On December 13th, at the end of the 28th Conference of the Parties (COP28) to the UN Framework Convention on Climate Change (UNFCCC) that took place in Dubai, 197 nations attending the negotiations signed a new climate agreement that should set the world on a path to achieve the goals laid out in the Paris Agreement of 2015.
The COP28 agreement, also called the Global Stocktake, is the first COP text that openly states that countries need to “transition away from fossil fuels”.
The Global Stocktake – the systematic process designed for nations and stakeholders to assess every five years their progress in achieving the objectives of the Paris Climate Change Agreement – recognizes that the world is on track to reach an increase in temperatures in the range of 2.1–2.8 °C with the full implementation of the latest nationally determined contributions.
It also acknowledges the progress that has been made since prior to the adoption of the Paris Agreement when some projections showed a global temperature increase of 4°C.
Therefore the stocktake recognizes the need for deep, rapid and sustained reductions in greenhouse gas emissions in line with 1.5 °C pathways, showing there is a lot that still needs to be done. It calls on Parties to contribute to some of the following global efforts, in nationally determined contributions:
- Tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030;
- 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;
- Accelerating efforts towards the phase-down of unabated coal power;
- Accelerating zero- and low-emission technologies, including, inter alia, renewables, nuclear, abatement and removal technologies such as carbon capture and utilization and storage, particularly in hard-to-abate sectors, and low-carbon hydrogen production;
- Accelerating and substantially reducing non-carbon-dioxide emissions globally, including in particular methane emissions by 2030;
- Accelerating the reduction of emissions from road transport on a range of pathways, including through development of infrastructure and rapid deployment of zero- and low-emission vehicles;
- Phasing out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible.
Even though the final text is an improvement of the draft proposed at the beginning of the week, the language still omits the phasing out of fossil fuels altogether.
It is, however, for the first time addressing the need to stop burning fossil fuels and signals the end of their era. It also confirms the massive growth of renewables. To close the gap between the current nationally determined contributions that lead towards 2.1–2.8°C of warming and the global target of 1.5°C, countries have agreed to triple the renewables capacity to 11,000 GW by 2030.
According to the IEA’s Roadmap to Net Zero report, the tripling of renewables is the single biggest step the world can take by 2030 to keep 1.5C within reach.
Government targets already add up to a doubling of renewable capacity by 2030 and estimates show the gap between doubling and a global tripling is 3.7 TW. Expanding renewable capacity on this scale would avoid around 7 billion tonnes of CO2 emissions between 2023 and 2030 which is equivalent to all the current CO2 emissions from China’s power sector.
The numbers show just how much governments need to do in terms of increasing emission reductions and addressing residual emissions.
Carbon Dioxide Removal
Carbon dioxide removal (CDR) took center stage at discussions during COP28. It can help support countries in bridging the gap between current emission reduction commitments and what is needed to limit global warming to 1.5°C. To fulfill its potential, it should be accelerated massively by 2030. According to CDR.fyi, durable CDR credits would need to scale almost 1,000 times to reach 40 million tons in 2030. The end goal is for them to be scaled to a gigaton’s annual capacity to support progress towards eliminating global emissions.
“Currently we have about $1 to $2 billion that has been deployed in CDR mostly from off-take agreements. Over the whole decade, we need to do well over $100 billion in order to put CDR on the growth path, so it can meet the gigaton scale by mid-century,” commented Robert Höglund, climate advisor, manager of Milkywire Climate Transformation Fund and co-founder of CDR.fyi.
Some companies like Nasdaq are also working to create efficient technology and infrastructure for the carbon markets and interconnect them. The company recognizes the need to connect local carbon markets with each other, and local exchanges and registries with global carbon removal solutions in a more efficient way to serve the rapidly growing carbon market.
According to Fredrik Ekström, President of Nasdaq Stockholm, creating a structure that increases trust in carbon markets and a structure in off-take agreements enhances the financing of these new technologies and projects that provide climate change mitigation.
