COP28: What does it mean for business?
When even NGOs are giving a cautious welcome to the outcome of a COP you can be sure it has achieved something worth having.
That something is the first global commitment to start transitioning away from fossil fuels in a ‘just, orderly and equitable manner’ and crucially ‘accelerating action in this critical decade so as to achieve net zero by 2050 in keeping with the science’.
While some commentary has been quick to point out that the text agreed has loop holes (such as allowing space for ongoing use of gas as a transitional fuel, focusing the fossil-fuel phase-out only on fossil fuels in energy systems and potentially allowing abated emissions to continue in line with the science), the outcome is still significant. It signals the beginning of the end of the fossil fuel era.
For business that is a significant moment because it will reframe investment decisions and valuations for assets and infrastructure and provides a clear framework that guides net zero policy globally.
Business has railed against uncertainty and called for clarity on how we get to net zero. This was particularly highlighted in September when Rishi Sunak announced the net zero roll back. At that point we saw businesses uniting in protest and many vowing to continue their plans regardless.
COP28 and the UAE Consensus gives greater clarity and we now have a UN-backed text calling for countries to get the Paris Agreement back on track and align behind new efforts to deliver the 1.5C limit on global warming.
Few seem to believe that we have done enough yet to hit that Paris goal, indeed the International Energy Agency has explicitly said that we are still not on track to hit 1.5 despite the agreements at COP28.
But for business and governments looking to build new infrastructure, factories and communities there has to now be an assumption that these should focus on non-fossil fuel energy sources or by 2050 they risk becoming stranded assets or requiring significant retrofitting to adapt to a future that does not use fossil fuels for energy. It is essentially a framework for the electrification of the economy and for the world to invest in low-carbon assets.
Fossil-fuel powered assets and will also likely decline more rapidly in value as that 2050 deadline gets closer – another driver for business and finance to push forward on implementing the spirit of the COP28 text.
The agreement is also significant in that it had backing from the US and China (which both claimed to have played an influential role in getting negotiations back on track around a strengthened draft text after the early draft was widely criticised for not going far enough on fossil fuels).
Yet there is not global consensus on the results and island state groups and those in the global South remain angry at the outcome, claiming that their voices were not heard and that the agreement does not go far enough to prevent climate change causing catastrophic impact to their countries.
While that is likely true, COP28 has delivered more than many feared and it has set a new direction of travel that requires greater ambition and sets a framework for further progress that needs to be achieved at COP29 (to be held Azerbaijan).
Among other key achievements from COP28 which have direct relevance to business are:
- Around 130 countries agreed to triple renewable energy capacity to at least 11,000 gigawatts – firing the starting gun on another major infrastructure programme globally, and raising fresh questions about how we streamline planning to allow that to actually happen
- The Global Decarbonisation Charter, an agreement from 50 oil and gas companies to stop adding to emissions by 2050 (although this does require extensive use of nascent technology such as CCS) and including the Methane Reduction Pledge to cut emissions from activities such as flaring
- Agreement on a loss and damage fund that will see richer nations paying poorer nations that suffer loss and damage due to extreme weather or other climate change related outcomes
- New agreements to drive forward carbon markets (as outlined in detail in my colleague Dafydd Rees’ blog)
- A new agreement on cooling which saw 64 countries pledging to cut emissions from cooling across all sectors by 68% by 2050
- Around $84 billion committed to climate adaption and mitigation projects
- The launch of CHAMP to accelerate the deployment of climate finance to cities and local governments (detailed in my colleague Sophie Morello’s blog)
- The US government, the Bezos Earth Fund and The Rockefeller Foundation announced the Energy Transition Accelerator (ETA), a carbon finance platform aimed at catalysing private capital to support just energy transition strategies in developing and emerging economies
- Launch of the Blue Pacific Prosperity initiative with around $250 million pledged to help kick start a plan to protect 30% of the Pacific Ocean through expanded ocean protection zones
- Emirates Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action: A pledge by more than 150 countries to include agriculture and food systems into NDCs and other national plans before COP30.
COP28 will also be seen in the UAE as a huge success. The choice of the UAE as host was controversial because of its position as a major oil producer.
However, as we have written about on many occasions, there was an outside chance that the UAE’s role as a power broker in the industry might enable it to gain leverage where others had failed.
That would now appear to have been the case. The UAE also announced a $30 billion fund to invest in renewables so we can be sure it will remain a power player even in a decarbonised future.
Perhaps what COP28 most signifies for business is certainty that change has started and will accelerate as we move away more rapidly from fossil fuels. That brings a requirement to adapt but also huge opportunity to invest in a low carbon future.