COP28: What to expect

A guest article from Forefront Advisers: the industry leading analysis provider on political trends and policy developments across the UK & Europe.

Key takeaways

- The recent letter from the COP28 head Sultan Al-Jaber illustrates what will be the main items of discussion in Dubai. There are probably too many to make progress on all of them.

- COP28 is likely to introduce new goals or solutions such as a global renewable energy target or foreign exchange risk guarantee mechanisms. However, on long-standing issues - such as the phasedown of fossil fuels or raising the funding of MDBs - a compromise is less likely.

- The multilateral and bilateral summits that precede COP28 - such as the G20, UNGA, and US-China talks - will already give a good indication of how far apart countries are and what are the possible avenues of compromise.

The COP28 agenda is taking shape

- In early July, the head of COP28 Sultan Al-Jaber published a letter, outlining the main areas of work for COP28.

- The letter also states that the Environment Ministers of South Africa and Denmark will lead the consultations on the Global Stocktake (GST). The goal of the GST is to enable countries to see where they are collectively making progress toward meeting the goals of the Paris Agreement - and where they are not.

- Al-Jaber’s decision to delegate some of his responsibilities to the Ministers of South Africa and Denmark is likely an attempt to defuse the tensions around his leadership and the role of the oil industry in shaping the climate discussions.

Energy

- The document lays out six new concrete deliverables for the energy transition.

- First, COP28 will discuss tripling renewable energy capacity and doubling the rate of energy efficiency improvements across sectors by 2030, including ramping up electrification and enhanced cooling approaches.

- Second, COP28 will discuss more than halving oil and gas industry scope 1 and 2 emissions, including reaching near-zero methane emissions by 2030.

- Third, COP28 will debate how to transform heavy-emitting sectors, including scaling up the use of low-carbon hydrogen, CCS, and carbon dioxide removal.

- Fourth, COP28 will also take on the issue of the decarbonisation of transport systems through vehicle electrification and modal shifts.

- Fifth, COP28 will accelerate efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies, addressing coal-related methane emissions and deploying clean baseload capacity.

- Sixth, COP28 will also feature a discussion on how companies and countries should remain accountable through disclosures, in line with best practices and global standards.

- The six different energy deliverables aim to satisfy the various constituencies of COP28. The inclusion of a global renewable energy and energy efficiency goal will please actors such as the EU, which had insisted on this.

- The mention of CCS and the absence of a clear commitment to the total phasedown of fossil fuels will please fossil fuel-producing countries. The debate is unlikely to be settled at COP28.

Finance

- As became evident at the recent summit for a New Global Financing Pact in Paris, finance will be one of the defining themes of climate diplomacy in 2023.

- Al-Jaber’s letter acknowledges this reality and identifies three main objectives for COP28.

- First, multilateral development banks (MDBs) must release more capital for climate action in developing countries. The letter urges shareholders of MDBs to endorse the 2022 G20 Capital Adequacy Review recommendations to unlock even more public finance.

- Second, MDBs must adopt innovative solutions to catalyse much greater flows of private capital for the net zero transition. One of these solutions includes better foreign exchange risk guarantee mechanisms.

- Third, the letter notes that to accelerate progress on finance, it is important to reform and harmonise regulatory systems (including agreeing on definitions for transition finance and disclosure of climate-related data) and unlock voluntary carbon markets.

- Some of these calls are likely to fail. For example, the US Government has already made clear that they oppose a near-term capital increase for the World Bank.

- Other ideas to raise funds - such as the creation of a global shipping tax or a tax on oil imports - are not discussed in the letter, but are likely to resurface at COP28.

- The harmonisation of regulatory systems is progressing. In June, the International Sustainability Standards Board (ISSB) unveiled its first two global sustainability disclosure standards, which focus on general sustainability disclosures and climate-related disclosures. The standards would apply from next year onwards, with the first reporting expected in 2025.

Adaptation and loss and damage

- The letter also discusses the importance of making progress in the areas of climate adaptation, and loss and damage. These two issues are often neglected in climate diplomacy because developed countries value them less.

- The key goal for COP28 will be the operationalisation of the new loss and damage fund and the relative funding arrangements as agreed at COP27 in Sharm El Sheikh, in 2022.

- In addition, the letter sets out that COP28 could lead to the adoption of a comprehensive framework for the Global Goal on Adaptation. Such a goal needs to become the equivalent of the 1.5°C goal for mitigation.

- As in previous COPs, the discussion on adaptation and loss and damage will be the hardest. For example, US Climate Envoy John Kerry has recently made clear that the US opposes the concept of ‘climate reparations’ for countries that have been impacted by climate change.

- The timeline for the operationalisation of the fund that the letter puts forward is also extremely ambitious. More likely, COP28 will only discuss the governance system of the fund, but the funding arrangements will only be agreed upon at a later stage.

Next steps

- Over the coming months, there will be a number of summits that will prepare the groundwork for COP28. The G20 Environment and Energy Minister Meeting in India which took place at the end of July failed to bring any tangible progress on the issues described above. The discussion will resume at the G20 Leaders’ Summit in September.

- Towards the end of September, world leaders will also meet in New York for the UN General Assembly. Around the same time, the concluding report of the first GST will be released, showing how off-track we collectively are from meeting the goals of the Paris Agreement.

- Another important step for climate diplomacy was John Kerry's visit to China. While there were no breakthroughs in the discussions, both sides pledged to restart their regular meetings on climate. US-China climate talks were put on ice last year, after the visit to Taiwan by the House Speaker Nancy Pelosi.

Conclusion

- To accommodate the demands of as many countries as possible, the list of priorities for COP28 is very long. 

- To agree to a global renewable goal, developed countries may have to give up on the phasedown of fossil fuels. 

- To avoid increasing their climate finance contributions, developed countries could accept innovative solutions such as foreign exchange risk guarantees.