Ahead of the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28), scheduled to take place in Dubai, United Arab Emirates (UAE), from November 30 to December 12, many international conferences have been held to accelerate action on the top priority issue for the world.
A global approach to challenges needed
The future of the global energy sector will be the focus of discussions at COP28, including the goal of tripling investment in renewable energy and providing financial support for developing countries, to reduce emissions and develop clean energy. The recent conference in Spain aimed to promote an international alliance, tasked with supporting the implementation of the goal of limiting the global average temperature increase to below 1.5C, under the Paris Agreement on climate change.
Speaking at this conference, IEA Director Birol said that countries can still achieve this goal, but many challenges remain. One of the challenges is geopolitical fragmentation on the world map, which greatly hinders some common measures that countries hope to be able to deploy. The IEA head cited that the level of investment in technology in general and clean energy technology, in particular, is strong, but does not meet current needs. One of the main reasons is the lack of international cooperation on this issue.
Sharing the same opinion, Spanish Minister of Ecological Transition Teresa Ribera said, that multilateral cooperation is the way to respond to current challenges. Ribera emphasised: “Global problems need global solutions”. Minister Ribera called for accelerating the pace of the transition from fossil energy to green energy.
The IEA warns of the negative impact of expanding investment in fossil fuels, while emissions remain high during the world economic recovery period, after the COVID-19 pandemic and the energy crisis. Stressing that continued fossil fuel development is inconsistent with the global decarbonisation goal by mid-century and the goal of curbing temperature rise, the IEA calls on rich countries as well as developing countries, to improve emissions neutrality targets, while stating that the key factor that makes climate goals still achievable is increased use of clean energy.
According to the IEA, rich countries must set a target of carbon neutrality by 2045, five years earlier than the current target. The world needs to invest 4.5 trillion USD per year in the transition to clean energy from the beginning of the next decade, up from the 1.8 trillion USD expected to be needed in 2023. By 2030, the world needs to triple renewable energy capacity, double efficient energy infrastructure, and increase heat pump sales and electric vehicle sales. The world also needs to cut methane emissions in the energy sector by 75%, at a cost of only about 75 billion USD (equivalent to 2% of the net income of the oil and gas industry in 2022).
Messages from financial institutions
Climate investment for emerging markets and developing economies is a matter of concern around the world, attracting the attention of major financial institutions, such as the International Monetary Fund (IMF) and the World Bank (WB). The IMF urges the private sector to make a major contribution to meeting the huge climate investment needs of developing countries.
In its latest Global Financial Stability Report, the IMF said that to achieve carbon neutrality goals by 2050, significant investments are needed in activities to mitigate the impact of climate change in emerging markets and developing economies, which emit about two-thirds of global greenhouse gases today. By 2030, these economies need about 2 trillion USD per year to achieve this ambitious goal. This is a fivefold increase over the 400 million USD in climate investments planned for the next seven years. Based on the forecast that public investment growth will be limited, the IMF believes that the private sector will have to be the source of about 80% of investment. The IMF report states that policy coordination in many areas is needed to create an attractive investment environment and pave the way for the private sector to invest in climate finance in emerging markets and developing economies.
Meanwhile, the World Bank has also proposed steps to increase lending capacity to developing countries by 100 billion USD, over the next decade. This move is part of the WB’s reform process to expand its mission of supporting member countries, to increase their ability to respond to climate change. World Bank President Ajay Banga pledged to reshape the organization’s mission to better address the challenges posed by climate change.
Speaking at an event of the Council on Foreign Relations based in New York, Banga said that the World Bank needs to change its current dual mission of hunger eradication, poverty reduction and promoting common prosperity, to include the task of handling the impacts caused by climate change. The President of the World Bank explained: “I think that the dual goal needs to change to not only eliminate hunger and reduce poverty but also ensure the safety of the Earth so that people can live, because of the intertwined nature of the world crisis we are facing”. According to the President of the WB, he is trying to redefine the priority areas in which the WB is providing loans to developing countries, he is especially interested in five areas, including human resource development, prosperity, climate change, infrastructure and digital development.
Banga once called for the World Bank to cooperate more closely with the private sector, to be able to meet the huge loans related to the task of adapting and minimising the impact of climate change. President Banga said that the WB needs to carefully select countries with high emission levels, to encourage the private sectors of these countries to invest in renewable energy development, to help limit carbon emissions to achieve the greatest effectiveness in the fight against climate change.
Expanding public-private partnerships to create leverage to increase capital and invest more in climate action programmes is one of the important issues to help the world achieve its goal of reducing greenhouse gas emissions and limiting global heat gain. Plans by major financial institutions to expand their commitments and support the realisation of climate goals are expected to create new advances in the difficult battle facing the world.