Nasdaq is also following how Article 6 will interact in the future with the voluntary carbon market and country’s individual emissions targets. Long-term the goal is for a harmonization between compliance markets like the EU ETS and the voluntary carbon markets to manage the decarbonization of both countries and corporates under one scheme.
COP28 gathers experts and professionals who highlight the urgent climate actions that are needed now for the social costs of carbon to be avoided. The social costs of carbon – the damages estimated from adding each additional ton of carbon emissions to the atmosphere, vary substantially, ranging from $13.36 to $3000/tCO2 but they need to be avoided through rapid emission reduction strategies.
In 2021, a study called “The social cost of carbon dioxide under climate-economy feedbacks and temperature variability” estimated the cost to be more than $300/tCO2e. A study published in September 2022 in Nature estimated the social cost of carbon to be $185 per tonne of CO2.
That compares to a cost of emission reductions of $20 per ton of CO2, provided by the International Monetary Fund. The estimate is demonstrated with an example of a $20 million spending by a government to develop wind farms that would reduce emissions by 1 million tons. Compared to the costs of carbon dioxide removal, estimated in the range of $100 – $800 per ton, emission reduction provide the largest economic benefits for climate change mitigation in the short and medium term.
Ross Sheil, GM of Cloverly, a technology powered climate action platform, helping companies manage emissions, commented on the efficiency of compliance carbon markets: “ A lot of resistance on adoption of carbon removals today comes from the voluntary carbon markets being voluntary. We all have seen how successful a mandatory scheme has been in reducing emissions looking at the EU over an 18 year period that has been credited in driving a reduction of 37% in emissions.”
He also highlighted the need of CDR to scale to bring the necessary emission reductions: “The VCMI code of practice recommends the appropriate percentage of carbon removals in a strategy to be 15 – 20%. If all companies with SBTi targets adopt 20% of carbon removals to offset their carbon footprint, it’s an additional demand of 6 billion carbon removals required on an annual basis.”
Separate attention was given to solutions that harness the power of the world’s oceans. Two whole pavilions were dedicated to the cause, and we went in for a deeper dive into the subject of how it can help mitigate the climate crisis with Director of International Partnerships at Ocean Visions, Leonardo Valenzuela Pérez, PhD.
Valenzuela Pérez spoke to Carbon Herald about some of the main challenges in the way of implementing technologies and processes that could help mitigate the impacts of climate change or even reverse them.
“There is a lot of debate about the potential contributions of marine carbon removal techniques, but the reality is these discussions are occurring in an environment of very limited field data. To get actionable information about the potential contributions of marine carbon removal techniques, we need to advance a comprehensive research, development, and demonstration effort to answer the fundamental questions about additionality, durability, safety, costs, and social acceptability.
This means doing the science and engineering at appropriate scales, developing enabling policy and regulatory environments that allow for accelerated R&D — including by making it easier to permit responsible research—and optimizing technologies to increase their potential for climate-relevant impact. Our new high-level road map outlines a program to advance these needs,” Valenzuela Pérez said.
Although the 2-week climate talks did not result in countries moving forward on Article 6.2 and Article 6.4 of the Paris Agreement, the topic of carbon credits and carbon markets was almost omnipresent throughout the conference.
To gain a better understanding of what the current state of the voluntary carbon market is, and where things might be headed, we spoke to Pankaj Pandey, Chief Operating Officer of EKI Energy – currently the world’s largest carbon project developer.
Different estimates suggest that at the moment of writing, the company holds a 15% to 20% share of the global voluntary carbon market (VCM).
“This past year was very challenging for the carbon market. So, the expectation here is that at least something will happen to clear out the integrity and transparency issues that are mainly related to issues with Measuring, Reporting and Verification (MRV). We’re all hoping COP28 will help clear the air on this matter.”
“But I do think people have started to realize that without the voluntary carbon market, we can’t reach carbon neutrality and net zero goals, so its importance is acknowledged. Now, it is more up to registries and standardization bodies to improve their methodologies. And of course, project developers and investors should apply these methodologies to their projects. But I’m very optimistic that this challenging period for the VMC that we’re in right now will come to an end.”