COP28 Key Takeaways

Overview

• The landmark "The UAE Consensus" sets out the climate agenda to keep 1.5 C within reach.
• An ambitious response to the Global Stocktake (GST) and putting forward a plan to close the emissions gap to 2030.
• Calling on Parties to transition away from fossil fuels to reach net zero, including a new specific target to triple renewables and double energy efficiency and building momentum for the loss and damage fund.

Global Stocktake

• The Global Stocktake was by far the most scrutinized item at COP28. It was the first comprehensive assessment of global climate action against the goals of the Paris Agreement.
• In the GST, the parties clearly stated the need for deep, rapid and sustained reductions in greenhouse gas (GHG) emissions in line with 1.5 C pathway and emphasized the need for urgent action.
• To stay within the 1.5 C warming target, global emissions need to be cut by 43% below 2019 levels by 2030. However, current climate targets put us on track for only a 14% reduction.

Energy Markets in Focus at COP28

The Energy sector was at the core of COP28 discussions:

• Looking at the private sector, the main highlight was the formation of the Oil & Gas Decarbonization Charter signed by 50 companies accounting for more than 40% of global oil and gas production.
  • The signatories committed to net zero operations by 2050 across Scope 1 and 2 emissions, near-zero methane in upstream operations by 2030, zero routine flaring by 2030 and increased transparency in emissions reporting.
  • During COP28, the Canadian Government introduced a new regulatory framework for a cap on emissions from Canada's oil and gas sector (read TD Securities' take on the Canadian Government's Framework for Oil & Gas Sector Emissions Cap).
• Methane also took center stage in Dubai with both the U.S. and Canada announcing new regulations.
  • The Biden Administration released the long-awaited final methane rule during COP28. This is expected to reduce methane emissions by nearly 80% by 2030 in line with the Oil & Gas Decarbonization Charter.
• Renewed attention on nuclear with over 20 countries signing the Declaration to Triple Nuclear Energy Capacity by 2050 recognizing the key role of nuclear energy in reaching net zero.

Bottom Line

• COP28 was an energy COP: Taking place at the tail end of the hottest year on record, it was not surprising that COP28 turned out to be an energy-focused COP. It is premature to say if the GST marked the "beginning of the end" for fossil fuels, but it was still an historical milestone with fossil fuels included in a COP text for the first time.
• Focus on the positive: Considering the current macroeconomic backdrop and ongoing geopolitical uncertainties, we expect governments and the private sector to focus on phasing-up renewables — nuclear included — and increasing funding towards these energy sources.
• Methane is the low-hanging fruit: As one of the most actionable COP28 outcomes, we expect the energy sector to take significant steps towards lowering its methane footprint with 50 companies already committed to reaching net zero methane emissions by 2030
• One-size-fits-all approach doesn't exist: The GST calls for parties to contribute to global efforts taking into account their different national circumstances. We expect the push to define transition criteria to be private sector led with national transitional taxonomies lagging behind.

What's Next?

Now attention turns to decisive tasks that will dominate the climate agenda for the next two years: reaching an agreement on global carbon trading mechanism, a new global climate finance goal and preparing for new national climate commitments.

TD Securities' ESG Solutions Team

TD Securities' ESG Solutions team is a centralized resource providing ESG advisory and financing solutions across the firm’s Global Markets and Corporate & Investment Banking global client base.