Thina M. Saltvedt

14-12-2023 15:25

The three most important takeaways from the COP28 meeting

COP28 ended this week with a compromise text on fossil fuel, consensus on a renewables and energy efficiency target and progress on a loss and damage fund for the least developed countries. Nordea’s sustainability expert Thina Saltvedt reflects on the outcome of and decisions made at the COP28 meeting.
Thina Margrethe Saltvedt Nordea
Sustainability expert Thina Saltvedt.

Transition away from fossil fuels

For the first time ever, a commitment to transition away from fossil fuels is part of a global climate deal. No previous decision in the history of climate negotiations has stated at transition away from all fossil fuels so explicitly. In the final text countries committed to “transitioning away from fossil fuels in our energy systems, beginning in this decade, in a just, orderly and equitable manner so as to achieve net zero by 2050 in keeping with the science”. Two years ago in Glasgow only coal was referenced. 

The COP28 presidency, United Arab Emirates, managed to balance produce an outcome with 130 countries in favour of this (including EU, US and many developing countries) and the fossil fuel producing countries opposing it, led by Saudi Arabia. Nonetheless, it is the first time a wording on fossil fuels is included in a COP text. The deal brings increased risk for oil and gas companies without a strong and credible Scope 3 strategy, and it is sending a clear signal to all fossil fuel-related companies which will now have no choice but to come up with clear plans. 

Expansion of renewable energy capacity 

A pledge to triple renewable power generation capacity by 2030 was signed by 130 countries (including the USA, the EU, Brazil, Nigeria and Canada, but excluding China, India, South Africa). In this pledge countries commit to work together to reach an installed capacity of at least 11,000 GW by 2030. While the transition away from fossil fuels statement is globally a strong statement and signal, the big ticket for market and investors is the tripling of global renewable power generation capacity by 2030 and the doubling of annual energy efficiency improvements by 2030 attached to the pledge. 

Ultimately fossil fuels will only be phased out if there is low-carbon and clean energy to replace it in the global energy system. Coupled with national and regional action, financing and investment it will be the biggest factor in starting to replacing fossil capacity globally and eventually achieving the phasedown/out in line with the 1,5 Celsius target from the Paris Agreement which has been politically difficult to put on paper. The pledge will probably also help provide policy stability to renewables developers/utilities, support demand for renewables equipment and boost grid investments.

Agreement on a loss and damage fund

The fund to compensate vulnerable countries for climate costs was already agreed upon on in the first day of COP28 and was considered a breakthrough and most likely helped to achieve the final outcome. Wealthy countries have so far pledged a combined total of just over $700m to the loss and damage fund for the least developed countries. $100m pledges were made by the United Arab Emirates, Germany, Italy and France. Nordics pledges as follows:

 local currencyMio. US dollars
DenmarkDKK 175$25.6
FinlandEUR 3$3.3
NorwayNOK 270$25.4
SwedenSEK 130$30

At the end of COP28 other important pledges were also made on cooling and methane which will help reduce near-term warming and boost companies offering solutions to manage, control and reduce other types of greenhouse gasses. 

For Nordea and other banks which have committed to facilitate the real economy transition and have targets in line with the Paris Agreement, the COP28 ended with several positive results. We look forward to support our customers in their transition plans and help them capture the growth opportunities that the deals and pledges implies.