Finance and Fossil Fuels Take Center Stage at Cop 28

Finance for the energy transition and discussions over a phase-out or phase-down of fossil fuels will be the crucial topics at the UN Cop 28 climate summit, starting later this month, delegates heard today at the FT Energy Transitions summit.

“Finance will again be the big, big issue”, Cop 26 president and UK member of parliament Alok Sharma said. There will be no progress without “finance, finance and finance”, UN climate high level champion for Egypt Mahmoud Mohieldin agreed. Egypt hosted last year’s Cop 27, while Cop 26, in 2021, took place in the UK.

“The most concerning element is the lack of trust”, chief executive of philanthropic organisation the Children’s Investment Fund Foundation Kate Hampton said. Hampton is also on Cop 28 president-designate Sultan al-Jaber’s advisory panel for the conference. Observers and participants in the Cop process have pointed to a lack of trust from developing countries in developed countries, as the latter have so far failed to deliver on climate finance commitments.

Panellists earlier in the day flagged the issues that developing countries can face to get financing for climate-related projects. The cost of capital is high and many projects are not financed in the local currency. When it comes to finance for renewable energy projects in developing nations, “there’s a risk perception which is out of proportion from the physical reality and the market reality”, chief executive at clean energy certification firm Evident Ed Everson said.

Future of fossil fuels

Some participants have raised concerns about the expected presence of the fossil fuel industry at Cop 28, but Sharma asserted that “the oil and gas sector needs to be part of this discussion”. There should be “very stringent fiscal and regulatory measures to force the change” in the oil and gas industry, Hampton said, adding that it must align its lobbying with the Paris climate agreement.

“There has to be some language on phase out of fossil fuels” at Cop 28, Sharma said. He anticipates further efforts to encourage countries to phase out unabated fossil fuels and to “try and reach agreement on a date for peaking of emissions”, he said.

“Cop is a political forcing mechanism” and “ambition levels are intrinsically linked to the Cop process”, Hampton said.

A group of 16 countries under the High Ambition Coalition this week called for a global peak of greenhouse gas emissions by 2025 and for a “transition away from fossil fuels”. The EU is also calling for a phase out of unabated fossil fuels. EU climate commissioner Wopke Hoekstra also expressed concern that abatement — often carbon capture and storage — should not give heavy-emitting industry “carte blanche” to continue using fossil fuels.