COP28 & the future of fossil fuels: A historic agreement and hopes ahead.

By Valeria de los Casares, Research Assistant for the European Chair for Sustainable Development and Climate Transition

Introduction – Expectations and issues post COP27

The 28th ‘Conference of the Parties’ to the United Nations Framework Convention on Climate Change (UNFCCC), or ‘COP28’ took place from the 30 November until the 12 December of this year, hosted by the United Arab Emirates (UAE) in Dubai. This has been the largest COP ever, with around 100,000 delegates attending the hundreds of negotiations, side events and conferences that were organised around the most pressing climate issues of our times. To put this in perspective, this is almost twice the number registered for last year’s COP in Sharm El-Sheikh, the previous largest. Moreover, stakes for negotiators and country delegates were high as they were expected to pick up a long list of unresolved issues from COP27. The first Global Stocktake since the Paris Agreement has also taken place this year, assessing the world community’s progress towards reaching the goals of the Paris Agreement. 

The thousands of reviews, policy papers, speeches and news articles that have covered the aftermath of COP have deemed it a (moderate) success, notably for the historic inclusion of the term ‘fossil fuels’ in the final agreement shared on the 12th of December (see Figure 1 for the precise excerpt). In fact, the role of fossil fuels in the green transition and their eventual phase out has been a major contentious topic in the negotiations taking place at COP.

Figure 1. Excerpt from the First Global Stocktake from the COP28. On Mitigation.

The issue of fossil fuels, and specially of oil and gas, is particularly important for COP as no text coming from any of the previous years has been able to explicitly set guidelines or expectations of what their role should be or how an eventual phase out would look like. In fact, in all previous resolutions, negotiators representing nations from around the world have struggled to put into words something that has by now been established as a scientific consensus: that the burning of fossil fuels like coal, oil and gas should be eventually phased out to avoid further global warming. 

A historic agreement: the ‘beginning of the end’ of fossil fuels?

For the first time, a COP resolution has called “on parties to contribute” to take actions including “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”. This marks a departure from previous texts that favoured language that focused on reducing emissions rather than taking specific actions or targeting specific industries. Indeed, in recent years, pressure to address explicitly the role of oil and gas and political ambition to transition these industries, such as by eliminating subsidies, has been surging.¹ The inclusion of explicit language on the final day of COP has thus come to be the culmination of a years-long process of campaigning from civil society but also from more ambitious governments.

These industries had at the same time been instrumental in blocking ambitious deals and policy that seeked to include language beyond emissions goals and numerous articles have criticised the notable presence of oil and gas lobbyists at this year’s COP.² Despite this, COP28 has proved to be very fruitful. On the first day of COP, parties reached consensus on an agreement for the Loss and Damage Fund, which set the scene for high ambition. Afterwards, negotiations stalled notably around the issue of fossil fuels but the final agreement marked a step ahead. There are a number of reasons on why addressing directly the oil & gas sector constitutes a milestone in COP negotiations:

• First, the oil & gas industry still dominates energy production in most of the world. In some parts of the world, such as Africa, countries’ industrialisation relies in part on expanding natural gas use and oil and gas production remain important to meet economic and social goals, as shift turns to meeting domestic demand (IEA, 2022).  

• Secondly, we have witnessed growing momentum for an eventual phase out of fossil fuels. Parties like the EU have expressed support for measures such as eliminating subsidies for fossil fuels and for accelerating renewable energy production capacity. The IEA (2023) has estimated that we will reach peak production of fossil fuels by the end of this decade, with declines in advanced economies and China offsetting increasing demand elsewhere. Matching ambition from a COP resolution represents willingness to support this shift.

• Finally, oil and gas companies have huge transitions ahead to make and it is critical for global policymakers to provide a roadmap forward. As the IEA 2023 World Energy Outlook Special Report ‘The Oil and Gas Industry in Net Zero Transitions’ shows, oil and gas companies only currently account for 1% of clean energy investment globally, but with this investment growing each year (See Figure 2).³ This same report highlights the opportunities and challenges that are ahead for these companies and potential strategies to build stability and work with international partners to support the transition process.

Figure 2. Oil and gas industry in the net-zero transition. From IEA (2023)

Addressing Challenges and Opportunities

While this resolution constitutes a landmark agreement, there is still scepticism around the role of oil & gas in the transition to a net-zero economy and the future of the sector. Market prices have not largely shown investors moving away from fossil fuels and various international associations have voiced their discontent with the lack of ambition of the final deal. Critics have focused on the fact that countries’ climate action is emphasised to be “nationally-determined” and, while it is acknowledged that parties must phase out fossil fuels to slow down climate change, no roadmap or targets are provided.⁴ This flexible approach has pleased countries such as Saudi Arabia or the hosting country who had notably favoured taking a relaxed approach towards these industries, focusing on emissions instead and ‘acting with pragmatism’ in order to find a suitable agreement for all.

