Throughout the two-week conference, negotiators leveraged several scientific publications, particularly research from the Intergovernmental Panel on Climate Change’s (“IPCC”) Climate Change Synthesis Report, to inform suggestions. The IPCC’s findings indicate that human activity has “unequivocally”2 caused global warming and suggest that global greenhouse gas emissions should be cut 43% by 2030 (relative to 2019 levels), 60% by 2035 (relative to 2019 levels), and reach net zero by 2050 to limit global warming to 1.5°C1.
While the consistency of the conclusions around climate change challenges was expected, the more substantial question coming out of COP28 continues to be the extent to which there will be concerted action taken to achieve these aims. To that end, there was agreement on actions needed to minimize human impact on this planet3, including:
Other notable agreements to come out of the 14-day conference that support progress towards Stocktake goals include:
COP28 leaders cited the need to invest $5–7 trillion annually to “green” the global economy by 2030 and achieve collective climate goals6. Private sector investment will be critical in advancing all pledges, such as the tripling of renewable energy by 2030 or the doubling of energy efficiency improvements. The clean energy industry has seen elevated levels of private investment over the past few years, and this trend is expected to continue in the long term, despite short-term macroeconomic shifts, as governments and businesses aim to meet climate goals and capitalize on advancements in the sector.
Despite COP28’s calls for fossil fuel use reductions, global demand for liquid fuels is expected to remain constant (and possibly grow) through 20507. Natural gas is expected to play a particularly critical role in the energy transition, as it is a less carbon intensive alternative to coal, and demand for this fuel may be quite sticky as a consequence. There are benefits to the traction that natural gas has found displacing coal - the market-driven shift from coal to natural gas in the United States resulted in an estimated reduction of 532 million metric tons in CO2 emissions from 2005 – 2022, which is the equivalent of more than 10% of 2021 US greenhouse gas emissions8. This trend is likely to continue as the agreement highlighted a global need to accelerate efforts to phase down unabated coal power. Continued investment in oil and natural gas will be needed to maintain current production levels over the upcoming decades.
Nuclear power remains comparatively underutilized relative to the broad deployment of renewables alternatives such as solar and wind. Cost, safety, and spent fuel storage remain key barriers for expanded deployment. While aspirational, the Declaration to Triple Nuclear Energy should serve as a tailwind3 for businesses across the supply chain in the medium to long-term and could serve as a catalyst for policy change globally.
It is clear a shift in the market is necessary to galvanize climate investment on a scale commensurate with COP28 aspirations. It remains to be seen how individual businesses and governments will translate these pledges into action resulting in tangible outcomes. Investors should anticipate increased funding directed towards COP28 initiatives, reshaping investment strategies for nations, corporations, and stakeholders alike as the international community strives to fulfill the objectives of the Paris Agreement in the years to come.