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COP28 sets course for renewables and cleantech drive


Photo by Fadel Dawod/Getty Images

Significant global investment in new renewable projects and in so-called ‘cleantech’, such as carbon capture use and storage (CCUS) facilities, is expected to flow from a major new agreement reached by countries at COP28 in Dubai – despite concerns about the “loopholes” in the deal.

On Wednesday, following marathon talks, countries agreed to a proposal that “calls on parties to contribute” towards eight core initiatives broadly aimed at reducing greenhouse gas emissions and curtailing the rise in global temperatures.

As well as providing for a tripling of renewable energy capacity globally by 2030, countries also agreed to the target of “doubling the global average annual rate of energy efficiency improvements” by the end of this decade. The agreement further provides for “accelerating zero- and low-emission technologies”, with renewables, nuclear, CCUS and low-carbon hydrogen production cited as examples.

The countries further agreed on wording that provides for the transition away from fossil fuels in energy systems, the “phase-down” of unabated coal power, and the “phasing out” of “inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible”. The other initiatives specified in the text focus on methane emissions reduction and on reducing emissions from road transport – “including through development of infrastructure and rapid deployment of zero- and low-emission vehicles”.

Watson Michael

Michael Watson

Partner, Head of Climate and Sustainability Advisory

For businesses, the onus is on them now to understand their own agency and engage collaboratively … to help shape and get ahead of the change that is happening

Michael Watson, a climate and sustainability adviser at Pinsent Masons who attended COP28 in Dubai, said: “Going into COP28, what business wanted was more certainty and clarity – there is a policy gap and a policy implementation gap currently as to how precisely countries intend to deliver on the commitments made in the Paris Agreement in 2015 – most notably, to keeping global warming below a 1.5 degrees increase compared to pre-industrial levels. This agreement goes some way towards demonstrating the trajectory, but it leaves a lot of leeway to nation states as to how and how fast they move.”

Euan McVicar of Pinsent Masons, who also specialises in advising businesses on climate and sustainability issues, said the “degree of latitude” given to individual countries under the agreed text “does not necessarily help give enough direction of travel to drive global policy”. He said reform to the COP decision making process may be necessary to address this in future.

“There has already been some concern noted that the transition away from fossil fuels is to apply to energy systems and may not stretch to transportation, while the call to accelerate efforts in this critical decade are not spelled out, leaving open the argument that more can be done later even if we all know that will mean it will come at a greater cost,” McVicar said.

“However, the tripling of renewable energy capacity and doubling energy efficiency average improvements by 2030 are significant commitments and will require swift and effective policy interventions if they are to be achieved. Energy efficiency improvement is something that policy makers have struggled with to date. Creating the right private sector investment environment in both these areas will be vital. It will be interesting to see what progress on that has been made on those two goals by the time of the next COP in Azerbaijan in 2024,” he added.

In a press conference, UN climate change executive secretary Simon Stiell acknowledged that the agreed text “leaves a lot of room for interpretation”. He called on governments around the world to commit to “the most ambitious interpretation”, warning that if that does not happen, “loopholes” could be exploited in a way which would “crash our ability to protect people everywhere against rising climate impacts”.

He said the onus is now on governments and businesses “to turn these pledges into real-economy outcomes, without delay”, and that “transparency and people holding their governments to account will be vital to closing these loopholes”.

“This agreement is an [ambition] floor, not a ceiling, so the crucial years ahead must keep ramping up ambition and climate action,” Steill said.

Stiell told delegates at the conference that “there are vast benefits of bolder climate action”. He cited examples of “more security, stability and protection” for the world’s population, as well as “more jobs, greater economic growth, less pollution and better health; more empowerment of women as powerful agents of change; [and] more harnessing of nature and its best custodians”.

Mark Ferguson

Mark Ferguson

Head of Reputation, Crisis, and Client Operations

Elections in 2024 – including in the US, for the European Parliament, and almost certainly in the UK – promise to have a significant bearing on policy direction

Michael Watson said there are opportunities for business arising from the climate change agenda, but that increased scrutiny will also follow of the actions they take.

“For businesses, the onus is on them now to understand their own agency and engage collaboratively – with governments, industry bodies, their own employees, and their supply and value chains – to help shape and get ahead of the change that is happening. Equally, they can engage with policymakers to ensure governments implement the policy and regulatory changes needed to deliver the tripling up/doubling down agenda,” Watson said.

“In terms of tripling up renewable energy capacity, the intervention needed is mainly a scaling one – the policies and funding models exist and are available, they just need to be deployed at even more scale, whereas there remains some work to do to develop funding and financing models for energy efficiency projects to enable them to be scaled,” he said.

“There will be growing scrutiny of what actions businesses are taking to deliver on their own climate and sustainability targets. There is an increasing amount of resource, information and pressure on executive leadership teams in business to develop meaningful transition plans and disclose in accordance with globally acceptable standards. This will drive greater action and focus from stakeholders on their progress,” he said.

Public policy expert Mark Ferguson of Pinsent Masons added: “This agreement needs to be seen in the wider political context, as delivering on the initiatives set out will be difficult unless there’s political, policy, and regulatory certainty. Elections in 2024 – including in the US, for the European Parliament, and almost certainly in the UK – promise to have a significant bearing on policy direction. However, the non-binding nature of this agreement does also leave policy action vulnerable to the political environment in individual jurisdictions, with the pressures right-wing parties in the European Parliament have been exerting against the final files of the EU Green Deal an example of this.”

Hayden Morgan of Pinsent Masons also added: “In some ways, what has been agreed is a mere reaffirmation of the Paris Agreement and the drive to deliver ‘net zero’ by 2050 or sooner – for businesses and investors, it does not change the need to develop strategies for transitioning aligned with a net zero pathway for their sector. The Paris Agreement envisaged a new international carbon credit transfer system under which countries could exchange credits in return for others’ help towards their reduction of greenhouse gas emissions, but eight years on there is still no sign of agreement on how that system should operate.”

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