Ahead of COP28, more than 200 companies representing over $1.5 trillion in global annual revenue signed a letter urging national governments to address the primary cause of climate change: burning fossil fuels.
We can phase out fossil fuels, if businesses and governments work together
María Mendiluce
This article was first published in Reuters.
The agreement by leaders at last year’s COP28 climate summit in Dubai to move away from fossil fuels was met with praise and scepticism. Even those who welcomed the agreement understood the road ahead would be difficult.
Since December, there have been advances and diversions. Many governments and businesses are taking action to speed up the energy transition, but they will have to work more closely together if they are to avoid being thrown off course.
Dr Sultan al Jaber, the United Arab Emirate’s Special Envoy for Climate Change and COP28 President, was dismissed by many as the wrong man for the job given his other role as head of the Abu Dhabi National Oil Company. However, it was under his leadership that the move towards ending fossil fuels was agreed and, in recent months, he has called on all stakeholders, both state and non-state, to “step up”.
Speaking at a high-level round table convened by the International Energy Agency in February, al Jaber told attendees: “As I said after the final gavel in Dubai: We are what we do, we are not what we say. The UAE Consensus set a new direction and a clear course correction. We must now turn an unprecedented agreement into unprecedented action and results.”
And a newly created “COP Troika”, bringing together leadership from COP28, COP29 and COP30 – UAE, Azerbaijan and Brazil respectively – has the implementation of the UAE Consensus and keeping to 1.5C squarely in its sights.
Many countries and companies are also taking action. In February, Canada said it had secured the surrender of the last remaining permits for oil and gas development off its Pacific Coast, while the European Commission has recommended the EU adopts a net greenhouse gas reduction target of at least 90% by 2040.
If agreed, such a goal would mean a rapid increase in renewable energies and a phasing down of fossil fuels. The EU executive says scaling low carbon electricity would reduce the consumption of fossil fuels for energy by 80% by 2040.
In the private sector, more banks are sending a market signal that they will move away from financing fossil fuels. Recently Barclays and Danske Bank joined La Banque Postale, HSBC, BNP Paribas and others to announce curbs on various aspects of funding oil and gas.
There are also exciting technological and investment advancements. In January, H2 Green Steel raised more than 4 billion euros in debt financing for the world’s first large-scale green steel plant, and a month later, Schneider Electric announced an innovative tax credit-transfer agreement with ENGIE to accelerate progress toward its 100% renewable energy goal in North America.In a headline move, Volvo recently rolled its last diesel car off the production line.
These changes are all positive news, but we’ll need much more to be on track for 1.5C. And while these front runners move forward, others are pushing back, using geopolitical tensions and record oil and gas prices to try to prolong the fossil fuel era.
If the world is to genuinely move towards an end to fossil fuels —the only solution to avoid increasingly frequent and severe weather events, economic turmoil and, ultimately, the potential collapse of humanity — governments, businesses and investors must join forces.
After last year’s agreement by the G7 to accelerate the phase-out of unabated fossil fuels by 2050 at the latest, this year’s summit needs to hold true to that promise. With Italy at the helm in 2024, the grouping of wealthy nations has the opportunity to demonstrate leadership by reaching a consensus over fully decarbonizing power systems by 2035 and supporting countries in the Global South to diversify energy systems and develop 1.5C-aligned economic plans.
Key to conversations on fossil fuel phase-out are Nationally Determined Contributions. These map out each country’s policies and plans to reduce emissions in line with the Paris Agreement, and are set to be updated next year. The NDCs can be used to guide alignment between governments, business and investors, setting the conditions for scaling up clean energy in a coherent manner that does not leave businesses without the energy they need to operate or out of pocket.
Policymakers can also help by implementing carbon pricing mechanisms; repurposing fossil fuel subsidies towards clean energy; and supporting the deployment of clean technologie , including through targets for electric vehicle sales or heat pump installations and bans on the sale of new fossil fuel assets beyond specific dates.
Even if these regulations are not yet fully in place, companies can take near-term action, such as measuring their baseline energy consumption and emissions and setting targets for their reduction; securing renewable electricity sources; switching to low-carbon raw materials; electrifying end-uses where feasible and economic; tackling fossil fuel use in heat; switching to low-emission transport options; engaging in responsible policy advocacy; and supporting the decarbonisation of suppliers and their operations.
This demonstration of commitment from the private sector can help speed up policymaking by giving governments the confidence that they have the backing of companies.
Given the agreement reached at COP28, many more companies will join them in accelerating their transition to clean energy.
Companies have now the choice to choose the energy they want, and energy suppliers will adapt to their demands. Moving from fossil to clean just makes business sense.