COP27: your 20-minute explainer

Speaker 1:
Welcome to CPA Australia's With Interest podcast, bringing you this week's need to know information for businesses and accounting professionals.

Jane Rennie:
Hello and welcome to CPA Australia's With Interest podcast. I'm Dr. Jane Renniee, general manager, Media and Content. In this episode, we'll be discussing the United Nations Climate Change Conference of the Parties or COP27, which is being held right now in Egypt. Joining me to explain what's on the agenda, how Australia is participating and what the likely outcomes are, is CPA Australia's senior manager of environmental, social and governance policy, Patrick Viljoen. Welcome to With Interest, Patrick.

Patrick Viljoen:
Thank you very much, Jane.

Jane Rennie:
So COP27 began on the 6th of November and will run until the 18th. This is an annual forum. What's on the agenda this time around?

Patrick Viljoen:
Yeah, Jane, I think it's probably wise for us to reflect on the fact that there's nothing major on the agenda and there's a very specific reason why. So if we look at COP26, which was last year or held last year in Glasgow, there was a couple of really interesting things coming out there. But in this instance there is a set agenda, which most of the COPs stick to, but I think it's more of what you'll probably ask about later. It's framed as an implementation COP. So it's not as major as we've seen in the past with major commitments and statements coming out.

Jane Rennie:
And why is it being called an implementation COP then?

Patrick Viljoen:
Yeah, look, I think when we had COP26 or the one that was held in Glasgow, there's a couple of things that happened in there. So it was a global stocktake. So this gave us an opportunity just to think about where we are globally in terms of the commitments that we've made for carbon emissions. There's also a mechanism which we refer to as the ratcheting mechanism, and that basically sets forward the view in terms of if you've made a commitment, is it still justified, is it valid? Do we need to review that? Do you need to show more ambition, and how do you do that?

Now this is the next one in line and I think what we're trying to get is some level of, I think just pragmatic approach. So it's one thing to have all these announcements, but how do we just make sure that we're sticking to the announcements and there's progress. And this year it's more of a, we've done everything, we've made all these promises, how are we going to enact on those and what are we doing and how are we tracking against those promises? So hence, the implementation COP moniker.

Jane Rennie:
Well who actually set the agenda? Is there some sort of steering committee?

Patrick Viljoen:
There is. Look, and the presidency of COP does rotate in terms of who hosts it. So this year it is in the wonderful tourist destination of Sharm El-Sheikh in Egypt. So Egypt holds the presidency. Now there is a set format of points that need to be discussed, but your host country also has the opportunity to put forward discussion points for the agenda and Egypt's done exactly that this year. So from their perspective you'll see a very strong focus on an Africa first perspective and that's quite good in as much as if you look at Africa, they're disproportionately more prone to the effects of climate change. So it's a good positioning piece for Egypt to say, we need to start thinking about the people that actually are impacted by what we're trying to alleviate here.

Jane Rennie:
And who's attending the forum? Is it all members of the United Nations? And what about other non-member nations or even industry bodies for example, can they attend?

Patrick Viljoen:
Yeah, look, I think it was a bit contentious this year in as much as the level of representation, and I'll speak to that in a minute. But this all comes back to the original signatories of the Kyoto protocol and the Paris accord and various kind of mechanisms that were put in place. So it's usually the signatories to that particular piece. It does not however mean that people can't attend and can contribute, but it does become a little bit more difficult if you don't form part of a official delegation of a country, for example. So there's a couple of instances this year of people that followed an efficacy approach for their own local concern. So a couple of people that came from South Africa, for example, that dealt specifically with things around the Wild Coast and for them it was very difficult, one, securing a visa and two, actually getting a speaking opportunity, purely because it's not as important or framed as being as important as the big players or the country. So that does cause a bit of an issue.

Also, just to note that, and I've mentioned this when we met up earlier, this is not a country club, so you need to make commitments. There's a couple of formal things that you need to do in order to have that speaking opportunity as a country because you can't just coast along. So there are mechanisms in place to keep countries online with what we're trying to do.

Jane Rennie:
You mentioned some of the bigger countries just then. Are there power players in this forum, some of the countries that are really going to dominate what the outcomes are?

