Reflecting on COP28 – How have the four gaps been addressed?

Opinions on whether COP28 was a success will always differ among countries, participants, and special interest groups; any pledge of funds won’t be high enough for some and the wording will not be strong enough for many. But in my view, it has been a success tackling many issues for the first time. The challenge now is translating pledges into decisive action.

A major point of contention remains the wording around fossil fuels. While in many circles the final agreement to “transition away” from fossil fuels will be hailed as a success, particularly against the backdrop of a summit held in the UAE, the avoidance of language concerning a “phase down” or even a “phase out” will come as a disappointment to the over 100 countries that were supportive of this stronger language.

Going into COP28, we highlighted four gaps to be addressed at the conference – the ambition, credibility, justice, and adaptation gaps. Looking through that lens, now that COP28 has drawn to a close, we have seen commitments that made progress on closing each of the gaps, but do they go far enough?

Ambition gap – Are country commitments in line with limiting warming to 1.5C?

According to Climate Action Tracker, we were on track for 2.4C warming based on formal Nationally Determined Contributions (NDCs) going into COP28. The warming projections update published during COP28 suggests that this has worsened to 2.5C given emissions are still on the rise. The next formal set of NDCs are due in Q1 2025 and should reflect how the Global Stocktake outcomes were considered to raise ambition.

The UN Global Stocktake (GST) provides an assessment of progress towards achieving the Paris Agreement goals and a GST synthesis report was published in September highlighting that we’re not on track for limiting warming to 1.5C. In response to this, we saw a total of $83bn of climate finance pledged and 175 announcements made at COP28, including a number of declarations that have the potential to substantially reduce emissions, including the Global Decarbonisation Accelerator and the Declaration on transforming food & agriculture.

The UN Global Stocktake (GST) provides an assessment of progress towards achieving the Paris Agreement goals and a GST synthesis report was published in September highlighting that we’re not on track for limiting warming to 1.5C. In response to this, we saw a total of $83bn of climate finance pledged and 175 announcements made at COP28, including a number of declarations that have the potential to substantially reduce emissions, including the Global Decarbonisation Accelerator and the Declaration on transforming food & agriculture.

These pledges have the potential to reduce the ambition gap, but not fully close it. The Energy Transition Commission (ETC) assessed the impact of the key pledges made and concluded that even if all countries signed up and policies were put in place to fully implement them, there would be a 6Gt gap of CO2 emissions and a 30Mt gap of methane emissions versus what is required for 1.5C alignment in 2030.

Credibility gap – Are commitments reflected in credible actions?

This can only be assessed once we see the actions taken after COP28 to put pledges into practice. Saying that, we have seen positive developments that can help close the credibility gap, including wording in the final text that urges Parties to phase out inefficient fossil fuel subsidies which in 2022 amounted to $7tn, a $2tn increase compared to 2020.

To increase the credibility of voluntary carbon markets, an alignment of standards and integrity for voluntary carbon markets was announced at COP28. The VCMI, ICVCM, GHG protocol and SBTi have joined forces to develop an end-to-end integrity framework for carbon credits and six different carbon credit verification providers have also agreed to work together to harmonise standards.

In 2022, emissions increased by 1.2% and reached new record levels. A peak and drop in emissions (43% by 2030 vs 2019) is the only thing that will ultimately demonstrate that credible action is being taken.

The COP process cannot just be a cycle of COPs where new initiatives continue to be announced, they also need to be completed with real world impacts such as seeing progress on KPIs that tell us we are getting closer to net zero and not further away. The latest State of climate action 2023 report highlights 42 indicators that could be used for this – only one of them is currently on track, the % sale of electric vehicles.

Justice gap - Are transition actions and climate finance delivered in a just manner for the most impacted and vulnerable?

An essential consideration here is the support and finance provided from developed to developing countries for mitigation, adaptation, and losses from climate impacts.

The long-awaited loss and damage fund was announced on Day 1, a positive and welcome surprise to many, but the just over $700m pledged for it are just a drop in the ocean of what is needed to support the most vulnerable countries in managing climate impacts.

Then there is the $100bn climate finance promise from developed to developing nations that was made in 2009 and due to be delivered by 2020. Initial data suggests it was finally delivered in 2022. At COP28, a new collective quantified goal (NCQG) was to be established to come into effect in 2025, but this was not concluded, it was merely agreed to hold further discussions in 2024. It is important that the mechanisms for delivery need to be more binding to avoid similar failures going forward and build trust.

There was a strong focus on people at COP28 and it was encouraging to see the launch of the Just Transition Work Programme which considers the social impacts on communities, consumers and workers.

The progress made at COP28 to close the justice gap was positive, but of course a lot more needs to be done to deliver an equitable transition in practice.

Adaptation gap - Will finance and action be delivered to enable adaptation to the increasing physical impacts?

At COP27, the Sharm-el-Sheikh Adaptation Agenda was launched to enhance resilience in the most vulnerable regions. Developed nations agreed to “at least double their collective provision of climate finance for adaptation” from 2019 levels by 2025 – roughly equating to $40bn. Despite this and the increasing damage from physical risks experienced across the globe, adaptation finance flows are woefully insufficient and 5-10 times below estimated needs according to the UN. Crucially, only 2% comes from the private sector and new blended finance mechanisms are needed to address this.

At COP28, a key aim was to set specific, measurable targets for the Global Goal on Adaptation and raise the bar on closing the adaptation finance gap. Only 23 out of 46 of the Least Developed Countries have a National Adaptation Plan and one key area of focus at COP28 was the need for capacity building, not just finance flows. However, adaption action did not seem to receive the same amount of ‘airtime’ as mitigation action to reduce emissions did. At the end of the hottest year on record, the adaptation gap remains large.

Why does this matter to investors?

In simple terms, signals and policies around climate action shape investment risks and opportunities and also provide the foundations for delivering on net zero investor targets. The signal from COP28 to investors is that 1.5C remains the ambition and that a transition away from fossil fuels is required. If pledges are implemented with credible policy actions that set the right financial incentives, for example to transform food systems and triple renewable energy capacity, this can lead to new investment opportunities and help mobilise private capital.

At the same time, implications of a transition away from fossil fuels can increase the risk of stranded assets that investors need to carefully consider. Another opportunity that may become more attractive to investors is the involvement in carbon markets once the announced end-to-end integrity framework is delivered to tackle criticism around the quality and effectiveness of carbon markets and offsets.

Eva Cairns, Head of Sustainability Insights and Climate Strategy, attended COP28 on behalf of abrdn, you can read more of her thoughts on the successes and shortcomings of the summit here.