Delegates from nearly 200 nations convened in Dubai from November 30 to December 12, 2023, to participate in the 28th United Nations Climate Change Conference, also known as the Conference of the Parties (COP28). The COPs are the world's top decision-making body on climate issues, as well as one of the world's largest international gatherings, where leaders convene to collaborate on climate change solutions.

Few months earlier, On July 27th, the UN Secretary-General, emphasized the need for world leaders to stand up for climate action and climate justice, notably those from the G20 nations, which account for 80 percent of global emissions. The UN secretary-General stated, “The era of global warming has ended; the era of global boiling has arrived”. This warning was clearly heard in the COP28 summit, which aimed to mobilize more funds for climate adaptation, and expected to provoke more resistance from hydrocarbon producers, against having these funds efficiently utilized[i].

The UAE Consensus

The UAE provided a watershed opportunity for the world to come together, change course, and boost efforts to keep 1.5 degrees Celsius within reach, so that the ambitious Paris Agreement targets can be met. At the COP28 summit, nearly every government has pledged to phase out fossil fuels.

The UAE Consensus is a comprehensive agreement signed by 197 countries and the European Union that, among other things, lays the foundation for a transition away from fossil fuels, triples renewables, and doubles energy efficiency by 2030, as well as ushers in a new climate finance architecture to achieve net zero emissions by 2050.

The UAE Consensus was provided through the Paris Agreement's four pillars: speeding a just energy transition, rectifying climate finance, focusing on people and nature, and encouraging inclusion in climate action. According to preliminary estimates, the United Nations Climate Summit in Dubai contributed to the mobilization of a record $85 billion in a committed climate action money, including three funds namely loss and damage fund, green climate fund and ALTERRA climate fund[ii].

To help developing countries meet their climate goals, wealthy countries must work together to achieve the aim of jointly raising $100 billion[iii] in the context of significant mitigation action and transparency on implementation until 2025.

UAE leaders’ declaration on a global climate finance framework

The global agenda for sustainable development must be comprehensive, systemic, and revolutionary. Climate transition plans provide a vehicle for navigating a fast-changing environment, identifying trade-offs, and creating measures that satisfy larger sustainable development and climate goals. Governments must discover methods to use the technological, economic, social, and environmental knowledge available across society while also ensuring cohesiveness and unity of purpose. 

True solutions need intelligence and a comprehensive perspective, in addition to technical knowledge. Similarly, international collaboration is essential for drawing on the expertise and resources of governments worldwide, ensuring that lessons and solutions are shared, and ensuring that no area, country, or community falls behind.

Investing $5-7 trillion per year in greening the global economy by 2030 will be vital for meeting the common climate goals[iv]. Collaborative efforts to achieve the goals of the Paris Agreement present an opportunity to expedite low-carbon, climate-resilient, and nature-positive growth at the local, regional, and global levels. This is turn will contribute to the attainment of the Sustainable Development Goals (SDGs) and promote inclusive communities.  

Global leaders are urged to grab this unique economic opportunity for inclusive and shared prosperity, so that no nation is forced to choose between combating poverty and combating climate change. The world does not need to start from scratch; instead, it should build on major initiatives such as the Paris Pact for People and Planet (4P), the Bridgetown Initiative, the Accra-Marrakesh Agenda, the G20 New Delhi Leaders' Declaration, the Nairobi Declaration on Climate Change, and the African Leaders' Call to Action.

Providing equitable, country-owned transitions 

Climate change has the potential to create unparalleled possibilities. They are based on the transformation of energy and industrial sectors, as well as sustainable transportation and agriculture systems, the development of climate-resilient, nature-positive economies, and just transitions to net-zero economies. To seize these possibilities and accomplish country-owned transformations that leave no one behind, developing nations will often require concessional resources to unleash private capital, as well as large-scale transfer of knowledge, skills, and technology. These initiatives must be based on strong domestic climate policy frameworks and pledges, as well as adaption methods and solid data[v]

According to the IEA, global CO2 emissions from transportation were roughly 8.2 gigatons in 2019, accounting for over one-quarter of total global CO2 emissions. Since 2000, emissions have gradually climbed by roughly 2% each year, but grew by less than 0.5% in 2019, owing mostly to efficiency gains, electrification, and increased use of biofuels. For many years, there has been growing concern about the e-health effects of particle and other air pollution emitted by transportation[vi]. The World Health Organization (WHO) estimates that more than 80% of persons living in metropolitan areas where air quality is monitored are exposed to levels of pollution that exceed WHO-recommended limits[vii].

