COP28: a historic summit or a missed opportunity?

International negotiations such as climate summits are discussions about texts — texts that should guide policy and thus help shape the future. Many of these texts go relatively unnoticed, but not the final agreements of climate summits. The fact that global warming is now so imminent has only sharpened the focus.

What is written in the final text of a climate treaty Conference of the Parties (COP) is heard and can have all sorts of consequences. It is no coincidence that it has taken 30 years for such a final text to include that we should "move away from fossil fuels in energy systems.”

Fossil fuel producers know very well that any signal on the world stage that their products are at a dead end can undermine investment. After all, many energy investments are long-term investments, and people won't make them if they know the end is in sight.

That is why the fossil fuel lobby has managed to keep this kind of language out of the texts for 30 years. Until now.

The beginning of the end?

The 28th climate summit, COP28, was held in Dubai. It was chaired by the United Arab Emirates, a state that derives the lion's share of its income from oil. The summit will be remembered for these 29 words alone, which are a guide to follow:

“A just and orderly transition away from fossil fuels in energy systems, accelerating action in this critical decade to reach net zero by 2050, taking into account the science.”

You can immediately see from the somewhat skewed structure that various parties tweaked the wording until there was something everyone could live with. Many players, including UN climate chief Simon Stiell and EU climate commissioner Wopke Hoekstra, have argued that this is the beginning of the end for fossil fuels. But what will this actually mean for cash flows in the energy sector?

The fact is that by 2023 there will already be half as much investment in fossil fuels as in renewables. There is a real chance that this final text will accelerate this decline. We have to, because we face an immense task.

Indeed, a “war effort” is required. The energy source on which we have built 200 years of prosperity, fossil fuels, must be replaced by clean energy sources as quickly as possible. In every corner of the planet. Even in poorer countries, where populations and economies are growing like coal, and where often very little renewable energy is generated.

That is why many people have pointed out its shortcomings. As Samoa, one of the small Pacific island states seriously threatened by rising sea levels, put it: "We had hoped that the text would say that emissions would peak in 2025 and then start to decline. Instead, it contains all sorts of loopholes that allow the continued use of fossil fuels.”

For example, Article 29 states that “transitional fuels” — read natural gas — can play a role in the energy transition. Colombia and Antigua believe this will ensure the continued use of natural gas in developing countries for many years to come. “It is still much easier for us to find funding for a $100 million gas project than for a $20 million solar project," said Antigua and Barbuda.

Bangladesh, another country very vulnerable to global warming, was more positive: “There was a cloud in front of the pole star that was warming us by 1.5 degrees. This COP has blown that cloud away.”

Clarity, not Trumpian fog

Despite the many and varied interests that come together at such a COP, the final text of COP28 is very much science-driven. This is important because COP28 was the first “global stocktake”: the first stand-off since the Paris Agreement in 2015. Then it is good that the final text contains no trace of the Trumpian nonsense that climate change is a lie.

It echoes the conclusions of the sixth report of the UN's Intergovernmental Panel on Climate Change: if we want to limit the temperature rise to around 1.5 degrees, global greenhouse gas emissions will need to be cut by 43 per cent from 2019 levels by 2030 and by 60 per cent by 2035.

For your information: the rich Flanders region will not achieve this 43% reduction for the part of its emissions that it can decide for itself — the emissions of large energy-intensive companies that are not covered by the Emissions Trading Scheme.

These non-ETS emissions, which include those from households and buildings, amounted to 48.5 million tonnes in Flanders in 2005. Flanders wants to reduce these emissions by 40 percent by 2030 (although the EU requires 47 percent). This would result in emissions of 29.1 million tonnes in 2030.

However, the UN climate panel calls for a 43% reduction in Flanders' non-ETS emissions in 2019, or 45.2 million tonnes. This would require Flanders to emit only 25.9 million tonnes more in 2030. In other words, the Flemish government's target is well over 10 per cent higher.

The EU as a whole is well on the way to meeting its commitment to reduce emissions by 55 per cent. It is therefore logical to conclude that other European member states are taking the coals out of Flanders' fire.

However, the coalition agreement of the current Flemish government states that it wants to focus on the north of Europe and in particular on the Scandinavian countries. This certainly does not apply to climate policy, where the Scandinavians are in fact leading the way.

Tripling renewable energy

One of the notable targets that made it into the final text is the promise to triple renewable energy production to 11,000 gigawatts by 2030 and to double energy efficiency. 123 countries, including EU countries, the United States, Canada and many in Latin America and Africa, have signed up to this pledge. India and China did not sign, but these countries are likely to meet the pledge as they invest heavily in solar and wind power.

What does such a commitment mean in concrete terms? By the end of 2022, there will be around 1000 gigawatts of installed solar power and the same for wind power. Together with 1,300 gigawatts of hydropower, that makes 3.3 terawatts. That is three times as much, and given the price trend and the speed at which “solar” can be installed, additional solar power is expected to make up a large part of that.

