COP28: The key takeaways, and what COP29 might look like
A look-back at Gowling WLG’s recent webinar following the close of COP28, looking at how it might impact business – as well as some thoughts on what COP29 may have in store. We set out the consolidated thoughts of Gowling’s Ben Stansfield (London), Jonathan Brufal (Dubai), Thomas Timmins and Jennifer King (Toronto) and Lasitha Perera (CEO of the Green Guarantee Company).
The United Nations Framework Convention on Climate Change (UNFCCC) has formed the basis for international climate negotiations since the Earth summit held in Rio de Janeiro in 1992. The parties to the UNFCCC meet annually at a Conference of the Parties, or COP.
The 28thCOP — COP28 — was held in Dubai in December this year and was attended by approximately 100,000 people from across the globe, representing nation states, NGOs, interest groups, businesses, and communities most-impacted by climate change.
The headline from COP28 was the agreement that supposedly heralds the “beginning of the end” of the fossil fuel era by laying the groundwork for a ‘just transition’ – i.e. moving away from a fossil-fuel driven economy in a timeframe that is fair given the size of the economy and the ability for certain nations to invest heavily in renewable energy.
Every COP has a final flurry at the end where a text or agreement is negotiated – in this case, called the Global Stocktake. After a disappointing first draft, the final Global Stocktake was generally welcomed – it mentioned fossil fuels for the first time in COP text (although this was only a call to transition away from fossil fuels “in a just, orderly and equitable manner”); and it also called upon a tripling of renewable energy capacity globally and a doubling of the global average annual rate of energy efficiency improvements, in each case by 2030.
Following COP28, people have the licence to talk openly about fossil fuels – it used to be a tricky topic but it feels like the canary is now out of the cage. Of course, for some, a “phasedown of unabated coal” and a “transitioning away from fossil fuels” didn’t go far enough, and real action is needed.
The loss and damage fund – set up at COP27 – was effectively operationalised this year, with developed countries effectively recompensing those countries most affected by climate change. In what was seen as an encouraging step, most countries made sizeable payments, with the US being an outlier (putting in a modest $17.5 million). The fund has raised around $700 million which may sound like a lot, but is less than 10% of the annual US defence budget. But, again – the fact that the fund is up-and-running is to be celebrated.
While the loss and damage fund certainly helps, it does not cover the trillions of dollars needed to effectively combat the effects if climate change in developing countries. To cover the deficit, developing countries will need to borrow, but as they have no investment rating, businesses like the Green Guarantee Company will need to step in. The Green Guarantee Company will provide investors with investment rate guarantees to support their investment in projects in developing countries. There is certainly money available – and investment opportunities aplenty – it is a question of de-risking the investment. The question is whether big institutional investors will invest, but with investors needing to be more sustainability-led, they may have little option but to look at this as a route to achieving their own 2050 net zero targets.
The Global Stocktake is not legally binding. And even if it were, it would bind the Parties to the COP – the nations states themselves. So should business pay attention to it? Yes — it is a powerful market signal – especially to investors and entrepreneurs, particularly in the energy sector.
COP28 continues to set the direction of travel — full steam ahead on measures to keep to 1.5 degrees Celsius global average temperate increases as against pre-industrial levels. But COP28 isn’t enough. Businesses need more clarity, without which meaningful investment could slow, so a clearer global approach is still needed.
COP29 is going to be held in Baku, Azerbaijan on 11 – 24 November. That’s an interesting date because six days before, the US goes to vote for their President (on 5 November) and barring court action, we should know the result by the time COP29 starts. Will anything be achieved if a climate-sceptic were to be elected? Would decisions made be ignored following an inauguration in early 2025? And it is not just the USA at the ballot box – more than half the people around the world will take part in national elections before COP29 starts – and citizens won’t just be voting nationally, but in cities too: the London Mayoral election will be in May 2024 and environmental issues are likely to be central to the debate.
Aside from the politics of climate change, finance will be high on the agenda at COP29, given the deficit between the loss and damage fund and the amount needed to combat climate change in developing countries. Increasingly, the private financing sector will be asked to play its part, and that will be front and centre at COP29.