Major Outcomes from COP28
What came out of COP28 - Keeping the Paris agreement alive
Source: UNFCC, COP28 / Christophe Viseux
Diplomacy is about compromise and keeping that in mind, the outcome of COP28 hosted by the UAE between November 30 and December 12 represents a landmark one in the history of climate agreements. Signatories to the UNFCCC, or nearly all countries in the world, have agreed to transition away from fossil fuels. They also operationalised a fund to deal with loss and damage resulting from climate change, and set important, albeit not numerical targets for energy efficiency and renewables. The outcomes of COP28 set the tone of climate negotiations for the rest of this crucial decade.
So, with a COP that had a record number of fossil fuel lobbyists in attendance, why is the global stocktake so important, what does it mean in practice, and how are we going to achieve its targets? What does this all mean for business? Read below the ESGmark® Team’s takeaways from this year’s climate summit.
Global Stocktake
The Global Stocktake is the COP28 outcome reviewing progress on Nationally Determined Contributions (NDCs) and global climate action under the Paris Agreement. The Paris Agreement requires each country to communicate their domestic plan for climate change mitigation, including their national climate-related policies and measures – these are NDCs. The Global Stocktake is the first of its kind and its role is to inform the next round of NDCs due in 2025. Every five years, a Stocktake is intended to review progress on the Paris Agreement to ensure that climate ambition is not only upkept, but always increased with every set of goals released until we achieve the goals set at COP21.
The 2020s so far have been characterised by repeated calls to action and while climate impacts as a consideration are now a standing agenda item in all economic and social negotiations, the world is lagging behind. We are at risk of falling short of keeping global temperatures under the 1.5°C mark with many experts arguing that this is due to countries’ unambitious NDCs. Many therefore saw the document as one of our last chances to correct the course of global climate action.
Fossil fuels
Then, the Global Stocktake was vital to set the tone for climate action for the rest of the decade. On December 13 2023, the final document in UN legal jargon set out a transition away from fossil fuels. Many actors and activists are disappointed that a clear phase-out could not be negotiated into the agreement. However, as the first agreement to ever come out of a COP that references all fossil fuels, we think this is cause for hope. As this COP is the first since the Paris Agreement trying to set the course for future action on the climate, it is symbolically and practically important to have a text that references a transition away from fossil fuels.
Alongside a step away from fossil fuels, a tripling of renewable energy capacity was also pledged in the stocktake and a doubling energy efficiency, both by 2030.
Loss and Damages
On the very first day of COP28, climate finance achieved a win. The committee set up at COP27 to formulate plans for a fund to pay for the loss and damages caused by climate quickly and painlessly got their proposal through. A fund was set up and developed countries have pledged a total of US$770.6m to help developing countries and island states bear the burden of a changing climate.
While the fund – located within the World Bank – is an important achievement, critics say that its weaknesses overshadow its seamless setup. Given that there are no rules or obligations setting out who pays into it and how much, developing countries and especially island states are worried that it will not meet its intended purpose. Indeed, of the almost US$800m, over US$100m will go towards setting up the fund with the leftover covering less than 2% of the concerned countries’ annual needs.
Always a tough subject at COPs, finance more broadly remained an area identified as ‘weak’ in the Global Stocktake. It was acknowledged by both negotiators, and critiques and fans of the agreement, that climate finance should be in the trillions across the fields of energy, mitigation, adaptation and loss and damages, and that our current infrastructures are not fit to collect, disperse, and monitor such funds.
Takeaway and COP’s impact on ESG
Many hope that the stocktake will mean investment being withdrawn from new fossil fuel-run technology. Though this is not explicitly stated in the text, and the extraction of new fossil fuels in developed nations is also not addressed, domestic regulations might change. National governments are free to interpret the COP28 outcomes and determine the actions they take. As such, impacts on domestic ambition, regulations, and economy will vary, further complicating international business, and global trade and supply chain management. It is worth keeping an eye on trends in ESG investing and reporting over the next years as NDCs are determined and submitted to COP30 in 2025.
Overall, the global community can be relieved that the Paris Agreement and political will is still alive, while a strong and continued push for climate action will be needed for geopolitical leaders to commit to more ambitious and tangible climate action. Whether the Global Stocktake is indeed the beginning of the end of fossil fuels depends on countries’ interpretation of it and how seriously they take the commitments asked of them in their next iteration of their NDCs. Certainly, a move away from fossil fuels together with continued gains in renewable development and energy efficiency have the potential to keep global temperatures in rein, but concrete plans for implementation of these targets need to come soon.