Preparing for UAE’s high-stakes COP28

As negotiators start to prepare for the 28th UN Climate Change Conference (COP28), the stakes are high. Why? Because the meeting that starts in November will conclude the global stocktake intended to assess countries’ collective progress towards achieving the Paris Agreement’s goal of limiting global temperature rises to 1.5°C above pre-industrial levels by 2050.

1. The meeting will conclude the global stocktake of countries’ collective progress towards the Paris Agreement’s goals. But there’s no agreed course of action for what happens if, as expected, countries are revealed to be falling behind.
2. Last year’s COP meeting in Egypt showed how fragile the process is, despite agreement on “loss and damage” for vulnerable countries, and accelerating progress in the development of climate finance.
3. Preparations for Dubai’s high-stakes COP28 are already underway, with phasing down oil and gas use likely to be high on the agenda.

No one expects the assessment that started two years ago at Glasgow’s COP26 to conclude that the globe is on track. Many countries’ national climate change plans, or Nationally Determined Contributions (NDCs), are already known to fall short of what’s needed.

But the key question is: what will then be done to keep Paris alive? There’s no agreed course of action for what happens next. Negotiators will have to find a way forward before the conference convenes in just nine short months from now.

“A few advanced economies are tracking towards below two degrees with very ambitious commitments, although there’s still a question mark over whether they’ll hit those commitments,” notes Jaakko Kooroshy, London Stock Exchange Group’s (LSEG) Global Head of Sustainable Investment Research.

“And some large emerging economies such as India have very low emissions today and are aligned to well below two degrees, although their emissions are growing fast. But many other economies are aligning to above three degrees; in some cases, closer to four degrees. Countries like Australia or Canada – and that’s where we need new commitments.”

The FTSE Russell 2022 Net Zero Atlas warned that national climate reduction policies on aggregate were still falling short of the scale and pace needed. While countries’ current climate policies are gradually aligning with their 2030 commitments, they still imply a 2.8°C level of warming on average, well below the ambition needed to meet the goals of the Paris Agreement.

For evidence of the fragility of climate change negotiations, look no further than COP27. With many negotiators voicing frustration that the conference did not go further to cut greenhouse gas emissions, the meeting did at least achieve a historic agreement to provide “loss and damage” funding for vulnerable countries hit hard by climate disasters, similar to that recently pledged to Pakistan.

Yet this also creates a risk of future loss of faith in negotiations if developed countries do not keep their commitments.

Another bright spot is the development of climate finance tools, which continues regardless.

“There’s a lot of interesting work going on and a feeling of acceleration,” asserts Tessa Walsh, ESG Financing Editor at IFR. “Looking at loss and damage, it’s all about adaptation. How do we help companies brace against the worst incoming effects of climate change?

“With adaptation finances traditionally being the preserve of governments, the key issue is how to get private sector capital into adaptation. So, how do we get that money where it needs to go, which is often into the riskier parts of the world that are facing more extreme conditions?”

Preparation is underway in earnest for UAE’s COP28 – where the topic of the energy transition is certain to be on the agenda, in what is the geographical centre of the world’s hydrocarbon industry.

Many countries are currently working out how to tell the story of their energy transition plans and attract the funding to fulfil them, with Middle Eastern countries’ plans, especially controversial.

“There’s a lot of scepticism about fossil fuel-dependent economies and how they’re going to tackle a transition,” notes Walsh. “Are they going do it in good faith or not? The whole debate about greenwashing has probably been chilling to some of those countries. But the fact of the matter is, we need them on board if we are going to transition and we have to figure out an acceptable way to still keep them engaged with the process positively.”

Broadly speaking, there is some room for optimism about global progress towards the Paris goals. While some developed economies do not have sufficiently ambitious policies for 2030, they have more impressive carbon reduction ambitions for 2050. And some emerging economies are doing far more to reduce carbon emissions before 2030 than implied by their NDCs.

“There’s some leeway for some of these developing countries to become more ambitious,” says Kooroshy. “Our sense is that some of them are holding out in negotiation for what they will get in return. And that’s maybe where some of the leeway for these negotiations lies.”

Expect tough negotiations ahead of a high-stakes COP.

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