COP28: Taking stock and moving the transition forward

On November 30, the twenty-eighth annual Conference of the Parties (COP28) will convene in the UAE. At each COP, delegates from the nearly 200 parties that represent the supreme decision-making body that ensures the implementation of the United Nations Framework Convention on Climate Change (UNFCC) come together to discuss and negotiate measures to mitigate climate change and its catastrophic consequences. This year’s COP is especially important, as attendees will discuss the results of the first gap analysis of the progress made in meeting the targets set in the Paris Agreement, called the Global Stocktake. The findings and implications of the assessment will assist parties in advancing their actions to close the gap. The actions individual countries then commit to, which are called nationally determined contributions (NDC), will be updated within the next two years after the COP.

At COP28, parties also face the daunting task of delivering the operationalization of the Loss and Damage Fund established at COP27. Loss and damage compensation refers to funding arrangements for developing countries that have suffered damage from climate change. The transitional committee on the operationalization of the new funding arrangements has made significant progress and delivered a list of recommendations for implementation.

Unsurprisingly, the synthesis report of the Global Stocktake technical assessment concluded that actions to reach the Paris targets must be massively ramped up. These findings point to the presence of a considerable emissions gap, which was also reported in the UN Environment Program’s Emissions Gap Report 2023. A double gap has been identified: Not only are the NDCs insufficient for reaching the Paris target, the actions taken to live up to the NDCs are often lacking too. In principle, the Global Stocktake emphasizes the need for transforming systems in all sectors.

In this article, we focus on the transition of the energy system and the food and land-use system, as they are responsible for the majority of global anthropogenic greenhouse gas (GHG) emissions. We discuss the current standing of and changes needed in these transitions, how much the NDCs already include them, why international collaboration is so important, the links to financial system risks, and what we expect COP delegates to focus on regarding these transitions.

The energy sector is the largest source of greenhouse gas emissions. Most of these emissions are a byproduct of burning coal, oil, or gas for electricity and heat generation, industry, and transport. The energy transition is aimed at changing the global energy system so that global warming is limited to the Paris temperature goals. One way to make this happen is through shifting from (unabated) use of fossil fuels to renewable energy, such as wind, solar, and hydropower.

Although renewable energy sources are becoming an increasingly affordable alternative to fossil fuels, many complexities and challenges hinder the transition to a system that overwhelmingly relies on renewables. This is because the energy transition not only requires a shift away from fossil fuels, it also requires fundamental changes that go beyond the ways in which we generate energy. For example, improvements need to be made to the energy infrastructure to ensure a reliable energy supply. In addition, to achieve the full benefits of generating electricity with renewable sources, fossil-reliant end-user technologies need to be replaced with electrical alternatives such as electric vehicles. Other important measures include increasing the use of cleaner and zero-carbon fuels (such as hydrogen), optimizing energy demand, improving energy efficiency, and investing in emissions-abatement technologies. To add to the complexity, President of the European Central Bank Christine Lagarde also warned that a transition to clean energy should be just and inclusive. COP28 is an opportunity for countries to come together and discuss how to make progress on these and other measures as part of the global energy transition. We expect that reducing fossil fuel dependence will be one of the major concerns during COP28 because it is an essential part of reaching the targets of the Paris Agreement.

The role of the energy transition in NDCs

Climate action plans, as laid out in NDCs, or in some cases long-term low-emissions development strategies (LT-LEDS), include country-specific emissions-reduction targets for the upcoming five-year cycle. These targets necessitate a rigorous transformation of the energy sector. For the world to limit long-term global warming to 2 degrees Celsius, global annual emissions in 2030 (56 gigatons CO2 equivalent based on current policies) should have been reduced by 16 gigatons CO2e. To put this number in perspective: This is equivalent to about six times the annual emissions of the European Union. The Global Stocktake, therefore, urges countries to discuss the establishment of more ambitious NDCs at this year’s COP28, and limiting or ending unabated use of fossil fuels could be an important component of these ambitions. Currently, a modest number of countries commit to limiting or ending fossil fuels in their NDCs or LT-LEDS. The Global Stocktake results will substantially support COP28 delegates who call for such climate action, which is over and above the NDCs of many countries.