Patrick Viljoen:
Yeah, look, I think that there always will be, and it does form this whole, I think almost like a contrast and compare view if we look at what's happening globally. So you'll always find that developed economies do tend to be the heavy hitters. So with that in mind, places like the European Union, the United States, they're the kind of heavy players and I think it's beholden to them to fix a lot of things more so than other countries would because they're the largest contributors to carbon emissions. But yeah, it has become pretty stark if you look in terms of the kind of conversations that we're having, that there is that divide in between the developed economies and then the developing nations and how do you balance between those two? But the developed economies are still the heavy hitters.

Jane Rennie:
I mentioned earlier, or rather you mentioned earlier, that it's being called an implementation COP, but some people are also calling it an accountability COP. Does that mean decisions will be binding on participants or that this time around people will be held more responsible for their decisions that might previously have been the case?

Patrick Viljoen:
Yeah, look, I think it's important for us just to mention that it's not legally binding if you do a national commitment. So Australia for example, so we've upped it to 43% right? Now, I know that in terms of that whole commitment for us as a nation, that's legally binding on us. So that's the way that the Commonwealth government went in to change the law. So it's enacted in law. But when we get to these forums, the kind of commitment that you put forward there in terms of that particular forum, it's not binding on that particular forum, but I think it's reputational damage that you can suffer if you don't stick to it. So these kind of commitments that we see being put forward is scrutinised at that particular venue or at that particular session that you're in. So there is a risk, real risk that you'll be called out by other countries and that's quite a public forum to get called out on.

And if you look in terms of Australia a couple of years ago and when we had, let's phrase it a sub-standard kind of commitment, we got called out on that quite a lot. So it's not legally binding per se in that forum, but it is a reputational piece that backs that.

Jane Rennie:
I remember last time around in COP26 and certainly there was a sense that Australia was at risk of being a climate pariah. How is Australia regarded this time around in the international community? Has there been an about turn?

Patrick Viljoen:
Yeah, look, I think there's optimism and I think a lot of people are quite happy that we've upped our contribution target to 43%. So there is optimism on the back of that. However, I do think there's certain jurisdictions that are holding reservations in terms of it's fine that we've made that commitment. It's now in terms of how do we put financing, how do we put resources and how do we put planning around that to make sure that it happens? So it's always this conversation in as much as the road to hell is paved with good intentions. But it's how do we now move from the commitment and from this increased level of ambition to getting proper action and backing that? Because without that it's just all hot air.

Jane Rennie:
Clearly a year has driven an enormous change then. I'm pretty sure I can guess, but what's made the difference in a nutshell?

Patrick Viljoen:
Yeah, look, I think it's more the change of government and I'm not taking pot shots at governments here, but you do see the level of aspiration being lifted. And again, we'll speak about that a little bit later, but a lot of what we're seeing in terms of the about change from government is backed by proper policy. So Labour went into the election with a very good piece of policy around climate change, the Powering Australia policy piece, and that rolled into the way that they're doing things at the minute. So in terms of legislation that's being rolled out, the way that we've changed the conversation in government and let's be fair, there is a very different kind of tone that we're now seeing coming out of government and that's quite good. So I think we're hearing the right things and we're seeing changes happening, but time will tell in terms of the kind of nitty gritty and the kind of detail behind that and what that looks like.

Jane Rennie:
I recall that last time around, Scott Morrison didn't attend and was criticised that Australia hadn't sent its prime Minister. Anthony Albanese is not attending this time. Are you concerned about his absence from the forum?

Patrick Viljoen:
I'm not particularly concerned with that. I think there was a very good reason given for that. So I think the Prime Minister is quite busy with other considerations at the moment. So meeting with our Pacific neighbours and there's a couple of other big forum items happening at the moment. I'm always quite mindful when we talk about these kind of things of prime ministers and presidents being there. I'm not as keen on a lot of hand shaking and photographs happening. It's about making those decisions. So for me it would be having the correct people there that can actually make the decisions and can actually push that agenda that we've put forward.

So at the moment our delegation is led by the Minister for Climate Change, so Chris Bowen. And there's also a lot of representation from government, industry, non-government organisations, First Nation Australians, business, and then there's a large contingent from civil society. This is going to be quite a cheeky thing to say, but we're talking about climate change here. So carbon emissions is a big component of that. So I would rather we fly the correct people over than have the incorrect people going over at the expense of increased carbon emissions link to those flights.

