The doors have closed at COP28 after almost two weeks of negotiations held in Dubai in the UAE. This year’s conference marked the first ‘global stocktake’ – a review of global climate action so far and a ‘ratcheting up’ of ambition needed before the end of the decade to meet the COP21 mandate (the “Paris Agreement”)  for temperature goals.

The stocktake found that global greenhouse gas emissions need to be cut by 43% by 2030, compared to 2019 levels, to keep global temperature increase within the 1.5^oC limit. The agreement reached at COP28 (the Decision) is intended to trigger stronger climate action plans in the next round of state Party nationally determined contributions (NDCs), due by 2025. The Decision, in line with other announcements and outcomes at COP28, will have implications for industry and the private sector, particularly with regard to Environmental Social and Governance (ESG) issues – see our key takeaways below. 

A clear message on fossil fuels 

The final wording of the Decision calls on parties to contribute to “transitioning away from fossil fuels in energy systems” in a “just, orderly and equitable manner”. This is the first time that a COP decision has explicitly referred to fossil fuels, with previous language focussing on the abatement of coal only. 

This commitment has been heralded as sending a strong message that global energy systems must move away from the use of oil, gas and coal. It is notable that such agreement was reached at negotiations held in the UAE, one of the world’s biggest oil and gas producers. While the wording has been criticised as weaker than agreeing to a “phase out”, the inclusion of “transitioning away” from fossil fuels seems stronger than just “reducing”, or “phasing down” – other options on the negotiating table. This move can be seen as clear indication that ESG issues remain at the forefront of nation Parties’ agendas.

Loggerheads on carbon trading

Other areas saw less progress. Parties in closed door negotiations on carbon markets failed to reach agreement on how the mechanisms under Articles 6.2 (involving country to country emissions trading) and 6.4 (envisioning the creation of a global carbon market under UN supervision) of the Paris Agreement should operate. 

Actors in the voluntary carbon space had been anticipating guidance that could provide certainty and a unified global accounting system to the market. However, disagreements persisted over the treatment of carbon removals, transparency, and the strength of safeguards necessary to regulate the market. UN carbon markets will remain in a state of limbo until negotiations on this point recommence in 2024, with the possibility of a deal now pushed back to COP29 in Baku.

Doubling down on renewables 

In less controversial terrain, parties agreed to triple renewable energy capacity globally and to double their annual energy efficiency improvements by 2030 – the Decision providing a strong signal for acceleration of global renewable energy projects and thus keeping ESG goals in the spotlight. The Decision also makes reference to the lowering prices and increased efficiencies of wind and solar power and storage as important in increasing accessibility to low-emission technologies.

Industry pledges 

Activity continued outside the negotiating rooms, with a flurry of private sector and industry pledges timed to coincide with the conference, yet another indication ESG emphasis. 

COP28 saw the launch of the Global Decarbonisation Accelerator, an initiative based on three focus areas: energy systems of the future (like renewables and hydrogen), the fossil fuel sector and emission intensive industries, and methane. 

As a part of this programme, it was announced on 2 December that 50 oil and natural gas producers (which includes 30 national oil companies) who account for around 40% of global oil production, have agreed to reduce their process emissions to net-zero by 2050, covering Scope 1 and 2 emissions (ie excluding the Scope 3 emissions generated by combustion of fuel products). The agreement also covers methane, with the signatories agreeing to set interim targets that, by 2030, would reduce methane emissions to 0.2% of oil and natural gas production by 2030.

If the parties to this agreement deliver on their commitments, this agreement has the potential to be far reaching in terms of methane emissions. Methane accounts for 45% - 50% of oil and gas emissions and is much more potent than carbon dioxide, though once emitted, it exists in the atmosphere for a shorter period of time than carbon dioxide. As a result, addressing methane emissions is considered a key element in limiting near term global temperature increase.

This new industry pledge will sit alongside the existing commitment made by the 155 states that have signed up to the Global Methane Pledge, which aims to reduce global methane emissions by 30% before 2030. 

While such pledges signal shifting industry attitudes, the real legacy of COP28 waits to be seen, and may lie in ambitious and effective cooperation between industry and state bodies in achieving climate goals.