COP28 was in important moment for climate finance. It demonstrated the growing recognition and commitment to mobilise funds for climate action. And it also highlighted the persistent gaps and challenges that need to be addressed. We discuss the key climate finance related outcomes.
COP28 was a critical moment in global climate action. The first ever Global Stocktake – the report card on our progress to the 1.5-degree goal – delivered grim, albeit not surprising, news.
The global climate summit was therefore largely about setting us on a path of course correction.
Did it deliver? The answer is highly nuanced.
We first must recognise that Conference of the Parties (COP) is a complex democratic process that relies on 100% agreement between all parties present.
It involves diverse perspectives and interests. Each negotiator brings a different point of view shaped within their unique cultural, economic and geographic context.
As such, even significant progress captured in the outcome documents is often disguised in subtle language changes. While there is no doubt that we must increase our ambition and do more, it is also important to recognise progress when it has been made.
In this article, we zoom in on one of the key themes of COP28: climate finance.
We explore the main achievements, challenges and opportunities in this area, including:
Climate finance was one of the key cross-cutting themes at COP28. The change required simply cannot happen without increasing the level of investment in climate mitigation and adaptation strategies.
One of the key problems we face is the large investment gap between developing and developed countries. This gap needs to be closed to support greater technological development and capacity building across all parts of the planet – not just the large economies.
To achieve this, we need almost US$6 trillion per annum to flow into developing countries by 2030. Most recent estimates by the Climate Policy Initiative, show that our investment is at around US$1 trillion per annum – or a mere 1% of the global GDP.
We also need to address the imbalance of funds directed toward mitigation and adaptation solutions. Out of the US$1 trillion of current annual investment, only US$63 billion (or 6.3%) is directed into adaptation measures.
The original target agreed under the Paris Agreement was US$100 billion towards adaptation by 2020. This has since been raised to $212 billion by 2030.
COP28 has committed over US$85 billion to address the above challenges, through new financial initiatives, targets and pledges. The final text of the Global Stocktake has listed the breakdown as follows:
The private sector is currently contributing only 49% of the whole climate investment and only 1% toward adaptation. The final Global Stocktake text includes a call for policies that better support private sector investment in innovation and new technologies, increasing public capacity, and scaling existing solutions.
In addition to the funds mentioned in the Global Stocktake (and outlined above), COP28 saw the launch of the largest private investment fund dedicated for climate: Alterra. The fund is established by the UAE with an initial investment of US$30 billion. The objective is to mobilise US$250 billion globally – with contributions from the private sector and other partners.
This initial US$30 billion investment will be done through a partnership with BlackRock, Brookfield and TPG. US$25 billion will be dedicated towards direct institutional capital investments and the remaining US$5 billion will be used to provide risk mitigation capital to boost investment in the Global South.
Alterra’s investment will be guided by four key pillars aligned with the COP28 Action Agenda: energy transition, industrial decarbonisation, sustainable living and climate technologies.
A key finance related agenda item at COP28 was the operationalisation of Article 6 of the Paris Agreement – and specifically Article 6.2, 6.4 and 6.8.
Article 6 allows countries to cooperate with each other to reduce emissions, promote sustainable development and achieve their nationally determined contributions (NDCs). This includes, but is not limited to, the trade of carbon credits or direct investments.
There are a total of 9 paragraphs in Article 6, but the most pertinent points are captured in sections 6.2, 6.4 and 6.8:
COP28 negotiations failed to reach agreement on Article 6.2 and 6.4, but Article 6.8 did make it to the final draft text of the Global Stocktake.
Progress with Article 6.2 and 6.4 continues despite slower than hoped-for progress during COP28 negotiations.
Article 6.2 is already being pilot tested by several countries, outside of the COP process. There are 139 projects in total under bilateral agreements. This includes:
These are just three of the many examples demonstrating that progress can be made even while the international frameworks are being finalised.
Article 6.4 progress is also continuing. While COP28 negotiations stalled due to lack of consensus around the project methodologies and inclusion of avoidance versus removals, delaying the launch of the framework to 2025 or 2026, the private sector is getting ready.
Examples of this include:
So, where to from here?
Following the outcomes of COP28, we believe that pilot testing around Article 6.2 will continue.
We will also learn from the market reaction towards Article 6 labelled credits as launched by Verra. This additional label will be helpful in improving the integrity of carbon market in the long run.
Countries who have yet to establish their own compliance carbon markets will be making decisions on whether to launch their own registry and systems, or to adopt the systems from other countries and join a shared registry.
The voluntary carbon market will continue to exist and play an important role in providing price indications and testing integrity standards, while satisfying the global demand for voluntary climate investment.
COP28 saw notable progress on other existing market mechanisms. These include:
While the focus of this article has been on climate finance, we can’t complete a COP28 wrap up without the mention of several other wins that will be able to benefit greater society.
