INTERVIEW: COP28 director-general says progress on carbon markets needed to accelerate climate action

Forging a consensus around a global carbon price or tax will be a key priority at the upcoming Climate Change Conference in Dubai, COP28 Director-General Majid al-Suwaidi has told S&P Global Commodity Insights.

Suwaidi also said fast-tracking the pace of the energy transition would be a key objective at the conference, scheduled to take place from Nov. 28 to Dec.10.

This comes as global leaders are under pressure to accelerate national plans and align with Paris Agreement climate pledges.

"We are laser focused on achieving the 1.5 Celsius degrees target, as well as on how we address the mitigation, emissions and finance gaps, and make good on promises that were made as part of the Paris Agreement," Suwaidi told S&P Global in a Sept. 18 interview. "That is why we have ambitious targets when it comes to tripling renewable capacity, doubling hydrogen capacity and doubling energy efficiency. We need to decarbonize the energy system we have today, while we build up the energy system of the future," he said.

COP-28 President-Designate Sultan al-Jaber has been touring the world in the lead up to the event, urging governments to update their 2030 Nationally Determined Contributions targets. Jaber has called for the tripling of renewable energy output to 11,000 GW, the doubling of energy efficiency measures, and the doubling of hydrogen production to 180 million mt/year by 2030.

On Sept. 9, G20 nations agreed to support the tripling of renewables globally and acknowledged a $4 trillion/year need to accelerate investment in the energy transition.

Clarity on carbon

Suwaidi, who UAE's main negotiator at the Paris Agreement, also said a focus on the standardization is needed to help the carbon markets develop faster and further, after the industry has suffered a crisis of confidence in recent months due to growing scrutiny over the quality of carbon offsets.

"We need to get credibility in the market, and we think that it is really important to have progress on carbon markets at COP28," he said. "We think that all of these solutions [carbon taxes and carbon prices] are useful and helpful. The carbon markets, let's be frank, have had a few years of lost time in a way."

Carbon taxes and carbon pricing systems are emerging as key tools for governments in climate and international policy.

On Sept. 6 African leaders adopted the Nairobi Declaration, calling for a global carbon tax on fossil fuels to accelerate action against climate change and the acknowledgement of its impact on the continent.

Similarly, European Commission President Ursula von der Leyen recently called for international leaders to propose a plan for an international carbon price at COP28.

Carbon taxes and pricing systems help provide a source of revenue for the government while helping companies assess the impact of climate change on their operations and investments. But so far, the fraction of countries or regions using such instruments remains quite small.

Carbon-pricing programs like the EU Emissions Trading System are considered an effective and economic way to reduce greenhouse gas emissions.

Platts assessed EU ETS Allowances for December at Eur83.68/mtCO2e ($89.74/mtCO2e) on Sept. 6. EUAs averaged Eur85.23/mtCO2e in 2022 and Eur53.52/mtCO2e in 2021, according to data from S&P Global Commodity Insights.

Getting clarity around the use of Article 6.2 and Article 6.4 of the Paris Agreement is needed to spur the growth of carbon markets.

Article 6 sets out the rules for global trade in greenhouse gas emissions reductions and as such has a critical role to play in the development of voluntary carbon credits.

Many key decisions and rules around the use of Article 6 have been pushed back to the COP28 in Dubai though a broad architecture of Article 6 was agreed at the COP26 summit in November 2021 after years of political wrangling.

Global 'stocktake' of climate actions

Suwaidi said he was hopeful that COP28 "will be a critical milestone" in the climate process.

"As the COP28 Presidency, we want to achieve the climate goals and the commitment that was promised at Paris, such as keeping 1.5 C within reach, the mobilization of capital, adaptation goals, and addressing loss and damage for vulnerable communities," he added.

Finalizing the world's first global 'stocktake," or "inventory" of climate actions is another key goal at COP28. The global stocktake, which itemizes what countries and stakeholders are doing or failing to do to meet their Paris Agreement commitments, is considered to be the centerpiece in global climate efforts.

The United Nations Framework Convention on Climate Change published its global stocktake synthesis report Sept. 8 outlining key technical findings, confirming the world is way off track to meet Paris Agreement commitments.

"There is a rapidly narrowing window to raise ambition and implement existing commitments in order to limit warming to 1.5°C above pre-industrial levels," the report said.

Based on current national commitments, the gap to emissions consistent with limiting warming to 1.5 C in 2030 was estimated to be between 20.3 billion mtCO2e and 23.9 billion mtCO2e, it said.

Global greenhouse gas emissions from energy combustion amounted to 33.75 billion mtCO2e, according to Platts Global Integrated Energy Model. Platts is part of S&P Global.