Jane Rennie:
And then to confirm, your sense is that we have sent the right people and that they do have the right level of decision making authority?

Patrick Viljoen:
100%, yeah.

Jane Rennie:
So what do we know about Australia's agenda going into COP27? What can you tell us about that?

Patrick Viljoen:
Yeah, look, I think the kind of conversations I've been involved in, where the negotiating team were talking about our approach in terms of going into COP27, I think you do see, again, like I said earlier, the shift in tone. So what Australia at the moment is focusing on is it's not good enough for us to say it's all about Australia first. It is really important for us to get our own considerations correct. So there is this whole conversation about abatement within our own environment, disconnecting from the obsession we have with coal. There's all these things happening in the background. But there's also a recognition that we can't do that in isolation. So there is a focus on working collectively with the Pacific, so with our neighbours, and making sure that as a region we're moving in the right direction.

And again, this speaks to this whole contrast and compare that I spoke about earlier, in as much as the developed and developing economies and that financing that needs to be unlocked. And I think that's what we're seeing coming out from the government as well, is that recognition that the kind of funding you would find in places like Fiji or Samoa would not be the same quantum as you would find in Australia. So it's beholden on us as a country to make sure that countries that are seeing that level of impact in terms of things like rising sea levels, they've got sufficient funding available and that's what we can help them with. So it's not only the expertise that we can give in that particular space, and I'm not saying Australia should be positioning itself as being, listen to what we're saying, but it is working collaboratively and then providing that expertise and money more specifically where it's necessary.

Jane Rennie:
So how do you think it's going so far, given that we're now over halfway through the COP27? What's your assessment?

Patrick Viljoen:
Look, I think it's very easy to fall into the cynical kind of spectrum of saying, "Oh, it's much of a muchness really. And it's just the same stuff being said again." I am mindful of the fact that I think there's a lot of recognition from developed economies that we've seen this collective sitting on hands happening. So the initial commitment that was made was a hundred billion US dollars by 2020 that was supposed to be unlocked for developing countries as part of their adaptation. And it's only been a paltry amount of that that's actually been released. And even when it was released, it was the vehicles and mechanisms that were followed were not actually really conducive. So it was more loans that had to be repaid. So therefore it doesn't give you a full indication of the burden on those particular countries.

And what you've seen now is again, a lot of countries coming forward and saying, "Oh, mea culpa, we've not been doing the right thing, and that additional funding would be released." So the UK for example, has made a lot more commitments in terms of the amount of money that they will push back into Africa. So we see that happening. The problem is just if we couldn't do that by 2020 and the bill has increased since then, what are we doing now, and what will be fundamentally different? And I think the one thing that you will see happening, and there's a lot of talk about this is business or the business sector is not waiting for government to start changing things because that's quite a slow process. So business is committing more, global business is committing more in terms of what they can do. It doesn't mean that they can change everything because certain things sits quite squarely with government, but there is this change happening.

But look, I think we went in knowing that we weren't going to have these wonderful things happening and it was all going to be fireworks. But I do wonder sometimes if it's not a little bit much of a muchness.

Jane Rennie:
Patrick, has Australia been part of that mea culpa? Because I have read criticism of Australia about their inaction on unlocking the financing as you mentioned. So what's the situation with Australia?

Patrick Viljoen:
Yeah, look, and I think if you come back to that whole Pacific piece, it was made abundantly clear that this is not about expertise, this is not about technology, this is not about all these kind of things. We're talking money and I think there is a recognition that from the federal government or the commonwealth government that money needs to start flowing. So I think there is a recognition that it's no longer good enough for us to say, "Oh, it's all about us." Along with across the ditch, New Zealand, we need to start working collaboratively. And that is the kind of messaging you see coming out of government. So I'm quite hopeful that they've had that collective nirvana moment and realising this is what we need to do and this is what we have to drive. And if you look at the budget as well, the kind of money that they're setting aside, it gives me hope that we're heading in the right direction.

Jane Rennie:
Well, what are some of the outcomes that have been agreed to so far at COP27 and what's Australia going to need to do to implement these?

