Our Policy and Public Affairs Team explores a few important things to know ahead of COP28 in Dubai, 30 November to 12 December 2023
This week sees the start of COP28, the United Nations Climate Change Conference in Dubai. It is an important one as under discussion will be the first global stocktake on our progress in tackling climate change. The stocktake’s conclusions are stark but unsurprising: countries are not doing enough to reduce emissions, mitigate climate risks, or financially support developing countries.
The stocktake is part of the Paris Agreement and its ‘ratchet mechanism’ to encourage countries to scale up their climate ambition. The UN Environment Programme reports that 2030 emissions must fall by 28% to 42% for a pathway to 2°C and 1.5°C. Under current pledges, the world is on track for a 2.5 to 2.9°C temperature rise this century.
IFoA members have been at the forefront of analysing climate risk and highlighting the limitations of current climate scenarios. These scenarios exclude many of the most severe impacts we can expect from climate change, such as tipping points and second-order impacts.
In ‘The Emperor’s New Climate Scenarios’, we warn that carbon budgets may be smaller than anticipated and risks may develop more quickly. There is the possibility that we have already used up the carbon budget for limiting warming to 1.5°C.
Earth system changes are highly uncertain. The IPPC estimates a temperature rise of between 2.5°C and 4°C, once CO2 concentration has stopped increasing. But there is an 18% probability that it could be greater than 4.5°C.
This year’s series of severe weather events show the urgency of action. “COP28 must be a clear turning point,” said the Executive-Secretary of UN Climate Change Simon Stiell. “Governments must not only agree what stronger climate actions will be taken but also start showing exactly how to deliver them.”
A key COP28 outcome will be a decision text on the global stocktake and agreed plans to increase ambition, both in stronger country plans (Nationally Determined Contributions or ‘NDCs’) and in sector-specific targets. COP President-Designate Sultan Al Jaber has called for countries to join COP28’s pledge to triple global renewables capacity and double annual efficiency improvements between now and 2030.
In a meeting earlier this month, the US and China jointly agreed to triple renewables. The 2 superpowers also agreed to develop their methane reduction actions and targets for inclusion in their 2035 NDCs and support each country’s methane reduction progress.
Methane is 30 times stronger than CO2 over 100 years and 80 times stronger over 20 years. It increases global heating by about half a degree higher than otherwise. The UNEP estimates that a methane emission reduction of 45% by 2030 could avoid 0.3°C of global warming by 2045.
Participants will be looking for progress on the COP26 Global Methane Pledge to reduce methane emissions by 30% by 2030. The COP Presidency has called on the energy sector to:
A third of emissions are from land and we need it to be a net sequester of carbon if we are to reach net zero. Countries will be invited to sign the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action. Another new topic is health, with the COP28 Declaration on Climate and Health launched last month at the World Health Summit in Berlin.
As in previous COPs, the wording on fossil fuels will be contentious. The COP’s location in a major fossil fuel state and the choice of a chief executive of the state-owned oil company as president have been very controversial.
However, Sultan Al Jaber has committed to the phasing down of unabated fossil fuels. This contrasts with last year where proposals by India to phase down all fossil fuels were stonewalled, despite support from more than 80 countries including the EU and US.
16 countries as part of the High Ambition Coalition are calling for a complete phase-out of fossil fuels production and use. This includes France, Spain, the Netherlands, and Ireland.
In 2009, developed countries committed to mobilising $100 billion per year for climate action in developing countries by 2020 (extended to 2025 in Paris). The latest figures from the OECD show that developed countries provided $89.6 billion in 2021, 16% from private finance.
The failure to meet the pledge has been a source of tension in global climate talks. Preliminary data suggesting that countries are likely to have met that target in 2022 is a welcome boost.
Sultan Al Jaber has called on multilateral development banks to support countries’ development goals without worsening debt distress, including through mechanisms on debt relief for climate.
One of the main outcomes of COP27 was a commitment to create a loss and damage fund to help low-income countries pay for the growing damages caused by climate change. A consensus proposal reached earlier this month opens the possibility that relatively wealthy countries like China or Saudi Arabia might contribute to the fund. That is despite officially being classified as developing countries.
If the consensus holds, we should see COP28 adopt a loss and damage fund. It has been a long time in the making: the mechanism was first set up in 2013 and endorsed in Paris in 2015.
Meanwhile, the Vulnerable Twenty Group, a coalition of the world’s most climate-vulnerable countries, estimate they have lost about one fifth of their wealth over the past 20 years due to the impacts of climate change.
While overall climate finance has improved, finance flows to developing countries for adaptation declined by 15% to around $21 billion in 2021. This leaves, according to the UN, an adaptation finance gap of $194 to $366 billion per year. The COP Presidency has reiterated COP26 calls to at least double adaptation finance by 2025.
It is hoped that an agreement on the framework of the Global Goal on Adaptation will help refocus attention. Established as part of the Paris Agreement, work has been ongoing since COP26 to decide the metrics and indicators to be used at both global and local levels to effectively monitor collective progress and operationalise the GGA.
Parties established the Mitigation Work Programme at COP26 to “urgently scale up mitigation ambition and implementation”. This work will include at least 2 annual global dialogues focusing on specific themes. The 2023 dialogue will look at accelerating a just energy transition by focusing on the issues of power and transport systems.
Inevitably geopolitics will have an impact on discussions. Russia, for instance, is blocking Europe from hosting the next COP, risking disruption to COP29. Commentators point to a new dynamic in international forums which is as much about competition as collaboration.
Yet the process must bridge the divide between the Global South and Global North and the mistrust of developing nations to move beyond target-setting towards implementation to deliver the real-world and urgent climate action we require.
The IFoA is supporting the actuarial profession to use its skill set and influence to help equip the wider global financial services markets to fully incorporate climate and biodiversity risks.
By using actuarial risk-management techniques, we can take uncertainty into account and ask not just ‘what is likely?’ but ‘what is possible?’ to better understand the extremely bad scenarios we might face.
The Emperor’s New Climate Scenarios calls for the development of realistic qualitative and quantitative climate scenarios to better capture risk drivers, uncertainties, and impacts.
A new paper, called ‘Climate Scorpion – the sting is in the tail’ will be published in February. This will highlight the range of uncertainty around critical Earth system assumptions and incorporate systems thinking.
