An historic agreement at the 11th hour
At last month’s COP28, the 28th annual UN climate meeting, leaders from 200 countries announced a landmark agreement to “transition away from fossil fuels.” It was a hard-won decision reached through collective determination, as delegates negotiated for two weeks with final talks extending through the night and past schedule. The fact that the deal could have been scuttled by even one “no,” makes it all the more significant.
Though many called it a compromise, it was the first COP agreement in history in which fossil fuels were explicitly named.1 The agreement’s final text prioritizes:
“Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade to achieve net zero by 2050 in keeping with the science.”2
This year’s overarching goal was to galvanize public and private sector participants to fulfill the 2015 Paris Agreement, and limit long-term global temperature rises to 1.5 degrees Celsius in an effort to mitigate the worst effects of climate change.
If earlier COPs were about raising ambition, this one saw a pivot to fielding solutions and confronting a reality that evaded previous sessions, a reality emphasized by COP28’s backdrop—the hottest year on record.3
Challenges and momentum
While the decision is momentous, it’s not without challenges. For example, the agreement is not legally binding; it can’t stop countries from using fossil fuels. The deal also calls for the acceleration of carbon capture and storage, a costly technology that some fear fossil-fuel companies could lean on too heavily without significantly reducing their emissions.4
Additionally, many noted that achieving the 1.5 C goal itself will take an historic level of commitment from countries and business around the world. It will require enacting policies to support rapid scaling of renewables and energy efficiency, a global financial system that provides more capital to developing economies, and increasing investment and finance to accelerate the energy transition everywhere.5
But the deal’s challenges are by no means insurmountable, particularly as the energy transition continues to gain momentum.
Over two-thirds of the world’s population favors solar energy (five times more than favors fossil fuels).6 Domestically, a majority of Americans believe we need to cut the use of fossil fuels drastically.7 Businesses are onboard in bigger numbers, and clean energy investment and deployment are accelerating quickly.8 In the transportation sector, Bloomberg estimates that zero-emission vehicles (ZEVs) could capture a higher market sooner than expected, thanks to price reductions and policy support like the Inflation Reduction Act.9
Commitments across the globe
Additionally, a host of world leaders took the opportunity to announce noteworthy clean energy policies and progress leading up to and during COP28:
- 116 countries pledged to triple their renewable energy capacity and double energy efficiency by 203010—in line with recent International Energy Agency (IEA) recommendations on how the energy sector can best reach the 1.5 C goal (read Greenbacker’s key takeaways on that analysis here).
- The World Bank committed to increase climate funding to 45% (or $40 billion) of its total annual lending.11
- Wealthy nations pledged $700 million to a “Loss and Damage” fund to help pay for the destructive effects of climate change in vulnerable developing countries.12
- The US and Net Zero World partner countries announced a slew of progress on their initiative to support clean, secure energy systems in emerging economies.13
- USAID announced that 21 companies committed $2.3 billion to climate adaptation financing, among a number of other climate initiatives.14
- The COP28 hosts, the United Arab Emirates, pledged $30 billion15 to a new fund to invest in climate-friendly global projects, including $5 billion for developing countries in the Southern Hemisphere facing disproportionate effects from climate change.
Genuine strides forward
History was made at COP28. Some liked it, and some didn’t, but in the end—and for the first time—the world agreed it’s time to move away from fossil fuels. This progress, even with its challenges, is laudable.
As UN Climate Change Executive Secretary Simon Stiell said:
“We needed this COP to send crystal clear signals on several fronts. We needed a global green light signaling it is all systems go on renewables, climate justice, and resilience. On this front, COP28 delivered some genuine strides forward… Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end.”16
Although we’re working against a clock to keep the door to 1.5 C from closing, it does remain open. However, to keep it open, the IEA estimates annual global clean energy investment will need to increase from $1.8 trillion to $4.5 trillion a year by the 2030s,17 representing a massive opportunity set for investor capital to drive to the energy transition.
Greenbacker Renewable Energy Company is an independent power producer and a leading climate-focused investment manager. Its Greenbacker Capital Management business segment serves as the investment manager to five energy-transition focused funds.
1 The two words that pushed international climate talks into overtime, MIT Technology Review, Casey Crownhart, December 14, 2023.
2 Conference of the Parties serving as the meeting of the Parties to the Paris Agreement Fifth session, Outcome of the first global stockade, United Nations Framework Convention on Climate Change, December 13, 2023.
3 COP28: United Nations Calls 2023 Hottest Year Ever, Bloomberg, Laura Millan, November 30, 2023.
4 At COP28 Climate Summit, Nations Agree to Move Away From Fossil Fuels, The New York Times, Brad Plumer and Max Bearak, December 13, 2023.
5 Two Words That Could Change the World, The New York Times, David Gelles, December 13, 2023.
6 Solar energy shines in global survey with 68% support, Reuters, Anthony Deutsch, September 15, 2023.
7 Support for Slashing Fossil Fuel Use Steady at 58% in U.S., Gallup, Justin McCarthy, April 19, 2023.
8 World Energy Outlook 2023, International Energy Agency, October 2023.
9 Zero-Emission Vehicles Factbook: COP28 Edition | BloombergNEF (bnef.com), BloombergNEF, Colin McKerracher, December 5, 2023.
10 COP28: Leaders pledge to triple renewable generation capacity by 2030, S&P Global Commodity Insights, December 2, 2023.
11 World Bank to boost climate financing share to 45%, broaden climate debt clauses, Reuters, Valerie Volcovici, December 1, 2023.
12 COP28 Agreement Signals “Beginning of the End” of the Fossil Fuel Era, UN Climate Change News, December 13, 2023.
13 At COP28, Net Zero World Showcases Progress in Transforming Emerging Energy Economies | Department of Energy, Department of Energy, December 6, 2023.
14 Highlights from USAID’s Contributions to COP28 | Press Release | U.S. Agency for International Development, US Agency for International Development, December 11, 2023.
15 Who is pledging climate finance at COP28, and how much?, Reuters, December 6, 2023.
16 “We didn’t turn the page on the fossil fuel era, but this outcome is the beginning of the end”: UN Climate Change Executive Secretary at COP 28 Closing | UNFCCC, December 13, 2023.
17 The path to limiting global warming to 1.5 °C has narrowed, but clean energy growth is keeping it open, International Energy Agency, September 26, 2023.
