $8.5 billion climate finance deal it was offered by wealthy nations at the COP26 talks in Glasgow last year, the National Treasury said in a statement Wednesday.

The plan is seen as a blueprint for other coal-dependent developing nations to cut greenhouse-gas emissions.

ECB Urges Banks to ‘Step Up Their Game’ on Climate Risk (11:07 am)

The European Central Bank is aware of the need for “further action to incorporate the consequences of the ongoing climate and environmental crises into our work,” said Frank Elderson, ECB executive board member.

The ECB’s interactions with banks show they’re making progress, he said. But “despite the progress we have seen, I will continue to stress that the banks under our supervision need to step up their game and truly manage climate-related and environmental risks in the same way we expect them to manage any other material risk,” Elderson said.

Malpass Says Developing Countries Are Facing Economic Crisis (10:22 am)

David Malpass, president of the World Bank, said heavy debt burdens combined with inflation and the fallout from climate change are pushing the developing world into an economic crisis.

The World Bank reached $32 billion in climate finance this year, which is a record and was “well above our Glasgow target,” he said. “We want to dramatically increase the number and size of projects that reduce greenhouse gas emissions.”

Georgieva Says Climate Success Depends on Finance ‘Incentives’ (10:15 am)

Kristalina Georgieva, managing director of the International Monetary Fund, said the finance needed to address climate change and the energy transition will not flow without changing the incentives for financiers. And “the best incentive we have to shift from high carbon intensity to low carbon intensity is to price carbon,” she said.

The average price of carbon globally is $5 but to be at the level that “changes investment and consumer behavior” it will have to go up to at least $75 a tonne by 2030, she said.

“Adam Smith, the founder of economics, said it: the butcher and the baker don’t feed you out of the generosity of their hearts, they feed you for self interest,” she said. “So we have to create the self interest for decarbonization.”

Conservative Estimate Puts 2030 Financing Gap at $2.4 Trillion (9:51 am)

There’s a gap in financing of around $2.4 trillion, compared with what’s needed by 2030, and that represents “the most conservative figure,” said Mahmoud Mohieldin, UN Climate Change High-Level Champion for COP27.

Serious debt reduction mechanisms are needed, while multilateral development banks and international finance institutions need to play a greater role in supporting such efforts, he said.

Mohieldin also said he is “very happy to see a chapter of GFANZ established for Africa with serious consideration of being practical and supporting a pipeline of projects.”

DTEK Needs ‘Billions’ of Dollars to Fix Power Grid (9:45 am)

Ukraine’s biggest private power producer, DTEK, said it’s running out of equipment to fix power stations damaged by Russian missile attacks.

“We need millions of dollars-worth of equipment for immediate fixes and billions for the long-term, deep repairs of the grid,” Chief Executive Officer Maxim Timchenko said in an interview at the COP27 climate conference in Egypt. “We appeal to countries and companies to help us.” DTEK has had to halt power exports to the rest of Europe to focus on maintaining domestic supplies, he said.

Africa Recognizes Need to Pursue Green Growth (8:43 am)

Africa’s common position at the COP27 summit recognizes the need for growth alongside the duty to provide electricity to its 600 million inhabitants who don’t have access to energy, UN Economic Commission for Africa acting Executive Secretary Antonio Pedro said. That energy shortfall is the reason the continent is promoting natural gas as a “transition fuel,” Pedro said in an interview with Bloomberg Television.

Net-Zero Asset Managers Group Says Alliance Has Grown to 291 (8:00 am)

The Net Zero Asset Managers initiative says 86 investors have set initial targets for the proportion of assets that will be managed in line with achieving net zero emissions by 2050 or sooner, with the total number of asset managers committing to net zero rising to 291.

That brings to 169 the total number of managers with such targets, collectively representing over $55 trillion in assets under management, according to a statement by NZAMi on Wednesday. New signatories include Capital Group, Northern Trust and AllianceBernstein.

Climate Change Could Cost Africa Two Thirds of Its GDP Growth (2:01 am)

Global warming could slash Africa’s economic growth by two thirds by the end of the century unless significant investment is made in climate adaptation, a new study shows.

Current climate policies will likely see temperatures exceed the pre-industrial average by 2.7C, curbing African growth rates 20% by 2050 and 64% by 2100, Christian Aid said in a report released Wednesday. Even a 1.5C rise in temperatures would reduce growth rates by 34% by the century’s end, it said.

While Africa is responsible for about 4% of planet-warming emissions, it’s already being hit hard by a changing climate. Devastating cyclones and floods have battered southeast and West Africa this year while the Horn of Africa is in the midst of its worst drought in four decades.

--With assistance from Salma El Wardany, John Ainger, Alfred Cang, Yousef Gamal El-Din, Paul Richardson, Akshat Rathi, Nicholas Comfort, Antony Sguazzin, Paul Wallace and Frances Schwartzkopff.

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