The energy transition conundrum: Where to post-COP28?
It was the year when the world experienced the hottest 12-month span on record.
As the calendar changes, we find ourselves once again at the crossroads of contemplating the most obvious struggle facing planet Earth, questioning our achievements in reigning in energy consumption, as the time steadily ticks.
The year 2023 can be earmarked as a significant one in the context of the climate crisis, intertwining with energy dynamics.
We not only witnessed the ongoing tug and pull among stakeholders but also touched a crucial milestone, where consensus on fossil fuels being the primary instigators behind the greenhouse gas emissions was reached.
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This consensus barely ruffled feathers.
China surged ahead by linking an unprecedented number of new coal plants and the United States achieved a historic pinnacle in oil production, surpassing all previous global records.
Additionally, liquefied natural gas (LNG) shipment volumes soared to unprecedented heights.
It was also the year when the world experienced the hottest 12-month span on record.
With the beginning of the new year, we are even closer to halfway through the critical decade (2020s) demanding a nearly 50% reduction in carbon dioxide emissions to avert catastrophic warming.
Yet, emissions persist on an upward trajectory, albeit marginally.
The recent COP28 climate conference held in Dubai offers scant evidence of any significant shift in this trajectory.
A dramatic COP28
World leaders gathered in Dubai at the end of November for the 28th United Nations Climate Change Conference (COP28). They ended the conference with a resolute commitment: kickstarting the "beginning of the end" of the fossil fuel era by laying the ground for a swift, just and equitable transition, underpinned by deep emissions cuts and scaled-up finance.
In a demonstration of global solidarity, negotiators from nearly 200 parties came together with a decision on the world's first "global stocktake" to ratchet up climate action before the end of the decade – with the overarching aim to keep the global temperature limit of 1.5°C within reach.
The conference saw boosts in climate finance, but critical issues such as defining climate finance, fossil fuel phase-outs, and specific timelines remained unaddressed, prompting disappointment from the Climate Justice Alliance.
The dramatic final moments involved strategic manoeuvring by the UAE, and back-channel diplomacy played out by the US and China, culminating in an accord calling for a transition away from fossil fuels, featuring options for cleansing existing fuels' climate impact.
The OPEC, holding the majority of global oil reserves, sent a rallying letter on 6 December to its affiliates, urging them to oppose an agreement focusing on fossil fuels.
Despite being in a tight spot and amid time constraints, COP28's UAE President Sultan Al Jaber, also heading the UAE's state oil company ADNOC, implemented a provocative tactic to prompt change.
Throughout the two-week summit, the UAE presidency strategically released intentionally provocative drafts, aiming to draw out negotiators' boundaries and foster agreement.
Al Jaber's office unveiled a draft deal text on 11 December, presenting a range of climate change combat options, including carbon capture, reduced fossil-fuel use, and subsidies cuts, without any reference to a "phase out."
Simultaneously, the chief envoys of major climate contributors, the United States and China, effectively articulated the global shift from oil, gas, and coal, rallying OPEC leaders to support this transition.
According to Reuters, US climate envoy John Kerry and Chinese counterpart Xie Zhenhua had charted a roadmap in their recent climate pact forged at Sunnylands, California, earlier in November.
This agreement avoided terms like "phasing out", but instead called for the accelerated substitution of fossil fuels with renewable energy sources.
The conference that extended past its scheduled time and experienced near-crisis moments culminated with negotiators securing an agreement calling for a collective "transition" away from fossil fuels.
As a gesture to oil producers, notably OPEC members and affiliates, the deal included provisions for mitigating the climate impact of current oil, gas, and coal through technologies like carbon capture and sequestration, effectively containing greenhouse gas emissions from entering the atmosphere.
The breakthroughs
While previous conferences fell short in addressing the critical issue of fossil fuels, a longstanding concern central to climate talks for nearly three decades, COP28 scored an unprecedented achievement.
This momentous agreement, though overdue, serves as a powerful signal to global leaders in government and business.
With increased engagement from the private sector and local leaders, guided by robust leadership from key figures such as UN Secretary-General Antonio Guterres, UNFCCC Executive Secretary Simon Stiell, and COP28 President Sultan Al Jaber, this conference yielded pivotal breakthroughs.
On day one, the Loss & Damage Fund was operationalised and swiftly backed by pledges: $100m each from the UAE and Germany, and $40m from the UK, plus an additional £20m. This achievement, led by frontline nations and backed by civil society, reflects years of relentless efforts and advocacy, unimaginable just a short while ago.
The COP28 also signalled a potential shift in climate finance, with multinational lenders like the World Bank committing to reform and leveraging capital to unlock private finance for developing nations, estimating over $83 billion in new financial pledges for climate action.
It includes, eight donor governments, including Belgium, Canada, France, Germany, Norway, Spain, Sweden, and the United Kingdom, collectively pledging $174.2 million to the Least Developed Countries Fund (LDCF) and Special Climate Change Fund (SCCF)
Nations pledged to triple clean energy capacity and double efficiency by 2030.
Besides, more countries collaborated outside the agreement to phase out coal-fired plants, aiming to significantly cut emissions, improve health, create jobs, and provide electricity to millions worldwide.
Meanwhile, 50 oil and gas companies pledged near-zero methane emissions by 2030 at COP28, aiming to mitigate its substantial heat-trapping impact.
