cop28

This year, the 28th Conference of Parties are meeting in Dubai, UAE, an economy built on fossil fuels and long considered one of the main villains of climate change, as they account for more than two-thirds of global emissions.  Photo: UNFCCC/KiaraWorth/Flickr

Cop28: Follow the money

The Israel-Hamas War could play spoilsport in making this year’s climate summit more decisive

The world’s biggest annual huddle to decide the fate of our planet’s future begins next week. And the hero of the story that will be written at the biggest climate summit ever in history with over 70,000 expected in attendance will be: money.

For the first time in years, there are clear numbers for what it will take to pull the world back from the brink, as evidenced in talks held at Bonn, Germany, and the $34 trillion figure that emerged from the G20 talks in India earlier this year. That’s in addition to talks to operationalise a global loss and damages fund and focus on funding energy transition, the first of four priorities listed by host UAE’s COP Presidency.

The G20 New Delhi Leaders’ Declaration acknowledged that developing nations will need $5.9 trillion till 2030 to meet Nationally Determined Contributions, and an additional $4 trillion each year for clean energy technologies to meet net zero goals. On an annualised basis, that’s about five percent of global GDP.

While the acknowledgment is important, and comes after years of largely unsuccessful wrangling between developing and developed nations over funds, the reality of climate talks raises more questions than answers.

The first global stocktake—the two-year long evaluation of progress of the 2015 Paris Climate Change Agreement commitments—has said global collective action is “not on track” and that emissions reductions were not at the scale required to meet the Agreement’s long-term goals. In short: we’re running out of time to limit global warming to 1.5 Celsius above pre-industrial levels.

Lack of good faith action and clarity on making climate finance available to vulnerable nations has for years slowed the world’s progress on cutting emissions and transitioning to clean energy and transport systems. Rich-country leaders are yet to deliver on their 2009 pledge to provide developing countries with $100 billion in annual climate financing. The trust deficit between the global north and south widened after developed nations backtracked on their climate pledges by reopening coal-fired capacities in Europe during the energy crisis created by the Russia-Ukraine war.

This year, the 28th Conference of Parties will meet in Dubai, UAE, an economy built on fossil fuels and long considered one of the main villains of climate change, as they account for more than two-thirds of global emissions.  

Earlier this year, activist groups sought reforms to the UN’s climate framework to eliminate, or at least reduce, the role of fossil fuel companies in its process. At COP27 last year in Sharm el-Sheikh, Egypt, fossil fuel delegates surpassed any single country’s delegation. This led the UN to mandate that oil, gas, and coal representatives will have to disclose their industry ties at future meetings.

Also, the COP28 is being led by Sultan Al Jaber, head of Abu Dhabi’s state-owned oil company Adnoc. And the summit is being held against the backdrop of resurgent fossil fuel investments after a brief dip during the pandemic. With Dubai being a global financial centre, the COP28 dialogues are expected to see unprecedented corporate presence, adding to concerns about whether the talks will become a gathering of economic elites.  

Yet, keeping corporate leaders out of COP discussions may no longer be an option for global leaders despite fears of bad faith corporate actions, given the sums required to pull back from the precipice of global warming.

“Since the world doesn’t have much money for mitigation, we need private sector money,” according to Avinash Persaud, architect of the Bridgetown Initiative and Barbados’ special climate envoy. “We need to unblock private sector money by reducing the cost of capital in our countries.”

Persaud, whose initiative seeks to reform global financial systems including multilateral development banks like the World Bank, Asian Development Bank, European Bank, etc., told reporters in New Delhi earlier this week there’s a need to triple lending capacities to help developing nations borrow huge amounts of funds they need to adapt and mitigate ongoing climate change impacts. “That money has to be long term and low cost, otherwise we can’t afford it. That’s what tripling is about. Triple the MDBs [Multilateral Development Banks]. Let us focus on resilience building, and that connects with climate.”

COP28 is expected to focus on operationalising the Loss and Damage Fund created at last year’s talks, which would provide critical financial assistance to nations most vulnerable to the harms of climate change. The loss and damage fund is to help global south nations already suffering from severe hurricanes, floods, droughts, and rising sea levels. Nations are yet to agree on how much money should go into the fund, how it should be capitalised, and who should decide how the funds should be used.

Another sought after outcome will be the tripling of renewable energy capacities, being pushed by the US, European Union, and the UAE.

While these funding discussions are challenging by themselves, the COP28 discussion will also happen in the shadow of the ongoing Israel-Hamas conflict next door. The International Monetary Fund has warned that a prolonging of the conflict can negatively affect the world economy. And this in turn could affect global funds available to fight climate change and also the actions of richer—and more polluting—nations for making financial compensation available to poorer, less developed countries.

The health of financial institutions will be a key factor influencing funding decision. The European Central Bank has warned that banks in Euro Zone are showing early signs of stress as loan defaults and late repayments have begun to rise. Elections will be another. According to The Economist, global decision making will slow down as 76 countries are scheduled to hold elections in 2024, the biggest election year ever. Climate talks will be most impacted by elections in the US, Russia, the European Union, and India.

For India, the battle will likely be to continue holding its line on coal use to fire its developing economy. India, the world’s fourth largest emitter, announced plans to invest about $9.9 billion (₹80,000 crore) over the next five years to raise coal production to one billion tonnes a year.

The announcement made a week before the COP28 summit will undoubtedly set up a challenge before the nation that has sought to emerge as the leader of the global south nations.

While India is one of the few major economies that are on track to meet their Paris agreement, it will have to balance its need to build a stronger economy to defend its people against climate change and to showcase actions that can attract more climate finance to fund its transition.

(This was first published here. Archana Chaudhary is a Delhi-based award-winning journalist who writes on climate change, economics, trade and foreign policy. She also writes the Asia 1.5 newsletter.)