Over the past two weeks, the news coming out of Dubai has been decidedly mixed. There were, as we will see, positive announcements. But these were counterbalanced by more sobering news—from a report where climate scientists suggested the world was careening toward a tipping point on climate change, to the awarding of COP29 to Azerbaijan, the second petrostate in a row to win the honor.
If you’ve been gripped with existential dread at the split screen playing out, you’re not alone. The officials and diplomats who descended on COP28 were ostensibly there to reach a consensus, but the draft agreements felt more like equivocation (surrender even?) than the ambitious commitments needed to get the world back on track.
The machinations and developments during COP28 highlighted a common theme of misalignment across several areas.
Incentives to act—and avoid action
Paths to net zero call for renewable energy to replace fossil fuels. The debate is about when these trajectories will intersect and broadly pits more-affluent nations with the means to invest in this shift against petrostates and oil companies that have a clear incentive to go full throttle on fossil fuels for as long as possible. Look no further than ExxonMobil, for example, which made $55.7 billion in profits in 2022.
Part of the issue is that climate change scenarios tend to focus on technological readiness for decarbonization and headline costs. Existing scenarios do not tend to pay much attention to broader socioeconomic impacts or to the geographic and temporal distribution of costs and benefits. Frameworks that apply this wider lens could be instrumental in providing a common fact base from which decision makers could understand incentives, maximize benefits, and prioritize investments.
Financing: Up-front pain for deferred gain
In the first few days of COP28, a potential agreement was announced involving the creation of a fund to compensate developing nations for the impact of climate change. The bloom was off the rose quickly when initial commitments from wealthy nations fell well short of full funding. This development has been emblematic of the larger financing challenges to support net zero. For example, the IEA estimated the world would need to spend $4.5 trillion annually by 2030 to limit global warming by 1.5° Celsius. In 2023, the total outlay was just $1.8 trillion.
On a fundamental level, investments are held captive to a couple versions of misalignment—timing and beneficiaries. On the first count, significant capital must be committed in the near term, but the benefits don’t accrue for years and sometimes decades. The rise in interest rates over the past two years as central banks sought to tame inflation, have made the calculus more difficult to square. On the second count, affluent nations have the resources to commit (in theory), but developing nations are most at risk to disruption from climate change and stand to benefit the most.
How should this misalignment be addressed? A carbon tax or cap-and-trade system may be the best way to steer investments from fossil fuels to renewable energy. Of course, agreeing upon and implementing such a system requires the same consensus among nations that continues to be so elusive on many climate-related matters.
Communications: Saying the quiet part out loud
Perhaps the most glaring misalignment of COP28 was its location and host. Even those who balked at Sultan al-Jaber, CEO of Abu Dhabi National Oil Company (Adnoc), serving as president of the conference might have hoped an environmental summit in the heart of an oil-producing region could produce surprising outcomes. That optimism cratered out of the gate with reports that Adnoc was planning to use the gathering to secure energy contracts with other nations.
This report was compounded by a video of al-Jaber five weeks before the start of COP28 declaring no science exists to support the phaseout of fossil fuels to limit global warming. A hastily assembled press conference saw al-Jaber suggest his remarks were taken out of context. As a result, this story dominated the news cycle for several days and seemed to confirm the narrative of greenwashing decried by COP 28 critics.
The dissonance between al-Jaber’s public and private comments reinforces the importance of authenticity, consistency, and discipline in messaging—and particularly on sustainability. And, increasingly, getting this right is also important for businesses. The EU’s Corporate Sustainability Reporting Directive (CSRD), which significantly raises the bar on sustainability-related reporting and disclosures and increases the number of companies that will have to report, goes into effect for the 2024 reporting cycle. The United States is also currently considering new guidelines. These new requirements offer companies an opportunity to put a stake in the ground and broaden awareness of their values and actions, but they also present new risks for organizations whose talk and actions don’t match.
Although COP28 ended with a watered-down agreement predictably lauded as a landmark deal while being trashed for its loopholes, it can be encouraging to remember the conference isn’t the end-all of climate action. Many countries are forging ahead with aggressive policies, and companies recognize their role in leading the charge. Nonprofits and start-ups are pursuing innovative work (see our Into the Weeds series for more details, inspiring stories, and insights), and climate warriors remain optimistic and resolute.
Let’s hope that spirit is more pervasive going forward.
