Writer: George K. KIONGSON, Jonathan PHILLIP
Social Media Team: George K. KIONGSON
Source: International Maritime Organization (https://www.imo.org/en/OurWork/Environment/Pages/IMO-at-COP-28.aspx)
Introduction: Quick History of COP
For over three decades, the Conference of the Parties (COP) by the United Nations (UN) has been on the global stage for tackling climate change. This annual meeting, hosted by different countries, brings nations together to negotiate, assess progress, and chart a sustainable future, from the Rio Summit's groundbreaking Framework Convention in 1992 to the Paris Agreement's landmark pledge to limit rising temperatures in 2015. COP28, held in Dubai in late 2023, marked a historical agreement to transition away from fossil fuels. Now, the focus shifts from lofty pledges and targets to action, where governments and the private sectors hold the key to unlocking a low-carbon future. This article aims to aid businesses in cracking the COP28 code by presenting the challenges and opportunities of carbon and renewables.
COP28 key takeaways and its influence on private sectors
After two intense weeks of deliberations and negotiations, COP28 concluded with mixed sentiments about whether this COP was successful or a flop, as the progress is not accelerating as expected by others. Nevertheless, here are some of the key takeaways from COP28:
Transition away from fossil fuels
In its 28th year of the COP, for the first time, fossil fuels were acknowledged, and a deal was agreed upon to "transition away from fossil fuels." However, the agreement did not explicitly commit to phase out or even phase down fossil fuels. As a compromise, the deal calls for transitioning away "in a just, orderly, and equitable manner, accelerating action in this critical decade." To some extent, the deal illustrates developments already in progress, as several governments have recently implemented policies to shift towards a greener economy. For example, Europe and the United States have decommissioned coal-fired power plants.
2. Article 6/Voluntary Carbon Market (VCM)
In 2023, the VCM was in a negative light as scandals emerged in the entire market sector, especially nature-based projects. Preceding COP28, market participants and stakeholders hope to acknowledge the issues and solutions regarding transparency, governance, and oversight while strengthening the end-buyers use and claims.
The COP28 announced the formulation of a coalition by the main entities and stakeholders of the VCM to ensure the positive impact of the market that gives assurance to the investors and buyers. It has been announced that several standards, such as Verra, will work with the Integrity Council for the Voluntary Carbon Market (ICVM) to adhere their methodologies to the Core Carbon Principles (CCPs)— parameters to guarantee the quality and integrity of the carbon credits. Furthermore, the Science Based Targets Initiative (SBTi), the Voluntary Carbon Markets Initiative (VCMI), the GHG Protocol, and the We Mean Business Coalition joined forces to develop integrity guidance that provides scientifically based methodologies for the decarbonization of production processes and the use of voluntary carbon credits to offset residual carbon emissions.
Another significant outcome of COP28 is the Transition Credit framework by the Coal Clean Credit Initiative (CCCI), which supports a transition from the fossil fuels agreement. This framework invests in the early phase-out of coal plants in emerging markets and replaces them with clean energy sources. The pilot project is in the Philippines, where 60% of the national power mix is coal.
Despite all these successful outcomes, the COP28 concluded without a final agreement regarding Articles 6.2 and 6.4 of the Paris Agreement. This outcome represents a missed chance to establish clear guidelines for carbon trading, including the role of VCM. Presently, this means another year of uncertainty for the VCM in the absence of international trade carbon credit rules, which poses a problem for smaller countries to leverage the opportunities of Article 6.2 regarding the internationally Transferred Mitigation Outcomes (ITMOs). However, the market is still growing, as evident by the numerous agreements between countries.
3. Tripling Renewable energy capacity globally
COP28 vows to triple the global renewable energy capacity to at least 11,000 GW and double the global average annual rate of energy efficiency improvements by 2030. Some new pledges were launched, such as the goal of tripling nuclear energy capacity globally by 2050. That would mean increasing the investment in renewables. According to the International Energy Agency (2023), more than USD 800 billion is needed to achieve this target. It is also mentioned that some investors are retreating because of the higher borrowing costs.
Conclusion
It is important to note that the progression of the carbon and renewables market depends on the corporations and the standards set in the COPs. It is crucial to emphasize that corporations lack the motivation and assurance to invest confidently in these markets without well-defined rules. To explore the market challenges and opportunities tailored to your needs, contact Mt.Stonegate. We lead to a better future, providing high-quality one-stop solution services and holding a solid position in the Asian Market.
Reference:
[1] International Energy Agency (2023). Lack of ambition and attention risks making electricity grids the weak link in clean energy transitions https://www.iea.org/news/lack-of-ambition-and-attention-risks-making-electricity-grids-the-weak-link-in-clean-energy-transitions