In line with the Glasgow Financial Alliance for Net Zero, COP28 introduced The Industrial Transition Accelerator which aims to fund the shift to low-carbon economies, scaling up innovative technologies like green hydrogen to cut emissions in energy-intensive sectors without compromising economic growth.
To enhance transparency, a tool called Net-Zero Data Public Utility was launched to consolidate corporate emissions data, empowering investors and the public to hold companies accountable for emission reductions.
These advancements collectively pave the way toward achieving a substantial reduction of global emissions by 43% by 2030 — an essential step endorsed by scientists to curb the global temperature rise within the 1.5-degree Celsius goal set by the Paris Agreement.
While COP28 marks progress, much work remains.
The conference sets a promising path, urging all parties to translate commitments into tangible action to address the climate crisis effectively.
The stumbling blocks
The COP28 wrapped up in a paradox where ambitious goals collided with harsh realities.
The staggering presence of over 2,450 oil and gas lobbyists highlighted this paradox as delegates sought to craft an agreement phasing out fossil fuels.
Despite the optimism following the 2015 Paris Agreement, all nations fell short of emission reduction targets.
The COP's failure in financial commitments further deepened distrust.
The final compromise lacked clarity on fossil fuel phase-outs and emphasized transitional fuels, leaving indigenous groups and activists disheartened.
In essence, the summit's grand proclamations were undercut by vague resolutions and the evident influence of petrostates.
The conference seemed to acknowledge climate debts and responsibilities but often resulted in inaction.
Despite grand talks, fossil fuel expansion continues unabated.
As the conference ended, it was evident that true climate justice extends beyond diplomatic stages, requiring action to address growing debts and pursue environmental justice.
How practical is a complete transition
The transformation of our energy sources towards sustainability requires a substantial investment in technologies, especially considering the lack of effective climate policies in the past 15 years, according to the Potsdam Institute for Climate Impact Research.
The urgency of the crisis demands a shift towards renewable energy to achieve sustainable climate policies.
In 2022, investment in renewable energy matched that of fossil fuels for the first time. The installation of wind turbines in the North Sea, off the coasts of Germany and England, symbolises this change, poised to provide energy to nearly half of the EU population in the near future.
The previously unimaginable scale of offshore wind farms now rivals traditional power plants like coal-fired or nuclear ones, becoming the backbone of the energy transition.
For instance, the North and Baltic Seas hold enormous potential for offshore wind energy, reportedly capable of generating approximately 300 gigawatts in Europe's northern sea alone, equivalent to over 200 nuclear power plants and capable of powering up to 300 million households, a tenfold increase from current outputs.
Preparation for this shift is underway in Germany, with power grid operators gearing up for the integration of renewable energy sources.
The enthusiasm of multiple countries and industries' representatives reflects the ongoing real-life transformation, signifying the actual commencement of this monumental change.
This shift not only promises a transformation in energy sourcing but also holds the potential to revolutionise society's energy landscape and environmental impact.
Who will work the Green Transition
Addressing the workforce for the green transition is critical.
The demand for skilled workers to drive this transformation is soaring, yet the supply falls short. Training and education are fundamental; without these, the transition stalls.
Not just a concern for low- and middle-income nations, this shortage impacts global progress.
Education curricula often neglect climate change, hindering preparation for this shift.
The COP28 reflected some focus on building capacity, but more action is needed to bridge the gap.
Collaboration between leaders in politics and business is essential to provide training and share information about emerging opportunities in sectors like renewable energy and sustainable practices.
Reskilling and upskilling programs are crucial for a successful transition, ensuring that individuals can contribute effectively to this shift towards a greener economy.
Coal remains the centre of concern
Coal stands out as a significant concern on the global stage, despite solemn vows made at previous COP summits, like COP26 in Glasgow, to do away with "unabated" coal power.
Recent estimates by the International Energy Agency (IEA) show an unexpected surge in global coal consumption by over 5% since the Glasgow agreement.
This upward trend has led to soaring coal emissions, responsible for a staggering 40% of energy-related greenhouse gas emissions.
Transitioning to renewable energy sources appears to be the ideal solution, but it demands substantial financial investment.
However, the funds offered by developed nations like the G7 fall far short of what's required for a comprehensive transition.
The discrepancy between the financial support needed and what's being provided remains a significant hurdle in coal phase-out plans.
At COP28, while leaders committed to a gradual phase-out of fossil fuels by 2050, they conveniently omitted discussions about financing such monumental changes.
This struggle highlights the urgency for affluent countries to play a more substantial role in supporting the transitions of their less financially equipped counterparts.
It's not all bad
The global trajectory points to a record surge in coal usage in 2023, notably led by heightened demand in emerging economies such as India and China.
However, there are signs of progress as the IEA forecasts a decline in Chinese coal consumption by 2024, while in regions like Europe and the US, coal consumption has seen declines due to the rise of renewable energy and increased efficiencies in energy generation.
The best performing developed-world stock in the Bloomberg World Energy Large & Midcap Price Return Index over the past quarter was not Chevron Corp or Exxon Mobil Corp or Phillips 66.
It was a company in the most unloved bit of the energy market — Vestas Wind Systems A/S, the Danish turbine-maker whose shares have gained 32% since the end of September.
Denmark leads the global transition to a carbon-neutral economy with over half of its energy sourced from wind power, boasting the highest per capita usage worldwide.
In the urgent battle against climate change, collaboration is key.
There's no competition, only global partners in green transformation. The need for collective support, technology sharing, and innovation exchange across borders is vital, recognising that solving this crisis requires a unified, global effort.