Patrick Viljoen:
Yeah, look, I think, again, it's a couple of things in here, right? So it's about the emissions and about making sure that the emissions or the commitments towards emissions that countries have made is still robust enough. And in that sense we can pretty much tick that off. From Australia's perspective, we've gone in with a higher aspiration, so that's quite good. So all these things in terms of the emissions part of it, that's quite good.

There is the focus on money and doesn't matter which way we slice this conversation, it'll always come back to the money. And that's something which has also started shifting. There is a provision that was built in as part of the meeting held several years back in Warsaw, where they spoke about the damage and compensation clause. So this basically alludes to the fact that if a country is disproportionately impacting on damage, say for example, you've got a heavy emitter as a particular country, but there's then damage happening in another country, that country could actually, or the affected party could actually sue for damage saying, "You caused this, I'm suffering this, you need to give me money for that or compensate me to a certain degree."

Now that mechanism is discussed every time in terms of the damage and compensation kind of approach. And a lot of the developed economies up to now have said, "We don't want to go down that avenue, because the quantum of what that impact could be, nobody knows what that is." But there is this recognition happening that you can see in terms of saying, "We're not going to go into that path in full, but there is recognition that we basically are not on the right path and we need to start thinking about compensation for developing nations or for nations that are disproportionately affected." So that conversation is shifting as well. So I think it's no longer an issue of just safeguarding money of saying, "Oh no, no, no, no, I don't want to go down this avenue because it's going to cost me." But it is a recognition that we're not on the right track.

Look, we're not even remotely close to hitting that 1.5 degree commitment, but how do we start doing that effectively? So putting money to commitments, I think that's something which has come out quite strongly.

Jane Rennie:
Patrick, I understand the Australian government will be running two consultations on climate change next year. What are they and what's the timing?

Patrick Viljoen:
Yeah, look, and this is more in terms of the accounting kind of spectrum, we need to start thinking about, look at New Zealand for example. So they've got mandatory requirements now in place, which will start in 2023 for climate related financial disclosure. So it's mandated by law. The Australian government, by virtue of Treasury, is now going through a consultation phase, in as much as what are the kind of considerations for us, so does it need to become mandatory in Australia? And if so, when? So, those consultations will happen in December and there will be an update again in March next year. So I think what you're seeing again in this instance is moving in that particular space. So do we need to review things like the Companies Act and the ASIC Act, to make sure that we can mandate properly financial disclosures for organisations linked to climate change? And that's a good thing happening.

Jane Rennie:
Patrick, a lot of this sounds like it's very far away from the lives of everyday Australians. Does it have any direct relevance?

Patrick Viljoen:
Yeah, it does. I think we keep on talking about business wanting to change the dial or lift the needle on climate and doing what they can do. And then you've got government on the other side as well. And again, if you come back to the policy piece, one of the big things that the government's trying to do as part of the decarbonization of the electricity grid, that will have impact, over duration in time for the average person out there because if you draw down on the grid at least then that it's cleaner. It's cleaner, it's not clean yet, it's cleaner than it used to be. But at the same time we're struggling with this whole concept of the rising cost of living. And there's a lot of talk about the alternative kinds of electricity provision is going to be expensive.

We don't see that happening, we don't see the bills coming down, all of that kind of stuff. And that's true, but you also need to think about this infrastructure development and there's a lot of investment happening that needs to be recouped at the same time. So I think it's important for us to realise that it's not going to be this panacea of going from one to the other without there being this bump in terms of price. It will happen and there will be higher costs in the short run, but you have to extrapolate that over the longer term to realise that once that switchover happens over duration in time, you'll see bills start coming down. But there is no such clean switch over at the moment of just saying, the price will remain the same and we'll switch into new technology. It just doesn't work that way. And I think that needs to be clearly communicated to Australia and to the average Australian to understand the journey that we're on. And it's not going to be just this magical switch that happens and there's no cost implication. There will be.

Jane Rennie:
That's all we've got time for today. Thanks very much to our guest expert, Patrick Viljoen, senior manager, ESG policy at CPA Australia. With Interest is a weekly podcast. If you like what you've heard today, why not subscribe on your favourite podcast app.