The Strategist

COP 28: All good things take some time?

Following the landmark Paris Agreement in 2015, the stated goal of the 28th climate conference (COP) in Dubai was to keep the world on a 1.5°C warming path compared to pre-industrial (1850-1900) temperature levels. With some 100,000 participants, more people came together than ever before. In this issue of the Strategist, we ask: Has the breakthrough for consistent emissions reductions now been achieved in Dubai?

Date
Author
Cedric Baur, Equity Analyst, LGT Private Banking
Reading time
10 minutes
Strategist COP 28
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This year's conference was already controversial in the run-up because it was being held in an oil-exporting country, the United Arab Emirates. However, the motto was to include these countries, which are key to the transformation, as well. Despite the current geopolitical and economic uncertainties, interest seemed to remain high.

Global warming still on the rise

Ahead of the conference, the United Nations Environment Programme (UNEP) revealed in its annual “Emissions Gap Report” a clear discrepancy between global greenhouse gas emissions and the Paris climate goal of limiting warming to 2°C, or 1.5°C if possible. At the current COP (Conference of the Parties), the aim was to review the policies that countries have put in place so far to meet the Paris climate goals and, for the first time, to define the necessary countermeasures in case of deviation. If current policies are consistently implemented, the growth of CO2 emissions will slow, but the global community is still on track for global warming of around 2.5-3°C by 2100. The main driver is energy production from fossil fuels, which remains the largest contributor to global emissions at 86%. Of course, the economy will not be spared from the trend of rising emissions either. A recent study by the University of Wellington estimates the global cost of extreme weather events due to anthropogenic global warming at an average of USD $143 billion per year, over the period 2000-2019. In 2022, these costs appear to be at around USD $280 billion and are likely to increase further in the coming years as temperatures rise. 

Small steps in the right direction

The first hurdle was already overcome on the first day of the conference with the so-called "Loss & Damage Fund". With pledged resources of approximately USD $800 million, this fund will help poorer countries adapt to the impacts of climate change. At the end of the conference, countries have also agreed to triple global renewable energy capacity and to double energy efficiency by 2030. 

The biggest sticking point in meeting the 1.5°C target remained the global phase-out of fossil fuels, which forced the conference into overtime. Once again, participating countries were unable to agree on a clear phase-out path. However, by “transitioning away” from fossil fuels, a first signal for the phase-out was sent. The goal of net-zero emissions by 2050 was reaffirmed, as was the commitment to reduce emissions of methane (another major greenhouse gas). Over the next two years, countries will also have to submit detailed plans to the UN for their own emissions reductions by 2035. In the long term, the decisions and measures are likely to have a positive impact on companies that offer solutions to reduce emissions along the entire value chain. However, it remains to be seen how the agreements reached will be put into practice in the member states. At the end of the 28th COP, a sense of disillusionment remains, even after another tough round of negotiations. Although small steps in the right direction have been taken in response to the first review of the political measures taken so far, a historically groundbreaking result has been missed. The Paris climate goal of limiting global warming to 1.5°C will be difficult to achieve with the decisions taken.

 

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