Our Policy and Public Affairs Team explores the important developments that came out of COP28 in Dubai, 30 November to 12 December 2023
“A cause for optimism”. That is what US’s John Kerry called the COP28 deal following the close of the 28th annual UN climate change conference. This is the first time there has been a clear reference to the future of all fossil fuels (coal, oil, and gas) in a COP text – although it doesn’t include any wording on the “phase out of fossil fuels”, something many governments wanted.
Here we look at what COP entails for fossil fuels, renewables, loss and damage, and more.
COP28 was always going to be controversial, hosted by a petrostate and with the CEO of UAE’s state-owned oil company as COP President accused of trying to conduct oil deals on the summit sidelines. On Monday, wording on phasing out was dropped suddenly from the draft text. What we have here is an agreement by the 198 parties to “contribute... to transitioning away from fossil fuels in energy systems in a just, orderly and equitable manner” with a new requirement for accelerated action this decade.
After negotiations throughout the night, the fifth iteration of the Global Stocktake text was adopted without objection just before midday GST. The optional “could” of earlier texts has been replaced with a call on parties to contribute to a menu of actions.
First of these is a commitment to triple renewable energy capacity globally and double the global average annual rate of energy efficiency improvements by 2030. 118 countries signed the Global Renewables and Energy Efficiency Pledge, spear-headed by the EU, the US, and the UAE. The Declaration to Triple Nuclear Energy by 2050 was signed by 22 countries, including the US, UK, and France.
The text calls for the acceleration of the “phase down” of unabated coal power (first tabled at COP26) and the accelerating of transition fuels and technologies, including carbon capture storage solutions. The EU pushed to add CCUS “in hard-to-abate sectors” to prevent abatement technology being used as an excuse to expand fossil fuel production.
Countries are called on to “phase out inefficient fossil fuel subsidies that do not address energy poverty or just transitions as soon as possible”. 2022 was a record year for fossil fuel subsidies, worth $7 trillion or 7.1 percent of GDP, according to the IMF, despite world leaders agreeing to phase out inefficient fossil fuel subsidies at COP26 in Glasgow 2 years ago.
There is a call for a “substantial” reduction in non-CO2 emissions, particularly methane, from the energy system by 2030. 155 countries have now signed the Global Methane Pledge, launched at COP26, to reduce their emissions by 30% by 2030, and more than $1 billion in new grant funding was announced this COP to help reduce methane.
There is a recognition that global emissions will likely peak before 2025 to limit warming to 1.5C, although this could be later for developing nations. Parties are called to submit updated nationally determined contributions (NDCs) for 2035 by COP30, in 2 years’ time, aligned to 1.5C and informed by latest science, “in the light of different national circumstances”.
This UNFCCC principle of “common but differentiated responsibilities and respective capabilities” (CBDR-RC) is to reflect developed nations’ greater responsibility for climate change. Along with finance, this proved a major sticking point to agreeing a framework for the Global Goal on Adaptation (GGA).
The GGA was established at the Paris COP in 2015 and a work programme started in Glasgow in 2021. Agreement was reached that the themes that should be covered by the goal, namely water, food, health, ecosystems, infrastructure, poverty eradication, and cultural heritage. However, specific goals such as universal health services and protecting 30% of ecosystems were removed from the final text.
The text that was finally agreed had weaker language on CBDR-RC and finance. It also removed the annual target of $400 billion in climate finance that was in the second draft. Targets for monitoring adaptation progress were pushed back to 2030. Madeleine Diouf Sarr, chair of the Least Developed Countries group, described the framework as a “historic achievement” but “regrettably devoid of actionable commitments.”
There was early success on climate finance with a breakthrough on the operationalisation of the Loss and Damage Fund to help low-income countries pay for the growing damages caused by climate change. However, the $700 million pledged – $60 million by the UK – is a small fraction of the $400 billion campaigners say is needed per year.
Developing countries were unhappy at the COP texts’ lack of new financial commitments for transitioning away from fossil fuels and adaptation. The Independent High-Level Expert Group in Climate Finance report, commissioned by the COP27 and COP28 presidencies, states the need for a 5-fold increase in concessional finance, a tripling in multilateral development bank finance, and a 15-fold increase in private climate finance to emerging markets and developing economies.
With unanimity needed for the signing of the final communiqué, some of the COP28 successes came as side deals announced by coalitions of different countries.
The UK was one of 10 countries to sign up to the Coalition of Ambition on Adaptation Finance to enhance country-owned programmatic financing, ease access to finance, and tackle the barriers to sources of adaptation finance.
It was one of 13 countries to endorse the UAE Leaders’ Declaration on a Global Climate Finance Framework to collectively invest $5 to 7 trillion annually in greening the global economy by 2030 and to widen the sources of concessional finance, with greater private capital mobilisation.
Multilateral development banks announced a new global taskforce for scaling debt-for-nature swaps and released a common set of principles to track nature-positive finance.
Kenya, Colombia, and France launched the Global Expert Review on Debt, Nature and Climate to understand how sovereign debt is hindering climate action.
More than 130 countries signed up to the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action. This includes US, China, the EU, and the UK: some of the largest emitters of greenhouse gases per capita from food. Together, the signatory countries account for 75% of all emissions from global food production and consumption.
The first ever Health Day at a COP saw 123 countries endorse the COP28 Declaration on Climate and Health, although some complained it did not take into account the impact of fossil fuels on health. As part of this, donors pledged almost $800 million to help fight neglected tropical diseases.
Over 60 countries signed the Global Cooling Pledge, which calls for counties to reduce their cooling-related emissions by at least 68% by 2050, compared with 2022 levels. Cooling emissions make up around 7% of annual global emissions.
Buildings were added to the Breakthrough Agenda, which began at COP26. This will see 27 countries improve action in the construction sector, with a vision that “near-zero emission and resilient buildings are the new normal by 2030”.
Canada also launched the Cement Breakthrough to accelerate investment in technologies needed to create a net zero cement sector by 2050.
The Oil and Gas Decarbonization Charter was signed by 50 fossil fuel companies, representing over 40% of global oil production. This commits them to eliminate emissions from their extraction operations by 2050, and to achieve near-zero methane emissions with no flaring by 2030.
COP28 host UAE and COP15 host China issued a Joint Statement on Climate, Nature and People, calling for climate change, biodiversity loss, and land degradation to be urgently addressed in a “coherent, synergetic and holistic manner”. The UK and US were among the endorsers.
60 countries joined the Gender-Responsive Just Transitions & Climate Action Partnership which aims to ensure a gender-responsive just transition.
As President al-Jaber cautioned, “an agreement is only as good as its implementation”. The Alliance of Small Island States criticised the “litany of loopholes” in the final text that could leave the way open for the production of fossil fuels to continue. Climate experts welcome the commitment to transition away from fossil fuels, but warn the agreement is weak:- “The world is heating faster and more powerfully than the COP response to deal with it.”
As a reminder, the 2023 Global Carbon Budget report, published on 5 December, estimates that global carbon dioxide emissions from fossil fuels and cement increased by 1.1% in 2023, hitting a new record high of 36.8 billion tonnes of CO2.
The IFoA has been at the forefront at looking at the risks of climate change and has been in conversation with UK regulators about improving the climate scenarios used in financial services. It offers a wide range of practical guides on climate change for actuaries to use in their work, as well as extensive resources on the IFoA’s new Virtual Learning Environment.
