COP28: Muted outcome sends weak signals for next round of NDCs in 2025

Despite its success in introducing language against fossil fuels for the first time, COP28's final outcome remains ambiguous, adds complexity to the energy transition and contains loopholes, which may result in weak resolutions in the run-up to the submission of updated Nationally Determined Contributions (NDCs) in 2025 by Asia Pacific countries, according to industry experts.

This COP marks the first-ever Global Stocktake (GST), which evaluates countries' collective progress in meeting the Paris Agreement's target of keeping global temperature rise within 1.5 Degree Celsius. The final GST text, however, was criticized for lacking both ambitious commitments and clear directions about what to do next.

"The commitment [on fossil fuels] lacks specifics on execution methods and timelines, offering flexibility for each country to select its unique pathways," said Zhu Kunfeng, director of upstream research and analysis, S&P Global Commodity Insights.

He said this marks the onset of a more demanding phase: navigating the transition away from fossil fuels, which are dominant in the current global energy system, and expected to play a critical role in the future for most energy scenarios.

"The commitment to transition away from fossil fuels in COP28 also introduces ambiguity regarding the simultaneous push to accelerate CCUS (carbon capture, utilization, and storage) technologies," Zhu said, adding that these technologies target emissions reduction from fossil fuel use and are being pursued by oil and gas companies to achieving their net-zero targets.

"The moving away from fossil fuels, including fossil fuels coupled with CCUS, adds complexity to determining the best strategy and pace for the transition," he said.

Zhu said the timing of the transition from fossil fuels holds critical importance in determining if COP28 commitments are sufficient for reaching the 1.5-degree goal. "COP28 doesn't definitively state this timing, leaving uncertainties about its overall impact," he said.

Not Enough

"I think this year's COP was just salvaged on the last day. While the final GST has 'transitioning away from fossil fuel' in the text, it also provides enough loopholes to countries to get out of it," Nishtha Singh, assistant director for climate with US-headquartered think tank Asia Society Policy Institute (ASPI), said.

She said while the loss and damage fund was commendable, the failure to reach a consensus on Article 6, the absence of CBDR [Common but Differentiated Responsibilities] principle that makes developed countries do more in the GST text, the stronger language on coal than oil and gas without significant progress on climate finance, and the provision to use 'transitioning fuels' that still helps oil and gas companies and countries are the areas of concern for developing countries.

"There was a small movement in this COP by inclusion of 'fossil fuels' for the first time. However, we need a much faster pace to stay within 1.5 degree target. The planet right now needs a much more successful COP," Singh said.

"It will be interesting to see the new NDCs that countries will submit by early 2025. However, the current GST text is weak. According to some estimates, basis the current GST text, we are projected to reach just below 3 degrees Celsius temperature rise," she said, highlighting that the science calls for "phaseout of fossil fuels by 2050."

Singh also pointed out that the failure to reach consensus for Article 6 text was one of the biggest disappointments of COP28, and that recommendations provided by the Supervisory Body (SB) should have been considered in the draft text.

"A consensus on Article 6 would have given better clarity to market participants and brought in some momentum to the market," she said. "Negotiation delay has now further delayed the operationalization of the market further than 2025. The failure to bring consensus on Article 6 has now put the market under huge uncertainty," Singh added.

"I haven't really done the numbers myself, but I think the 'transition from' commitment is not enough to meet the primary goal of the Paris Agreement and more will be needed next year," Tony Wood, energy and climate change program director at Australian think tank Grattan Institute, said.

He said COP28 commitments will be important for Australia and its Asian neighbors, particularly as they impact the positions of China, India, South Korea, and Japan.

"Australia has a complex role as a supplier of carbon-intensive commodities like coal and gas and huge potential for green commodities like steel, alumina, and ammonia. We will have to work closely with each of these countries as they make their own emissions reduction commitments," he added.

Accelerated renewables

COP28's Global Renewables and Energy Efficiency Pledge by over 100 countries was also hailed as a key success. One key item under the pledge was tripling renewable energy capacity by 2030.

S&P Global forecast that based on existing policies and projects, global renewable generation capacity is expected to triple in 2037, which means that policies would need to accelerate significantly to meet the 2030 goal.

China will triple its renewable capacity in 2033, Africa and the Middle East in 2032, the US in 2035, India in 2036, OECD's Asia Pacific countries in 2037, and the EU in 2042, according to S&P Global forecasts.

S&P Global's Zhu said the 2030 target is likely to escalate the demand for renewables, potentially straining the supply chain, but positioning Asian nations with proficiency and manufacturing capabilities to expand their foothold.

ASPI's Singh said the target should help channel more investments towards energy efficiency and clean energy sectors. "However, it will still largely depend on NDCs that are submitted in 2025 and domestic policies," she added.