COP28 marks a critical juncture in the global climate discourse. Amidst the urgency to limit global temperature rise to 1.5°C, the spotlight is clearly on oil and gas companies and whether they will take action to realign their business strategies under the Paris Agreement. The UAE, a pivotal player in oil production, and Sultan Al Jaber’s dual role as the head of ADNOC and president of COP28, adds not only drama but legitimate concerns about whether real progress will be achieved.
There are still four days to go. But in the end, we will surely hear about progress, and how that progress is simply not enough to put the world on track to reach global temperature targets. Whether news is considered “good” or “bad” depends on the reader’s lens. Here is our attempt to give you the good takes and bad takes on some of the major topics.
Methane Emissions Reduction
There has been a flurry of activity at COP28 (and in the US) that will shed even more light on methane emissions from fossil fuels.
At COP28, the oil and gas industry, with input from the Environmental Defense Fund, announced the creation of the Oil and Gas Decarbonization Charter (OGDC). The intent is to help companies implement and accelerate climate actions to eliminate methane emissions and routine flaring by 2030, and also achieve net zero emissions from oil and gas operations by 2050. While announced with much fanfare, the release was also met with accusations of greenwashing.
In the US, the EPA released their much-anticipated rules regarding methane emissions for the oil and gas sector. The rules recognize and encourage innovation in methane detection technology and expands options for using advanced methane detection technologies, like satellite monitoring, to find leaks.
The bottom line is that science and policy will cause the capital markets to grow increasingly aware of methane when it comes to the risks and costs associated with continued investment in fossil fuel production, transmission, and storage.
Tripling Renewable Energy by 2030
A pledge to triple renewable energy capacity to at least 11,000 gigawatts by 2030 garnered support from 118 countries.
If realized, this will would be a major achievement for COP28 in the fight against global warming. The aim is to clearly state the goal in the summit’s final agreement – the Global Stockade, in which about 200 nations will participate. This pledge, led by the US, Europe and the UAE, mirrors the International Energy Agency’s call for a tripling of renewable energy to meet the goals of the 2015 Paris Agreement.
Achieving this goal presents a challenge. Some, including the head of the International Renewable Energy Agency (IRENA), liken the challenge to “mission impossible.” This is in part due to the late start, but more importantly, in our view, due to the lack of critical infrastructure that enables renewable capacity to be connected to the grid. While other countries face this problem, nowhere is it more acute than in the US, where the vastness of the land and political divides create barriers to modernizing the grid. With stock prices of renewable energy companies lagging of late, investors need to understand the regulatory landscape and advocate for the policy changes that will allow such goals to be reached.
Fossil Fuel Phase Out
Viewed by many as the bar of success for COP28, a global agreement proclaiming an end to coal, oil, and gas remains the most contentious issue in Dubai. At COP27 in Glasgow, negotiators tried to insert a “phase out” of coal but instead settled on a “phase down.” But this year, there seems to be more momentum for a fossil fuel phase out. That said, the resistance among certain petrostates and the influence of the oil and gas industry can’t be underestimated.
Our position is that including the term “phase out” is essential, as it acknowledges consensus on the need to drastically reduce the emissions from the burning of fossil fuels. But such a phase out needs to be orchestrated to ensure that the energy supply meets the demand. In a report released just before COP28, the International Energy Agency (IEA) highlighted the importance of this and outlined various strategic paths for oil and gas companies to align with net zero transitions.
The bottom line is that regardless of the final wording, fossil fuel companies are not going away anytime soon. Creating investment policies for this sector is critical to any energy transition strategy. Decisions to divest, engage, or invest in those best positioned to transition is a function of investor objectives and constraints.
Climate Funding
COP28 progress on climate funding has seen both strides and skepticism. On one hand, the agreement on a loss and damage deal was heralded as a “historic” start, signaling a commitment by developed countries to address climate-induced damage in the global south and other developing countries. But with the US contributing a paltry $17.5 million and total pledges of less than $1 billion, funding falls woefully short – covering less than 0.2% of the actual need. The debate intensifies as discussions emerge about whether India and China, major economies claiming vulnerable communities, should benefit from the fund.
Against the backdrop of US oil and gas output hitting a record high during COP28, US Vice President Kamala Harris touted climate leadership and announced a new $3 billion US pledge to the Green Climate Fund (GCF). As the largest multilateral climate fund in the world dedicated to climate change, CGF provides both adaptation and mitigation funding to developing countries. The US pledge along with new contributions from Australia, Estonia, Italy, Portugal, and Switzerland push funding to a record level.
The bottom line remains a delicate balance between progress and the pressing need for more comprehensive, equitable, and substantial financial commitments to effectively combat climate change.
References
Methane Emissions Reduction
- AP News: US targets oil and natural gas industry’s role in global warming with new rule on methane emissions
- E&E News: Republicans bash Biden methane rule, COP28 funding promise
- Inside Climate News: Government, corporate and philanthropic interests coalesce on curbing methane emissions as calls at COP28 for binding global methane agreement intensify
- Bloomberg via Yahoo: Chevron, Exxon opt out of funding COP28 methane-cutting fund
- NBC News: Methane agreement reached at COP28 climate conference panned by some environmental groups
Tripling Renewable Energy by 2030
- Nikkei Asia: COP28 vow to triple renewable energy by 2030 supported by 118 nations
- Sky News: COP28: Leader’s voluntary pledge to triple renewable power like ‘mission impossible’, admits IRENA chief
- BloombergNEF: Tripling Global Renewables By 2030 Is Hard, Achievable and Necessary to Achieve Net Zero
- EDIE: Policy barriers could hold up efforts to triple renewables capacity
- The Indian Express: COP28: Global Stocktake calls for just phase-out of fossil fuels
Fossil Fuel Phase Out
- The Guardian: Agreement to phase out fossil fuels would be huge for humanity, says Gore
- The Guardian: Talks at Cop28 set to intensify in bid to break impasse over fossil fuels
- Reuters: World’s major oil producers spurn fossil fuel phase-out in net zero push
Climate Funding
- The Guardian: Agreement on loss and damage deal reached on first day of Cop28 talks
- The Conversation: Don’t applaud the climate summit’s loss and damage fund deal just yet – it might not warrant that standing ovation
- BBC News: COP28: Should India and China benefit from a climate damage fund?
- The Guardian: $700m pledged to loss and damage fund at Cop28 covers less than 0.2% needed
- CNN: Kamala Harris announces new $3 billion US pledge to global climate action at Dubai summit
- Reuters: COP28: US touts climate leadership as oil and gas output hits record