What’s in store for COP28?
In the lead up to attending the 28th Conference of the Parties (COP28), TEM’s Head of Carbon Solutions, Bjorn Everts, shares a plain English guide to what the conference is about, why it is important and what the key outcomes of the conference are expected to be in relation to carbon markets.
What is COP28?
COP28 is the 28th Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC). This year it is held in Dubai’s Expo City. The event will host more than 140 heads of state and government leaders and over 80,000 delegates.
COP28 occurs at a critical moment, with the past eight years being the warmest on record whilst temperatures continue to rise and the impacts of climate change, such as wildfires, floods, and storms, become increasingly severe and commonplace. This makes COP28 a vital opportunity to recalibrate and strengthen global climate action efforts in line with the ambitious targets of the Paris Agreement.
Since COP21 in 2015, COPs have primarily focused on how to implement the Paris Agreement, which is a landmark international accord that aims to limit global average temperature rise to well below 2°C and pursue efforts to limit the rise to 1.5°C above pre-industrial levels. The Paris Agreement is significant because it was adopted by almost every nation on earth. The accord sets out what are know as Nationally Determined Contributions for how each country will determine, plan and regularly report on the contribution it is making towards the global effort to mitigate global warming and decarbonise our economy.
The Paris Agreement also introduced the concept of a Global Stocktake, which is a mechanism to assess the collective progress of countries in limiting global temperature rise. This process is designed to occur every five years and involves a comprehensive review of the impact of countries’ climate actions based on their Nationally Determined Contributions.
The first Global Stocktake
The big-ticket item for COP28, is the conclusion of the first Global Stocktake. The Global Stocktake is a comprehensive review conducted every five years to evaluate global progress in addressing climate change, as outlined by the Paris Agreement. It basically assesses if we are doing what we said we would do through the Nationally Determined Contributions each country agreed on as part of the Paris Agreement.
Initiated at COP26 in 2021, the Global Stocktake involves three phases: Initially, it compiles and analyses data on climate change actions from various global entities. The next phase assesses how effectively the Paris Agreement is being implemented, identifying areas for enhancement.
In September 2023, a critical report emerged, acknowledging notable advancements, yet underscoring the need for intensified efforts. The first Global Stocktake culminates at COP28, which involves high-level discussions, aiming to translate insights from the research and the report into concrete, actionable strategies to bolster global climate action on a global and local scale.
Catalysing global carbon markets
In the world of global carbon markets, article 6 of the Paris Agreement is a big deal and it will be a focal point of the negotiations at COP28. Article 6 is a key component of the more operational side of the Paris Agreement that enables countries to meet their climate goals more effectively through international cooperation and the trade of carbon credits. It establishes a framework for carbon markets between countries – allowing countries to trade emissions reductions, known as Internationally Transferred Mitigation Outcomes (ITMOs).
ITMOs are essentially carbon credits that can be traded between countries, rather than between organisations. For example, if one country reduces its emissions more than required, it can sell the excess reductions as ITMOs to another country, which created an incentive mechanism for country level emissions reduction.
Closely related to this is concept of Corresponding Adjustments, which are another critical aspect of Article 6 and the trade of ITMOs in the Paris Agreement. When a country sells an ITMO to another country, a Corresponding Adjustment ensures that the emission reduction is only counted once towards a country’s climate targets. This means that when one country transfers some of its emission reductions to another, the selling country must adjust its own emissions data to exclude these reductions. This process is vital to prevent double counting of emissions reductions and maintain the integrity of global climate goals. It’s a key topic at COP28, as establishing clear, transparent rules for these adjustments is essential for the effective functioning of international carbon markets.
The overall financing needs for climate finance are enormous – the latest estimates are up to $9 trillion per year until 2030. The longer the delay in climate investments, the higher the future costs, particularly in addressing loss and damage.
In 2021/2022, climate finance flows were around $1.3 trillion, or approximately 1% of global GDP. However, there is an uneven distribution of this finance, with a significant portion committed by developed countries and a smaller fraction reaching the less developed countries. This disparity underscores the importance of developed countries continuing to provide public finance to developing nations.
COP28 could be a pivotal event where the future of climate finance provision, particularly adaptation finance and the operationalisation of the Loss & Damage Fund will be critically evaluated and negotiated. The outcomes of these discussions will have significant implications for our planet given the fact that we are in such a critical decade within which to enact change and that fact that change at scale means mobilising climate finance at scale and at pace.
Reflections prior to the event
While I am excited to attend COP28 as it presents significant opportunities for advancing global climate action, I am also continually reminded by my peers that it also faces challenges. The effectiveness of COP28 will be measured not only by the agreements reached, but also by the implementation and enforcement of these agreements in the years following the conference.
TEM at COP
I will be on the ground at COP, attending key events and meeting partners and industry leaders, alongside TEM’s Managing Director, Asia Pacific, David Tow. David will also be speaking at the IETA Pavilion on Saturday 2 December on Article 6 and carbon market opportunities in the APAC Region.
Stay tuned to our LinkedIn page for regular updates from myself and David at COP to help you stay on top of key developments and what this will mean for carbon markets and beyond.
- McKinsey and Company, What is the Global Stocktake: https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-the-global-stocktake
- UNFCC, Un Climate Change Conference: https://unfccc.int/cop28
- Carbon Market Watch, COP 27 FAQ: Article 6 of the Paris Agreement explained: https://carbonmarketwatch.org/2022/11/02/cop27-faq-article-6-of-the-paris-agreement-explained/#:~:text=Article%206%20of%20the%20Paris%20Agreement%20consists%20of%20nine%20paragraphs,implement%20Article%206%20in%20practice.
- Chatham House, What is Cop28 and why is it important: https://www.chathamhouse.org/2023/09/what-cop28-and-why-it-important
- McKinsay and Company, The net-zero transition: What it would cost, what it would bring: https://www.mckinsey.com/capabilities/sustainability/our-insights/the-net-zero-transition-what-it-would-cost-what-it-could-bring
- International Monetary Fund, Climate change – Fossil Fuel Subsidies: https://www.imf.org/en/Topics/climate-change/energy-subsidies
- Reuter, World needs 5 trillion in annual climate finance by 2030 for rapid climate action https://www.reuters.com/business/cop/world-needs-5-trillion-annual-climate-finance-by-2030-rapid-action-2021-10-28/#:~:text=Oct%2028%20,to%20meet%20international%20temperature%20goals
- UNICEF, Water Scarcity: https://www.unicef.org/wash/water-scarcity#:~:text=Over%20two%20billion%20people%20live,intense%20water%20scarcity%20by%202030.
- United States Environmental Protection Agency, Global Greenhouse Gas Emissions Data: https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data#Reference%203
- Greenly: What is the COP27 Loss and Damages Fund: https://greenly.earth/en-us/blog/company-guide/what-is-the-cop27-loss-and-damage-fund