The self-congratulatory backslapping at the 28th United Nations Climate Change Conference (COP28) in Dubai didn’t take long to emerge following news that delegates had reached agreement on the World Bank-managed loss and damage fund deal on the summit’s first day.
The fund, the UN says, has been a long-standing demand of developing nations on the frontlines of climate change – including some in Asia – to help them cope with the cost of the devastation caused by extreme weather events, such as drought, floods and rising seas.
“Today’s news on loss and damage gives this UN climate conference a running start,” says UN climate chief Simon Stiell, speaking during a press conference at which the announcement was made. “All governments and negotiators must use this momentum to deliver ambitious outcomes here in Dubai.”
However, not everyone is expecting the pace of progress on the myriad of challenges facing delegates at COP28 to be so straightforward.
Sarah Bratton Hughes, head of sustainable investing at American Century Investments, says, in her latest commentary aimed at the gathering in the United Arab Emirates, that COP28 will mainly highlight the lack of progress on the Paris agreement.
An evaluation of the goals set out under the Paris agreement shows, according to Bratton Hughes, that the world is not on track to reach the objectives of the international treaty, and she believes that global climate leaders should use COP28 to recalibrate the approach to achieving a low-carbon transition considering her view on the lack of progress.
“Given the economic costs and frequency of extreme weather events are at global highs, it seems appropriate to ask whether COP28 will pass a reality check,” she states. “Despite being 20 years into the energy transition – and with a growing number of countries having committed to net zero – little, if any, progress has been made.”
Much of this can be attributed to divestment, Bratton Hughes suggests, with carbon-heavy businesses simply passing the reins to other willing buyers, adding that the best examples of this are moves to divest from the oil and gas sector and the fact this has had little impact on the cost of capital for so-called dirty companies.
No overnight success
The role of policymakers in decarbonizing the global economy should not be understated, Bratton Hughes states, highlighting that the current combination of cumulative geopolitical conflicts, climate change-driven inflation and increased energy demand in developing countries are escalating the need for appropriate policy measures.
“We urge governments to take a holistic view in establishing policies that work in concert with investors’ ability to direct capital towards innovative climate solutions,” she states. “And that holistic approach should include concrete actions that uphold a just transition to a cleaner energy future.”
As an illustration, she points to the US, which has recently announced that it will invest US$1.2 billion to help develop two commercial-scale direct air capture facilities that absorb more than two million metric tons of carbon dioxide emissions annually in a move to jumpstart a network of carbon removal sites. The development is also expected to generate up to 4,800 green jobs.
Initiatives such as this are a step in the right direction, Bratton Hughes says. However, she cautions that large economies, such as the US, can more easily use subsidies to attract green investment than can emerging market and developing economies. And this can put the latter at a disadvantage in terms of developing their own clean energy employment opportunities.
“Making a just transition to a greener world will not be easy, but it is essential to long-term sustainability,” she stresses. “And despite the challenges, we can motivate action by focusing on potential solutions, not just problems.”
“While the COP28 stocktake is likely to report that urgent action is needed, recent history has shown we cannot simply shut down high-carbon energy production overnight, nor would doing so achieve optimal real-world outcomes.”