Moreover, a strong point of debate has been giving developing countries the chance to benefit from the industrialisation brought by oil & gas production. More so, when we look at the cost of implementing the net-zero transition and the industries that depend on fossil fuels that provide jobs for tens of thousands of people in countries where a non-negligible fraction of the population lives without access to energy. In the case of Nigeria, between 4.3 and 9.7% of the GDP has come from oil & gas, depending on the quarter, between 2018 and 2023 (National Bureau of Statistics, 2023). This must not be overlooked. Agreements such as the COP resolution will help drive investments and political ambition towards an eventual phase out of fossil fuels. Until then, nonetheless, the cost of reskilling is high and investments in clean energy sources take a long time to materialise. This is why developed countries such as those in the European Union need to lead by example and be leaders in the transition to a green energy system and where fossil fuel commitments must intersect with those around climate finance.

Conclusion & steps ahead

This COP agreement has come to represent a signal in marking ‘the beginning of the end’ of fossil fuels (UNFCC statement). While the roadmap is unclear and much of the work is still to be done, the traction that renewable energy is getting as well as the more and more clear political gear towards a net-zero future could pave the way for more ambitious phase-out policy. Actors such as the IEA and the EU are advocating for gradually closing down production of fossil fuels, starting from coal and moving to oil and gas. Moreover, just transition considerations are high in the agenda and the lessons from coal as a recessing energy source could bring key takeaways when it comes to building mechanisms to minimise the social costs of the energy transition, particularly for those who are most vulnerable, from populations at risk of energy poverty to people whose jobs depend on fossil fuels. It will be a difficult transition ahead given the privileged place that oil and gas have in our economic systems but if we listen to the science, substituting oil and gas for greener energies is a precondition to slow down further global warming.

Footnotes

1. See for example this press release from the European Parliament regarding a joint statement by EU MEPs on the need to strengthen climate commitments.
2. See for example statements by Kick Polluters Out Coalition, Climate Action Network (CAN) or Greenpeace.
3. IEA (2023) ‘The Oil and Gas Industry in Net Zero Transitions’.
4. See Greenpeace statement where the text was called  a ‘menu a la carte’ of options to accelerate the energy transition.

Bibliography

France24 (2023, 9 December). ‘‘Stunned’: OPEC urges members to block action on fossil fuels at COP28. https://www.france24.com/en/environment/20231209-french-energy-minister-angry-after-opec-urges-pushback-on-fossil-fuels-at-cop28

Gelles, D. (2023, 13 December). Two Words That Could Change the World. The New York Times. https://www.nytimes.com/2023/12/13/climate/two-words-that-could-change-the-world.html?te=1&nl=morning-briefing%3A-europe-edition&emc=edit_mbe_20231214

IEA (2022). Africa Energy Outlook 2022. IEA, Paris. https://www.iea.org/reports/africa-energy-outlook-2022, License: CC BY 4.0

IEA (2023). The Oil and Gas Industry in the Net-Zero Transition. IEA, Paris. https://iea.blob.core.windows.net/assets/41800202-d427-44fa-8544-12e3d6e023b4/TheOilandGasIndustryinNetZeroTransitions.pdf

IEA (2023). ‘What does COP28 need to do to keep 1.5 °C within reach? These are the IEA’s five criteria for success’, https://www.iea.org/commentaries/what-does-cop28-need-to-do-to-keep-1-5-c-within-reach-these-are-the-iea-s-five-criteria-for-success

SE (2023). Does the world need to phase out fossil fuels to deliver the goals of the Paris Agreement?, https://www.lse.ac.uk/granthaminstitute/news/does-the-world-need-to-phase-out-fossil-fuels-to-deliver-the-goals-of-the-paris-agreement/

Mooney, A., Williams, A. and Kerr, S. (2023, 13 December). Countries reach ‘historic’ COP28 deal to transition from fossil fuels. The Financial Times. https://www.ft.com/content/3ffd821c-6200-4808-b16d-ac9cb2207f11

Plumer, B. and Bearak, M. (2023, 13 December). In a First, Nations at Climate Summit agree to Move Away from Fossil Fuels. The New York Times. https://www.nytimes.com/2023/12/13/climate/cop28-climate-agreement.html?te=1&nl=morning-briefing%3A-europe-edition&emc=edit_mbe_20231214

Reed, S. (2023, 13 December). Oil Companies Are Fine With Call to Move Away from Fossil Fuels’. The New York Times. https://www.nytimes.com/2023/12/13/business/energy-environment/oil-companies-are-fine-with-call-to-move-away-from-fossil-fuels.html?te=1&nl=morning-briefing%3A-europe-edition&emc=edit_mbe_20231214

UNFCC (2023) ‘First Global Stocktake‘, https://unfccc.int/sites/default/files/resource/cma2023_L17_adv.pdf