Limiting or ending fossil fuel production has been a recurring topic at recent COPs. Proposals for a fossil fuel phaseout (and later phasedown) were brought to the table by several countries during the two most recent COP events. At COP26 in 2021, the discussion about fossil fuels led to agreement about phasing down all unabated coal power. Extending the phasedown to all fossil fuels was suggested at COP27 about a year later, but this proposal was ultimately discarded. Against this backdrop, the shift away from fossil fuels will certainly reemerge as an important topic at this year’s COP. The European Council in the run-up to COP28 indicated that it will raise the contested topic of limiting or ending the use of fossil fuels. A collective agreement about the future of fossil fuels will be important for countries’ willingness to include limiting or ending fossil fuels in their NDCs.

However, the imperative to limit and eventually end fossil fuel use faces concerns about a loss of value in fossil fuel assets due to collapsing investor expectations. This transition risk could bear steep implications for the economy and the financial sector. A change in investor expectations about policies limiting global warming to 2C instead of 3.5C could cause estimated losses on the balance sheets of the financial sector of up to USD 400 billion. The Global Stocktake also acknowledges the Intergovernmental Panel on Climate Change finding that the 1.5C target will be missed if existing and planned fossil fuel projects are used until the end of their lifetime. This emphasizes the fact that any new long-cycle fossil fuel project runs the risk of becoming a stranded asset. Additional investment in unabated fossil fuels would further increase transition risks.

International collaboration in major GHG-emitting sectors

International collaboration is a key mechanism in the global energy transition, as global warming can only be limited if the emissions of all countries combined are reduced rather than merely shifted from one country to another. International collaboration already occurs through the provision of technical and financial assistance to developing countries and the development of international low-carbon standards. However, much more international collaboration is needed in the coming years. The Network for Greening the Financial System (NGFS) shows in its “too little, too late” scenario that a lack of international policy coordination can lead to substantial physical and transition risks. In this scenario, the efforts of some countries are undermined by the inaction of others. As a result, global warming is expected to reach 2.3C by 2100. A lack of international policy coordination also introduces new transition risks, including substantial differences across geographies and sectors in terms of climate policies, such as carbon prices and low-carbon standards. Hence, a lack of international collaboration is a worst-case scenario for the global response to climate change.

At COP26, some 48 countries committed to a Breakthrough Agenda aimed at fostering international cooperation in emissions-heavy sectors. As of 2023, seven sectors are included in the agenda that together account for over 60% of global emissions: power, road transport, hydrogen, steel, cement, buildings, and agriculture (see “The food and land-use system transition” below). International cooperation in these and other sectors is critical because local climate action can have major economic consequences that extend beyond country borders. For example, some countries pursue climate objectives by implementing new trade conditions, such as in the case of the EU Carbon Border Adjustment Mechanism and the US Inflation Reduction Act. This year’s COP, which features a trade day for the first time ever, will provide the forum for strategic discussions about the climate-trade nexus.

COP participants will likely also discuss how global markets can be made more energy efficient by means of standards and certification – for example, international performance standards for low-carbon electric appliances and batteries for electric vehicles. The COP event also provides an opportunity to discuss how international cooperation can reduce the per unit cost of low-carbon products and renewable energy generation (such as hydrogen).

Finally, COP28 will also address opportunities for public-private collaboration aimed at fostering research and innovation by hosting an Energy Transition Changemakers event that builds on pre-existing commitments to develop a best practices platform and invites private sector actors to present innovations. The initiative aims to accelerate innovation in the fields of renewables, energy efficiency, green hydrogen, and the steel, cement, and aluminum sectors in particular.

Overall, the global energy transition is pivotal for closing the emissions gap identified by the Global Stocktake. With a modest but growing number of parties explicitly stating that they want to reduce fossil fuel production as well as intensify international collaboration on this topic (see figure 1), this year’s COP could help realign the global energy transition with previously agreed climate goals.

The food system is the world’s third-largest source of GHG emissions. Besides the emissions from energy use, the food system also generates substantial emissions from land-based activities, including agriculture, land use, and land-use change. The global food system also drives nearly 80% of global deforestation and is the primary driver of biodiversity loss. The food system transition has the dual aims of decarbonizing the food system and protecting it against climate risks. It also entails reshaping consumers’ food preferences, including by promoting the consumption of sustainable and healthy foods and reducing food waste.