From recognition of underrepresented voices and policy improvements to unlocking more contribution from the private sector, these include:
COP28 was attended by a record number of 2,400 fossil fuel representatives – this number is 4 times greater than at the previous COP.
Before COP28 even started, climate advocates were demanding a clear due date for the phase-out of fossil fuels as an unavoidable requirement to maintain our 1.5 degrees hopes.
This ambition seemed impossible until it was proposed in the first drafted text of the Global Stocktake, Point 35/ Option 1 (c):
Option 1: An orderly and just phase out of fossil fuels;
Option 2: Accelerating efforts towards phasing out unabated fossil fuels and to rapidly reducing their use so as to achieve net-zero CO2 in energy systems by or around mid-century;
Option 3: no text
Following the argument that these lines were unfair and unclear for the fossil fuel producers, the lines were widely debated. This led to the suggestion to change the words to “phase down” or merely to “phase out inefficient fossil fuel subsidies”.
The final agreed text reads:
Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science;
AND
Phasing out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible.
This was deemed a success.
In the words of Mohamed Adow, Director of Power Shift Africa:
“This is the first COP where the word ‘fossil fuels’ are actually included in the draft decision. This is the beginning of the end of the fossil fuel era.”
In addition to the text, an Oil and Gas Decarbonisation Charter (OGDC) was signed by over 50 companies representing 40% of global oil production, committing to zero methane emissions and ending routine flaring by 2030 and to total net-zero operations by 2050.
The Global Stocktake has further called on countries to accelerate adoption of zero and low emission technologies such as renewable and nuclear power, and abatement and removal technologies such as carbon capture and utilisation storage (CCUS).
It has also acknowledged the economies of scale impact on solar and wind power and storage adoption that has brought the price down to enable wider accessibility of renewable energy sources.
In support of this text, 25 countries launched the Declaration to Triple Nuclear Energy Capacity by 2050, recognizing nuclear energy’s role in limiting global warming to 1.5 degrees Celsius.
From the buildings sector, a Global Cooling Pledge was signed by 65 countries. It aims to reduce the climate impact of cooling systems and increase access to sustainable cooling, targeting a 68% reduction in cooling-related emissions by 2050.
Zero-Emission Vehicles (ZEVs) have also been called to scale as an advancement from today’s existing electric vehicle solutions. Countries have started making pledges around their targets on EV adoption. For example, Canada has just announced that all new cars must be 20% ZEVs by 2026, 60% by 2030 and 100% by 2035.
The role of digital transformation has been acknowledged in the Global Stocktake text as an enabler for reaching targets set across the key themes.
A Technology Mechanism initiative on artificial intelligence (AI) for climate action has been established to explore the role of AI to scale up financial and technological solutions in developing countries, especially those imposed by high challenges and risks.
In support of this digital enablement, Climate Action Data (CAD) Trust, an initiative founded by the World Bank, IETA and the government of Singapore has launched its Public Data Dashboard.
This tool displays project data from Verra, Global Carbon Council, EcoRegistry, BioCarbon Registry and the Clean Development Mechanism (CDM), as well as the national registry of Bhutan. It aims to be the global single source of truth for carbon project listings.
Indigenous peoples and local communities have long fought to be included in decision making forums globally.
Research has proven that many of the solutions we need today to protect nature, lie in the practices that IPLC groups have been implementing for many generations.
One of the highlights in this COP and Global Stocktake, is the rise in participation from IPLC groups. They have also been recognised in the text as key solution contributor, equivalent to science-based research.
Risks around biodiversity loss and the importance of protecting nature were acknowledged in the final text of the COP28 Global Stocktake. This includes the outcome of COP15: Kunming-Montreal Biodiversity Framework. In doing so, the parties have recognised that there is no net zero with outnature. And progress towards reaching Nature Positive 2050 will continue to be apriority.
A total of 143 countries signed the Declaration on Climate and Health, which aims to develop climate resilient, sustainable and equitable health systems in extreme climate conditions such as extreme heat and air pollution.
A total of 159 countries collectively signed a declaration on sustainable agriculture, resilient food systems and climate action. They also announced the mobilization of more than US$2.5 billion in funding for food security while addressing climate change.
COP28 was an important moment for climate finance.
It demonstrated the growing recognition and commitment of countries and the private sector to mobilise and deliver funds for climate action.
However, it also highlighted the persistent gaps and challenges that need to be addressed, such as the imbalance between mitigation and adaptation finance, the ongoing need for transparency and accountability, as well as more innovation and collaboration.
While there is a lot resting on the COP process, the real work happens in between the global summits. Through international collaboration, country level policy work, non-profit initiatives and compliance and voluntary efforts from the private sector.
In the words of COP28 President, Dr. Sultan Al Jaber:
“An agreement is only as good as its implementation. We are what we do, not what we say. We must take the steps necessary to turn this agreement into tangible action. If we unite in action, we can have a profoundly positive effect on all our futures.”
So, what happens from here in terms of the COP process?
How COP28 advanced climate finance outcomes and what's next
