COP 28 preview: taking the temperature

COP 28 begins on 30 November and controversy remains around its location in Dubai as well as the presidency under Sultan Al Jaber, CEO of the Abu Dhabi National Oil Company. Among potential highlights of the event, we hope to see transition strategies made more explicit. But the co-opting of the agenda by fossil fuel interests will generate further scepticism that the COP forum has become too closely aligned with the traditional economic interests of sovereigns and corporates.

Last November, we summarised the COP 27 meeting as showing “progress amid the setbacks.”¹ Looking past the more negative headlines, progress was made at the meeting and there were reasons to be optimistic.

It felt like COP 27 set the mixed tone for the year. On the one hand, 2023 is likely to be confirmed as the hottest year on record, the incidence and impact of severe weather events have worsened, and the climate topic remains highly politicised. More positively, we are seeing significant technological advances in energy efficiency and climate solutions, the capital being allocated to sustainability is increasing, and comprehensive and targeted climate policies (like the US Inflation Reduction Act) are shifting perceived wisdom.

Amid all the column inches on the additional consumer cost of moving from fossil fuels to renewable energies, it is easy to lose sight of the fact that governments subsidised the cost of fossil fuels to the tune of USD 7 trillion in 2022 – a figure representing 7.1% of global GDP.² Fossil fuels contribute over 75% of global greenhouse gas emissions, and the global economy is, in effect, paying twice – once to finance the cause of the emissions and again to finance the damage from the emissions. We do not expect any major developments on the phasing out or down of fossil fuels, but pressure to redirect subsidies could be significantly impactful for new carbon removal or storage technologies. Progress on methane emissions and renewable energies is also very likely.

COP 28 will be the first conference meeting to explicitly discuss the link between climate change and global health trends. This first-ever health ministerial meeting will be held in partnership with the World Health Organisation. OECD countries spend on average around 10% of their GDP on healthcare.³ Climate change is increasing the scale and breadth of health conditions, but the impact is especially acute for lower-income populations.

The topic of who and how climate is financed is an evergreen topic at these events, but we expect trade to represent a new dimension to discussions on transforming the climate finance system. Trade was voluntarily set aside from the Paris Agreement, but we expect it to be a major focus on the Finance thematic day. Climate policies risk being ineffective amid legal challenges and trade tensions caused by the Carbon Border Adjustment Mechanism – a tariff on carbon-intensive products imported by the European Union.⁴ Divergent climate policies and resistance from the World Trade Organisation are also factors. This topic may create more noise than progress, but it is important if global economies are to align on net zero through a new global framework for financing climate transition.

The last 12 months have been pivotal for biodiversity with COP 15’s Global Biodiversity Framework, the arrival of the Taskforce on Nature-related Financial Disclosures’ final recommendations and broad-based recognition of nature’s contribution to economic resilience – and the emerging risks to that. With evident urgency in mind, COP 28 could take discussions at the International Advisory Panel for Biodiversity Credits to a global stage. The panel is likely to build on gaps, lessons learned and existing best practice in the carbon credit market to promote the expansion of the biodiversity credit market.

Biodiversity leads to the next focus topic – food security. On 10 December, the day is dedicated to food, agriculture and water issues, with discussions focusing on investment, financing mechanisms, water-resilient food systems and regenerative agriculture. The World Bank has highlighted rising food insecurity⁵ amid ongoing geopolitical events, varying impacts of the return of El Niño and restrictions like India’s recent ban on the exportation of non-basmati rice. We expect a draft text on the delivery of a food system transformation targeting a just transition to sustainable food security.

The United Nations recently reiterated the targeting for financial and technical support to enable just transitions, where the shift to a more sustainable economy is fair to all.⁶ Just transition has been discussed in prior COPs, but the rising incidence and severity of climate impacts is hitting the most vulnerable communities the hardest. The Energy, Industry and Just Transition Day will look at opportunities to rapidly decarbonise energy and industrial value chains, while accelerating economic growth and protecting social welfare. We wait to see how many more countries join the Just Energy Transition Partnerships⁷, while further clarity is expected around the structure and governance of the Loss and Damage Fund announced last year.

In summary, there’s much to look forward to.

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¹ COP 27 review | Allianz Global Investors (allianzgi.com)
² Fossil Fuel Subsidies Surged to Record $7 Trillion (imf.org)
³ OECD Health Statistics 2023 - OECD
⁴ Carbon Border Adjustment Mechanism (europa.eu)
⁵ Food Security | Rising Food Insecurity in 2023 (worldbank.org)
⁶ A strong outcome at COP28 Is Crucial for Climate Action and the SDGs | UNFCCC
⁷ Just Energy Transition Partnerships: An opportunity to leapfrog from coal to clean energy | International Institute for Sustainable Development (iisd.org)