INTERVIEW: COP28 could be turning point for energy markets: IEA's Birol

A "successful" UN Climate Change Conference in Dubai hinges on a stronger commitment to climate goals by key fossil fuel producers, the head of the International Energy Agency said Nov. 7.

In a wide-ranging interview with S&P Global Commodity Insights, IEA executive director Fatih Birol said he has high expectations from COP28 but was realistic that some targets and outcomes would be tough to achieve, especially in the light of rising global conflict, with the energy markets already on edge.

Birol said the UN climate summit, which will take place from Nov. 30 to Dec. 12 in Dubai, has the opportunity to be a landmark event comparable with 2015's Paris summit.

COP28 wish list

When asked what a successful COP28 looked like, Birol listed five items.

"Governments agree globally to triple renewable capacity, and agree to double energy efficiency improvements," Birol said.

Thirdly "the oil and gas industry commit itself to Paris Agreement goals and set goals including a big reduction in methane emissions."

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Fourth, Birol said advanced economies must create financial mechanisms to support climate investment in developing countries and fifth, countries need to at last signal the need for an orderly retreat in fossil fuel use, starting with coal.

He admitted getting all parties to commit to a phaseout of unabated fossils fuels -- when emissions are not captured, utilized or stored -- was one of the "most difficult areas" on which to find consensus.

Wording on fossil fuel phaseout will be a contentious issue in Dubai, with some oil, gas and coal producer nations preferring to focus on carbon capture, utilization and storage.

The UN Framework Convention on Climate Change (UNFCCC) has repeatedly said phasing out of fossil fuels was urgently needed for the world to meet its Paris Agreement commitments, to limit warming to 1.5 degrees Celsius above pre-industrial levels.

Multiple crises

The mood ahead of Dubai was dominated by "international fragmentation" rather than the "international collaboration" evident in the run up to Paris, Birol said.

This comes as COP28, will be taking place in a region, where more than one-third of the world's oil exports is produced. This is also a difficult time for the Middle East, which is currently in the throes of an escalating Israel-Hamas war.

Rising geopolitical tensions have been a feature of the last few years, exacerbated by the Russia-Ukraine war and a weak macroeconomic environment amid rising inflation and high oil and gas prices.

The increased geopolitical instability in the Middle East could carry significant uncertainty for the climate negotiations in Dubai, according to analysts at S&P global.

"As uncertainty around the global economy outlook rises, some of the world leaders' priorities could shift and financial resources be redirected," they said in a recent note.

"The reignited conflict between Israel and Hamas, has a great potential to impact the outcomes of the conference by eroding consensus and affecting countries' positions on key topics of the COP28 action agenda."

Energy and politics

Energy and politics will be even more intertwined in the years to come, and energy diversification will be key to managing a smooth energy transition, according to Birol.

"I see geopolitics and energy will be more and more interwoven," he said, adding this trend was clearly observed in the clean energy sector.

The US and Europe have drawn up ambitious plans for clean energy technologies as they look to directly challenge China's dominance in global clean energy supply chains, which is already heightening trade frictions and intensifying competition.

However, a big advantage this year is the status of clean energy technologies, which are far more cost-effective compared with 2015.

"Their deployment is almost everywhere, and they are dominating, at least in electricity generation. In 2015, solar was for many people a romantic vision. It is now the mainstream," Birol said.

In its most recent annual World Energy Outlook report, the IEA said renewables will contribute 80% of new global power generation capacity to 2030, with solar accounting for more than half of the projected expansion.