COP28 day one: the key talking points
With COP28 kicking off in Dubai, Net Zero Investor took a closer look at the key investment and finance themes on the agenda
The 28th Conference of Parties (COP) Summit has kicked off in Dubai, aimed at bringing world leaders together to tackle climate change, it is expected to host more than 70,000 delegates from around the world.
The urgency of the event was highlighted by a flurry of concerning news: Global fossil fuel production is now on track to double levels needed to reach the 1.5 degree target and the world is now on track to hit a 3 degree scenario, according to the latest UN Emissions Gap Report released days ahead of the event. And the effects of this failure to adapt can be felt in the weather: The World Meteorological Organization released a report warning that 2023 is already on track to be the warmest year on record.
With that in mind, it appeared timely that this year’s summit was hosted by UAE, one of the World’s largest oil producers with Sultan Al Jaber, CEO of state-owned oil corporation Adnoc and chair of energy firm Masdar at COP president at the helm of the proceedings. Cynics might say this amounted to putting an arsonist in charge of fire safety. Advocates of the decision, including Sultan Al Jaber himself, point out that if the problem of fossil fuel emissions could most effectively be tackled by those at the heart of the fossil fuel industry.
In his opening speech, Al Jaber acknowledged that the progress made so far was insufficient: “ The world has reached a crossroad but the road we have been on will not get us to our destination on time” he warned.
But his words were overshadowed by the news that the presidency had used bilateral meetings to advance the interests of Adnoc and Masdar and aimed to strike trade – rather than climate deals, in violation of COP rules.
While Al Jaber did not acknowledge the reports he pledged to run “a transparent process that encourages free and open discussion among all parties.”
Another blow was the news that US president Joe Biden decided to give the occasion a miss, choosing to prioritise his presidential campaign. While he opted to be represented by climate envoy, John Kerry, the leader of the world’s historically biggest emitter of greenhouse gasses missing in action raised eyebrows.
Loss and Damages fund
All the more important for the organisers of this year’s proceedings to start the event with a bang, and so they did.
Countries in the Global South had been campaigning for funding to tackle the immediate impacts of the climate crisis for years and with funds from governments falling behind previous commitments, the UN warned that the climate finance gap has now hit between $194 to $366 billion per annum.
Sultan Al Jaber used the momentum of his opening speech to announce significant progress on the much anticipated Loss and Reparations Fund. UAE committed $100 million, Germany another $100 million, the UK $75 million, the US $17.5 million and Japan $10 million, bringing the total sum of the fund to just over $400 million.
Cynics might highlight that these pledges are rather negligible given both the size of the economies in question and the need for finance. “They must have found it behind the back of the sofa” were the words of the BBC’s climate correspondent in response to the US’s pledge.
Yet the US has long been an outspoken opponent to climate reparations so the news that it has committed any money has been celebrated by climate campaigners as an acknowledgement of its obligations.
“Unlocking climate finance?"
With public sector commitments falling short, many investors will be attending the event with a close eye on the UAE’s pledge to “unlock private finance.”
Indeed, capital flows to offer immediate remedies to the climate crisis have so far been dominated by loans from multilateral development banks, with private finance accounting for less than 2% of climate investment in the most affected countries, the UN said.
“For too long, finance has not been available, accessible or affordable. This presidency is committed to unlocking finance to ensure that the global south does not have to choose between development and climate action” Al Jaber said in his opening speech.
How exactly the presidency aims to attract private investment remains open, the 4th and 5th of December are widely seen as decisive days in this regard.
A key event to watch out for will be the Fourth Public Private Sector Climate Finance Dialogue taking place on the evening of the 3rd of December featuring among others IIGCC CEO Stephanie Pfeifer.
The EU will also host an event on making transition finance consistent with Paris Goals.
Transition Finance will also be high on the agenda at the Marrakech Partnership Action Event on the 4th of December which aims to address possible roadblocks to investing in transition finance.
On the 6th and 7th of December, the summit will also tackle growing interest in raising private investments in nature positive solutions and biodiversity.
$30bn investment in climate solutions
While the UAE has previously made it clear that it is in no hurry to ditch fossil fuels, it is also committing significant amounts of money to the energy transition.
UAE president Sheikh Mohamed bin Zayed Al Nahyan used his opening statement on the second day to announce a $30billion global fund to invest in global climate solutions. The fund, launched in partnership with BlackRock, Brookfield and TPG will invest $25 billion to steer institutional capital towards climate investments and another $5 billion in climate risk mitigation.
By the end of the decade, he hopes to attract $250bn in investment in renewable energy.
While the UAE present did not disclose any details on capital allocations, UAE sovereign wealth funds have already established themselves as players in the hydrogen- and wind energy markets, as previously reported on Net Zero Investor. Masdar is also keen on expanding its solar capacities, as the leaked trade talks revealed.
Global stocktake – move towards accountability?
Another key theme that stood out from the first day is the call for a global stocktake, the establishment of a greater accountability mechanism on decarbonisation progress. For many institutional investors’ the concept of taking stock of climate progress is not new. Many have now produced their net zero targets and are measuring the carbon intensity of their portfolios on a regular basis.
But from a country-level perspective, this level of accountability has been missing so far. A synthesis of the first country-level assessment on climate progress has been released ahead of COP. Climate activists hope that it will put greater pressure on countries not to expand their oil and gas production.
The elephant in the room: phasing out fossil fuels
The perhaps most crucial item is missing from the official agendas: Tangible policy commitments on phasing out fossil fuels. Global demand for oil has hit a new record in 2023 and is expected to surge further in 2024, according to the International Energy Agency.
Between now and 2085, the UAE plans to extract another 38 billion barrels of oil with no indication that it is slowing down its long-term oil extraction agenda. This means it is not only fully extracting oil from all remaining fields but actively investing in the exploration of new oil and gas fields.
Moreover, UAE ally Saudi Arabia plans to go even further, as the Centre for Climate Research revealed. It plans to launch an Oil Development Sustainability Programme aimed at artificially inflating demand for fossil fuels in the global South. Among others, it aims to incentivise the use of fossil-fuel powered cars in Africa and Asia and invest in super sonic air travel, which uses three times as much jet fuel than conventional planes.
These plans are not featured in official agendas, doubling down on fossil fuels comes with investment risks. If the energy transition succeeds, 28 of the world’s largest 40 petrostates stand to lose more than half of their revenue with $8 trillion of oil revenue to be wiped out by 2040, research by Carbon Tracker revealed.