With 2023 confirmed as the hottest year on record, mitigating climate change is becoming time critical. The 28th United Nations Climate Change Conference (more commonly referred to as COP28) was held in Dubai last year, with the highlight being a call to transition away from fossil fuels. This was the first time
such an agreement was reached.
What is the United Nations Climate Change Conference?
This is an annual meeting where representatives of member countries come together to assess progress towards dealing with climate change.
Negotiations take place and obligations related to reducing greenhouse gas emissions are established.
Last year’s event was the 28th conference to be held and is often referred to as the Conference of the Parties, or COP28.
A recap on where global temperatures are heading
The Intergovernmental Panel on Climate Change (IPCC) is the United Nations body responsible for assessing the science related to climate change.
The IPCC estimates that world greenhouse gas emissions need to peak before 2025, and decline 43% by 2030 to achieve the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.
Information from IPCC assessments and member country actions and pledges is collated to create a global stocktake. This measures the world’s progress towards meeting the Paris Agreement.
The first stocktake was discussed at COP28 and found that, by 2030, urgent action is needed to reduce emissions across all business sectors.
A step change is required to ensure a liveable and sustainable future for everyone.
What did COP28 achieve?
1. Transitioning away from fossil fuels
The biggest achievement at COP28 was an agreement to transition away from fossil fuels.
While the commitment is not as strong as some had hoped and lacks a definitive timeline, this represents a positive step towards the inevitable phasing out of fuels that are harmful to the environment.
2. Loss and Damage Fund
An agreement to establish a loss and damage fund was another noteworthy achievement.
The fund aims to compensate vulnerable developing countries affected by climate change. This is a significant victory for these countries, which have been fighting for climate damage compensation for the past thirty years.
There are many global standards for responsible mining that companies can follow, but most are self-enforced and voluntary. It remains undecided whether China and India will be eligible for compensation from this fund. Although both are considered developing countries, they are two of the world’s largest emitters of greenhouse gases.
3. Global Renewables and Energy Efficiency Pledge
130 countries committed to tripling the world’s installed capacity for generating renewable energy, expanding it to 11,000 gigawatts by 2030.
Based on current government policies, renewable power should represent half of the world’s energy mix by that year. This aim has been set in line with requirements to limit global warming to 1.5 degrees Celsius, according to forecasts by the International Energy Agency.
These 130 countries account for 40% of carbon dioxide emissions from fossil fuel combustion, 37% of global energy demand and 56% of world GDP.
Companies like Contact Energy, Mercury and Meridian Energy should benefit from ongoing support for renewable energy.
Another part of the pledge is for these countries to collectively double the rate of improvement in energy efficiency, from 2% to 4% each year until 2030.
In its simplest form, energy efficiency is using appliances or electronics designed to consume less energy, such as heat pumps or LED lighting.
On a larger scale, buildings can be designed with efficiencies in mind (like improved insulation) and industrial processes can be converted to use electricity rather than burn fossil fuels.
China, India and Indonesia didn’t sign the pledge because signatories were asked to end investment in new coal-fired power plants. This request directly conflicts with current plans in these countries.
Companies making excellent progress on energy efficiency include Apple, Microsoft, Schneider Electric and Tesla.
Apple’s latest iPhone uses software and power-efficient components to manage energy consumption. Microsoft’s data centres are designed to the LEED Gold standard, a green building certification.
Schneider Electric is a global leader in energy management, offering many solutions that improve energy efficiency. Tesla specialises in the production of electric vehicles and in battery storage systems.
4. Oil & Gas Decarbonization Charter
Fifty oil and gas companies signed a charter committing to net-zero emissions by 2050, the end of routine flaring by 2030 and to near-zero upstream methane emissions.
The companies include ExxonMobil, BP and Shell, as well as national oil companies that were previously reluctant to make a climate commitment.
5. Global Cooling Pledge
Almost seventy countries signed a pledge aimed at reducing emissions from cooling by 68% between 2022 and 2050. Refrigeration and other forms of cooling currently contribute 10% of global greenhouse gases.
Transitioning to sustainable cooling can reduce greenhouse gas emissions, while continuing to protect against heat stress for the wellbeing of people, reduce food loss and increase access to medicines.
6. Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action
A declaration focused on improving the resilience of agriculture and food systems has been supported by 158 countries.
It includes work to protect food producers like farmers and fisherfolk, and to introduce social programmes such as meals within schools.
7. Declaration on Climate and Health
143 countries signed a declaration on climate and health, recognising the need to protect people’s health from climate impacts such as extreme heat, air pollution and infectious diseases.
Signatories have committed to including health targets in their national climate plans.
A step in the right direction
It was encouraging to see a range of initiatives announced at COP28, particularly those focused on a fair transition that ensures developing countries and vulnerable groups won’t be left behind.
However, whilst declarations and commitments are all well and good, big announcements are only meaningful if they’re accompanied by accountability.
Time will tell whether or not these plans are successful.
This is an excerpt of an article published in the latest edition of our flagship publication for clients only, News & Views. Craigs Investment Partners clients can view News & Views, including the full version of this article by logging in to the client portal.
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Vanessa Stevens
Senior Sustainability Analyst
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.