Pierre Verlinden, who has worked in the solar panel sector for 40 years, told MO*: "By the end of 2022, 1,000 gigawatts of solar panels will be installed worldwide. By 2023, 440 gigawatts of new solar panels will be installed. It took 70 years to build the first terawatt. But by 2025, in three years' time, the second terawatt will be there. Today, 1 gigawatt of solar panels is being built every day.”

If we continue to build at the current rate of 1 gigawatt per day, we will reach 3 terawatts of additional solar capacity by 2030. But if the exponential growth of recent years continues, it is quite conceivable that 5 terawatts of additional solar power will be built by 2030. That's 20 billion solar panels; about 7 million solar panels a day, or 291,000 an hour — every hour until 2030. This is starting to look like the war effort needed to stop global warming.

Belgium is on the list of 123 countries supporting the pledge. But Flanders was not actually in favour of it. Andy Pieters, chief of cabinet for Flemish Environment Minister Zuhal Demir, told MO*: “We in Flanders think that the formulation of new targets should be looked at critically. We think it would be wise to first identify who will bear the burden and cost of such new targets before blindly supporting new ambitions. However, this critical stance did not lead to a Belgian position. So Belgium did not interrupt the European position.”

However, when it became clear that this promise would be included in the final text of COP28, Flemish resistance began to resurface. In the end, after consultations, Belgium remained on the list of 123 countries, along with all 26 other EU member states. We will have to wait and see what this means for our country.

A lot of money needed

One of the shortcomings of COP28 is the lack of clarity on financing. For example, there are no hard agreements to ensure that the increase in renewable energy does not take place mainly in the richer countries, as has been the case so far. There are currently more solar panels in Sweden than in the whole of North Africa.

The final text says that capital should be made cheaper for emerging economies and that they should work together, but there are no concrete agreements. But it should be clear that a 43 per cent reduction in 2019 emissions by 2030 will require not only "deep, rapid and sustained emission reductions,” as the text says, but also a lot of money.

The COP28 agreement lists the amounts. By 2030, $4,300 billion a year will be needed to invest in the energy transition, and after 2030 it will be as much as $5,000 billion a year. Helping developing countries adapt to the effects of climate change will require between $215 billion and $387 billion a year.

Humanity has enough money, the text argues. It is up to governments to mobilise these resources and remove barriers to climate investment. By investing themselves and sending clear signals to investors. Investors, central banks and financial regulators can also play their part.

But the final text of COP28 is short on concrete commitments on how much governments should spend on climate investment, and what signals they should use to get the private sector on board. It did establish the Loss and Damage Fund, into which $792 million was immediately injected, but it does not elaborate on how to achieve massive investment.

The EU, with its taxonomy of green investments, and the financial sector, with a kind of self-regulation that attaches an ESG (environmental, social and governance) label to certain investments, are working on this in their own ways. But there is not yet a coordinated international approach.

The G20, the Group of 20 major economies, has high expectations of development banks such as the World Bank in this area. The British researcher Mariana Mazzucato points out that there are some 520 development banks, national and international, that could take the lead.

The last annual meeting of the IMF and World Bank, which took place in Marrakech in October 2023, may have been more important for climate finance than COP28. There, the World Bank broadened its mission: poverty reduction and wealth creation remain the goals, but from now on it must be on a livable planet.

The World Bank Group itself claims to have made some $50 billion in climate investments by 2023, and aims to spend an average of 35 per cent of its loans on climate. The World Bank is also working on ways to bring more private climate investment to the South.

The recently launched Private Sector Investment Lab brings together CEOs of private sector financial giants such as Blackrock, Temasek or Mitsubishi Financial Group, led by World Bank President Ajay Banga and Mark Carney, former central banker of Canada and now UN Special Envoy for Climate Action and Finance. The lab will think creatively about how to increase sustainable investment in the global south.

Nathalie Francken, who represents Belgium on the World Bank Board, says: 'Private investors often seem to overestimate the risks of investing in low-income countries due to a lack of experience. A systematic exchange of information can help reduce this gap. Where investment risks are really too high, efforts will be made to provide appropriate investment guarantees.

What next?

The verdict on COP28 cannot be black and white. Geert Fremout, who has been part of the Belgian climate negotiating team for many years, is moderately positive: 'The result is less spectacular than it seems at first glance, but it remains in line with limiting warming to 1.5 degrees, as the Paris Agreement wants. As always, much will depend on what countries do with the text.

Countries have until 2025 to tell the UN how they are adapting their policies to the global “state of play” that was COP28. These “nationally determined contributions” will show how seriously they take the COP28 text.

This will be a battle in itself in each country. A struggle at all possible levels and in all possible ways: party political wrangling over policies to be pursued, social action of all smells and colours, climate issues, energy cooperatives, corporate engagement and the role each of us can or should play.

One of the great challenges of the coming years will be to ensure that everyone can participate, including poorer citizens and poorer countries.