COP28 Roundup: A Cautiously Optimistic Path Towards COP29?

15 Dec 2023

Market Insights :: Energy Market Commentary :: Global

The COP28 conference has drawn to a close and there have been a number of successes and failures. While the diplomatic process of ensuring that governments around the world commit to reducing carbon emissions is a complex area, it remains clear that companies across all industries should proactively decarbonise business operation as soon as possible.

Below is a summary of the key outcomes to cut through the noise.

The Energy Transition

The term ‘fossil fuels’ has made it into the global climate deal for the first time. The wording regarding them is weak and leaves plenty of loopholes, however, there is hope that now they have been unanimously acknowledged as a hinderance to net zero, future regulations will continue to tighten and push fossil fuels out of the picture. Global temperatures are currently set to rise above preindustrial levels by 2.5 - 2.9˚C, so there is concern that a stronger pledge for the phasing out of fossil fuels was needed from this COP to drive emission cuts by the 28-42% required to realign with the Paris Agreement goals of 2˚C and 1. 5˚C respectively [1].

Progress has been made regarding renewable energy generation, with around 130 countries [2] signing a clause to triple global renewable energy capacity and double the rate of energy efficiency by 2030. An increase in green energy of this scale would halve global demand for coal power by 2030 [3]. As renewables begin to dominate more and more of the market, there is hope that fossil fuels will become redundant.

Loss and Damage Fund

A number of pledges were received on the first day of the conference, building up to a fund of over $700 million. This includes contributions of $100 million from the host, UAE, and Germany; $145 million (€133 million) from the EU (excluding Germany’s contribution); and $17.5 million and $10 million from the USA and Japan respectively [4]. The operationalisation of the fund is a success, however, there is a lot more work to be done. Estimates show that this sum of money only covers 0.2% of the climate related expenses that developing countries are exposed to on an annual basis. Furthermore, questions have been raised as to how this will be replenished to allow for sustainable financial aid to vulnerable developing countries. Britain’s contribution of $75 million (£60 million) was not new and has been criticised for being a downgrade of previous pledge [4].

Climate Finance

The $100 billion target of annual financing for developing countries agreed in COP15 (back in 2009) is yet to be realised and has been pushed back, again. Nations are '[urged] with urgency' to deliver by 2025, by which point the mobilisation of these funds will be 5 years overdue.

Little progress was made in the way of building a global, standardised carbon market that would be overseen by the United Nations. With this system, a carbon credit refers to 1 tonne of carbon that is avoided or removed from the atmosphere. The key challenges are verifying the credibility of the credits and ensuring that there is no double-counting. The EU were among the parties that rejected the proposal as it did not align with the standards of the current EU emissions trading system and was seen as too liberal.

Health Day

Building resilient food systems has been put on the global agenda. This is an important component to developing a sustainable society in the context of carbon emissions, the natural environment and our health and wellbeing. The food industry accounts for around 30% of global emissions and 80% of deforestation. As temperatures increase worldwide, so does the insecurity of our food systems. The COP28 Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action, was signed by 134 countries and endorsed by 20 more, totalling 154 countries; this represents more than 70% of global food production.

A new initiative was announced, with the World Health Organisation (WHO), Green Climate Fund (GCF) and United Nations Development Fund (UNDF) joining forces to support 14 counties in Africa, Asia and South Eastern Asia with climate-health related mitigation and adaption measures. Furthermore, the President of Sri Lanka announced the Tropical Belt Initiative to help protect 134 countries that are vulnerable to the impacts of global warming [5].

Working with NUS

NUS have a dedicated Energy and Sustainability Services (ESS) team designed to support industrial and commercial clients with reducing emissions across their entire value chain. Our team of experts support clients with every stage of the net zero journey, from carbon footprinting and strategy development through to the practical implementation of recommendations. Get in touch today to kickstart your company's decarbonisation journey: contact@nusconsulting.com.

More: Energy Market Commentary, COP28, Decarbonization