Food systems did not feature prominently on previous COPs. Rather, past discussions centered on addressing emissions from land use and land-use change instead of food systems. Also, climate actions linked to food systems were not fully integrated into negotiated texts. COP26 represented an important moment for the food system transition with the announcement of the Breakthrough Agenda. The goal of this agenda is to make “climate-resilient, sustainable agriculture the most attractive and widely adopted option by farmers everywhere by 2030.” The agenda promotes sustainable farming (such as agroforestry and regenerative agriculture) and leveraging the carbon sink potential of the food system while delivering on climate adaptation goals. The focus shifted further at COP27, when parties adopted the Sharm el-Sheikh joint work on the “implementation of climate action on agriculture and food security.” This joint work represented the first step toward enhancing countries' capacities to implement climate action in the agricultural sector. This year's COP doubles down on food systems by putting the food transition at the heart of the agenda.

The role of food systems in NDCs

Food systems played a limited role in the first NDCs that were submitted after the ratification of the Paris Agreement in 2015. Since then, recognition that a food systems approach is needed has increased. The 2021 UN Food Systems Summit played an important role in turning this awareness into action by catalyzing national commitments to food system transformation. A recent assessment revealed that 125 out of the 134 updated NDCs (93%) included at least one measure related to food systems. However, only a third of NDCs back their commitments with concrete policy measures, with less than half providing some form of targets for these sectors and only four including food system-specific targets for emissions reductions. Furthermore, focus on sustainable food consumption and food waste has been very limited so far.

The 2015 Paris Agreement explicitly mentions food systems as part of global climate mitigation and adaptation. Despite this, the Global Stocktake finds that more rigorous and rapid systemic transformations, particularly of the food system, are needed to meet the Paris Agreement goals. This implies that the food system transformation should play a central role during the COP negotiations. These negotiations should touch upon many of the conditions that need to be in place for this transformation, including increased financial resources, technology transfer, technical cooperation, and capacity building. However, achieving unanimous agreement among all parties is expected to be challenging, given that the food transition is even more complex than the transition of the energy sector.

Boosting international collaboration

The food transition is a global challenge. Therefore, international collaboration is crucial. Recent summits, such as the Hiroshima Action Statement for Resilient Global Food Security, the Sustainable Development Goals Summit 2023, and the UN Food Systems Summit +2 Stocktaking Moment, have all highlighted the need for enhanced global investment in food and land-use systems. In addition, the Food and Land Use Coalition has proposed a reform agenda aiming at transforming food and land-use systems with the goal of achieving food security for a growing global population. Importantly, the reform agenda views food security in the context of interrelated topics, including climate change, biodiversity loss, human health, and poverty. It is of paramount importance to recognize that these challenges are interlinked and that international collaboration is key to unlocking transformative solutions.

The implementation of the transition across many actors and nations could benefit from global linkages by means of international frameworks specifically aimed at the food transition. This approach has been applied in the context of biodiversity, as seen in the Kunming-Montreal Global Biodiversity Framework, which sets the collective goal of safeguarding 30% of the planet by 2030. An international framework for the food transition encourages countries to take collective action toward shared goals. It also provides a basis for stakeholders within the food system to work together in mitigating agricultural emissions, promoting sustainable consumption, and reducing food waste. Therefore, a much welcomed development at this year’s COP is that global leaders are expected to sign the COP28 Leaders Declaration on Resilient Food Systems, Sustainable Agriculture, and Climate Action committing to integrating food systems in their climate action.

Food systems are highly vulnerable to climate impacts, with extreme events like floods, droughts, and heat waves threatening agriculture activities and food supplies. International consensus on adaptation targets in the food system would help protect workers and communities against these physical climate risks. At the same time, the rapid changes that are required in the food and land-use system could bear transition risk s if actors in the sector are not sufficiently prepared for the changes, as increased international commitments to decarbonize the agricultural sector can spur policies that limit food production, such as land-use restrictions and carbon taxes. If producers are not sufficiently prepared or equipped to change their production methods and/or if changes happen unexpectedly, this can lead to losses.

The transformation of the global food and land system is a complex task that requires international coordination. Parties attending this year’s COP face the difficult task of reaching consensus about shared goals and translating it into tangible commitments.

This year's COP marks an important point in the history of the Paris Agreement. Not only will parties be faced with the reality that climate action has so far been insufficient, they will also need to discuss how international and national climate action can be realigned with temperature goals in the Paris Agreement. Updated commitments to accelerate the energy and food system transitions are poised to play a key role this realignment exercise.