COP28 – A look ahead

Executive summary

The main point under contention this year will be the phase-out of fossil fuels and the limited progress achieved so far
As more businesses make net-zero commitments, there is mounting pressure for greater government support through policies and incentives
Will parties be able to put aside their differences and come to an agreement to tackle the increasingly severe impacts from climate change?

The annual global climate change conference—COP28—is due to begin at the end of November in Dubai. This year's conference takes place amid continuing economic turbulence and geopolitical unrest. Added to this, 2023 is on course to be the hottest year on record with many populations experiencing increased extreme weather events including wildfires, hurricanes, and flooding. Global leaders face mounting pressure to show action and outcomes at this year's climate conference—but stakeholders are left wondering if they can come together fast enough to tackle these challenges.

COP27 – A re-cap

As a reminder, the COP (Conference of Parties) is an annual decision-making meeting for signatories to the United Nations Framework Convention on Climate Change. Last year's conference in Sharm El Sheikh, Egypt, made lackluster progress in addressing climate change. In the context of the Ukraine-Russia War, an energy crisis, food shortages, inflation worries, and tension between the U.S. and China, participants and watchers knew it would be difficult to reach a global agreement on how to best cut greenhouse gas emissions.

However, after going into overtime, parties signed an agreement which represented a step forward on climate finance. As part of the agreement, a loss and damage fund was created to support emerging market countries suffering from the financial impacts of climate change. Moreover, signatories were given to support the Bridgetown Initiative, which seeks to reform international development finance in response to the climate crisis.

A few points from COP27 were left in limbo. While countries agreed that the world was not on track to prevent the global average temperature rising to 1.5C, no agreement was made to strengthen 2030 targets to better align with the Paris Agreement. A surprise point of contention came around the transition away from fossil fuels—where the agreement to "phase down" coal usage ended up being excluded from the final agreement.

Why is COP28 important?

COP28 is picking up where COP27 left off—or missed the mark. The main point under contention this year will be the phase-out of fossil fuels. Over the past year, climate stakeholders have argued that phasing down fossil fuels is not enough—real progress to limit warming requires language committing countries to a global phase-out.

While world leaders have promised to cut emissions, a recent report shows the top-20 energy producing countries plan to extract almost double the amount of fossil fuels under which global warming could be kept in line with Paris goals. Current climate policies would put the world at well above 2 degrees of warming—a steep emissions gap which participants are hoping COP28 will be able to address.

Among these participants are over 130 companies including Nestle, Unilever, and Volvo Cars, who are campaigning for the COP28 agreement to commit to complete decarbonization. As more and more businesses are making net-zero commitments, there is growing pressure for governments to encourage these efforts through policies and incentives. The initial success of the Inflation Reduction Act (IRA) in the U.S. shows how regulators can proactively support companies that not only meet corporate GHG emission reduction goals, but also national commitments made with the Paris Agreement.

What are countries expected to discuss?

Between the formal negotiations and the industry stakeholder events, COP28 will be a busy two weeks. However, there are a few topics which will take center stage:

Global Stocktake – A process meant to provide a global inventory on where the world stands on meeting the goals of the Paris Agreement. It is expected that the Stocktake will show that the implementation of climate goals and actions is lacking and below where we should be.
Climate adaptation – Two years ago at COP26, in Glasgow, the Glasgow-Sharm el-Sheikh work program was created to establish and work toward the climate adaptation goals laid out in the Paris Agreement. One aim of the program included assessing how to measure or capture adaptation efforts through standard metrics—an especially challenging goal since adaptation can take many different forms. The program concluded this year and parties are expected to discuss how to best implement the findings in support of enhanced adaptation efforts.
Nature and biodiversity – With the release of the TNFD Framework in September, companies and financial institutions are expecting to continue the focus on biodiversity at COP28 to ensure governments are factoring this topic into the climate conversation.

Conclusion

COP28 is a meaningful opportunity to address climate change, with the outcomes from previous COPs having real world impacts on businesses across the globe. To meet its commitments from the Paris Agreement, the IRA over the past year has moved policy forward and is resulting in increased industry efforts in the U.S. This has been accompanied by the EU continuing to expand its climate legislation, such as the launch of the world's first carbon border tax. This rise of global legislation reflects how the actions of our governments to meet commitments made at COP will continue to percolate policy results and impact companies for years to come.

Once again, this year's COP will take place in a world of continued discord, with the expectation that parties put aside these differences and come to an agreement to tackle the increasingly severe impacts from climate change. While many predict negotiations will break down in these headwinds, we will soon see if nations can agree to cut fossil fuel usage and expand their efforts toward a low-carbon, global economy.