COP28: “The Beginning of the End” of the Fossil Fuel Era?

“Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end.” 

- Simon Stiell, UN Climate Change Executive Secretary, COP28 closing speech 
 

December 18, 2023 

The 28th annual United Nations Climate Change Conference (COP28) kicked off in late November with a deal to create a loss and damage fund for countries in the Global South. Held in Dubai, the conference ended last week with nearly 200 countries coming to a “milestone” agreement that calls for the “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner.” 

Key Outcomes from COP28 

The agreement recognizes the need for “deep, rapid, and sustained reductions in greenhouse gas emissions” to limit global warming to 1.5°C and identifies several key global efforts, notably, to: 

• Transition away from fossil fuels: While many delegates had hoped for a deal that would call for the total phase-out of fossil fuels, the final language marks the first time in the UN’s climate meeting history that fossil fuels have been explicitly targeted. This despite a record number of oil and gas industry representatives attending this year’s conference. 

• Substantially reduce non-CO2 emissions: Oil and gas companies accounting for forty percent of global oil production signed an agreement to reduce methane emissions to near zero by 2030 and to end flaring, the practice of burning off methane at production sites. 

• Triple renewable energy capacity: The agreement targets both an increase in renewable energy capacity as well as a goal to double the global average annual rate of energy efficiency improvements by 2030. 

Nature and biodiversity also featured in the COP28 agreement. The parties included a goal to halt and reverse deforestation and forest degradation by 2030. In addition, the agreement made formal reference to the Kunming-Montreal Global Biodiversity Framework, which, among other goals, aims to preserve thirty percent of the world’s land and seas. 

Does It Matter? 

Some will argue that the outcomes of COP28 are largely toothless: the climate agreement is not legally binding, and the concessions made to get the nearly 200 countries present to sign off on the agreement mean that the final language falls short of that which many delegates and international stakeholders had hoped. 

That said, the commitments secured during COP28 provide investors and regulators, among other stakeholders, with formal points of reference for key climate-related issues, in much the same way that COP21’s Paris Agreement has informed climate-related action in recent years. At the very least, the topics raised during the conference will be focal points for these stakeholders going forward. 

While lacking an enforcement mechanism, the COP28 agreement should give investors and regulators confidence and backing for taking stronger action and more forthrightly communicating expectations to companies within their purview. With fossil fuels now officially in the crosshairs, oil and gas and other fossil-fuel-dependent companies are likely to see significant scrutiny of their practices and pressure to adapt their business models to ensure continued viability. 

Ultimately, the topics covered during COP28 impact all companies, further reinforcing the need for boards and management to be diligent about managing climate-related risks and proactively communicating how such risks are incorporated into long-term strategy. While the agreement coming out of this year’s conference may be less direct and timebound than some had hoped, we expect future years’ conferences to compel more urgent action. Companies that are well prepared for that push will gain advantage in terms of risk management, reputation, competition, and overall value creation.