COP28: The Cheque Book COP
The first few days of COP28 have seen a constant flow of new pledges, projects and initiatives. Announcements have ranged from cutting methane emissions to ramping up the flow of money to poorer countries. A package of commitments to further the energy transition is expected to include a pledge to triple global renewables capacity by 2030.
Prime Minister Rishi Sunak sought to focus on forests, climate finance and the energy transition on his visit to Dubai. A deal between the Abu Dhabi state controlled Masdar and RWE, of Germany, to invest £11bn in Dogger Bank, one of the world’s biggest offshore wind farms located in the North Sea, could see construction start as soon as 2025. Masdar has now made investments in renewable energy projects in close to 40 countries around the world.
Yet there can be no denial that the world is not where it needs to be in tackling climate change. UNEP says the world is currently on course for 2.9C of warming by 2100 and that global emissions need to peak in 2025. Worryingly, 2023 is on course to be the hottest year for 125,000 years.
The biggest challenge is to get finance to flow to developing countries. There is the long running problem that developing countries pay too high a cost for capital investment. There is also a gap between the money needed and the amount being spent. The UN says developing countries need up to $387 billion a year to adapt to climate change.
The hosts, the UAE, have launched at COP28 a $30 billion climate investment fund, alongside the likes of BlackRock and Brookfield, with a focus on the developing world. A Loss and Damage fund, to be administered by the World Bank, to deal with the impact of extreme weather events in the developing world has attracted financial commitments from the developed world. But billions are needed, not millions.
This week we expect to see initiatives that include an overhaul of the carbon offset market and the launch of an initiative from the global finance sector called the impact disclosure taskforce, which is designed to share available data which is relevant to the UN’s sustainable development goals.
A new global carbon offset mechanism known as “Article 6.4” has also been trailed, designed to establish a market mechanism which will be overseen by the UN that enables governments and companies to trade carbon credits.
COP28 faces daunting challenges. In the US, the ESG backlash led by Republican politicians has had an undeniable impact on confidence. The vital importance of including China in any global plans for emissions reduction also hangs over the discussions in Dubai.
Many of the optimists are highlighting how technology can help in easing the energy transition but carbon capture and storage are still very much in their infancy. According to the International Energy Agency there are only 40 commercial carbon-capture facilities currently in operation around the world.
The agenda of the next few days at COP28 are set to focus on climate finance. There is a growing sense of momentum in Dubai that this time, perhaps, the investment flows needed to unlock global green investment and clean tech projects could be within reach.