The fiscal cost for energy transition is likely to be considerable due to the transition's high investment intensity. Simulations reveal that the transition, in all of its routes, will be capital-intensive, with total CAPEX required by 2040 ranging from US$32.7 billion in the current policies scenario to US$94.9 billion for the deep decarbonization scenario. A significant portion of the investment is frontloaded. By 2025, almost 28 percent of the overall CAPEX should be allocated for the energy transition. All transition options will incur a large fiscal cost, which will be represented in the budget deficit as a percentage of GDP[viii].

Climate efforts to reduce emissions and increase resource efficiency can contribute to a more equitable and inclusive transition by creating more and better jobs in a variety of sectors, particularly when combined with policies to support labor force adjustment and upskilling, as well as private sector development. Investing in decarbonization and energy efficiency will lead to an increased demand for labor in renewable energy generation, installation, maintenance, and building efficiency upgrades- all need a diverse set of skills. Complementary investments in skills, both in the workplace and via formal technical training and education, will help developing countries’ workers fulfill this rising need. Emerging industries will create opportunities for entrepreneurs in areas like energy audits and monitoring, as well as green building design.

Making fiscal room for climate action

The International financial system, both public and private, has to be made more resilient to more frequent and severe shocks. This can be accomplished through the increased use of climate-resilient debt provisions, the consideration of debt-for-climate swaps, and the issuance of sustainability related bonds (such as green bonds). Additional voluntary IMF Special Drawing Rights (SDRs) should be rechanneled, subject to national legal frameworks, including through the resilience and sustainability trust (a trust that helps low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability).

The world also needs to see the complete implementation of the common framework for debt treatments beyond the Debt Service Suspension Initiative DSSI[ix]. Highly concessional funding mechanisms, such as the International Development Association and its crisis facility, must be appropriately provisioned to effectively serve the poorest and most vulnerable nations.

Extending the sources of concessional climate finance

Climate change mitigation, adaptation, and response will require considerable additional funding, including concessional financing with favorable terms. However, in many locations and industries, efforts to lay the groundwork for climate-smart growth may not necessarily yield returns consistent with private-sector models. Therefore, it is necessary to address these gaps, especially in the case of adaptation, which often necessitates non-debt funding. 

Innovative mechanisms to explore include better use of hybrid capital; policy-based guarantees; portfolio guarantees of Multilateral Development Bank (MDB) loans; global philanthropy; re-channeling of inefficient subsidies; and emissions pricing and taxation mechanisms, as applicable and in accordance with national circumstances, and we highlight upcoming initiatives in this regard.

The MENA region’s transition prospects

The Middle East and North Africa region is an important component of the global energy system, accounting for more than half (57%) of the world's oil reserves and two-fifths (41%) of its gas reserves[x]. Fluctuating fossil fuel prices impact economic development in the region and pays a high bill to hedge against this volatility risk. Abundant renewable resources, such as solar and wind energies, shall help both, net oil importers and exporters, have a more sustainable development path. 

The abundance of solar radiation and suitable wind resources create optimal circumstances for renewable-based power generation. In 2022, the renewable capacity in the region witnessed a record increase of 12.8% (3.2 GW), with Iran, the United Arab Emirates (UAE), and Jordan leading the area[xi]. To ensure future earnings, the region's hydrocarbon-producing nations aspire to preserve their world-leading energy-export status by developing low-carbon alternatives such as hydrogen and carbon capture, utilization, and storage (CCUS).

Several international projects have been joined by GCC nations including: The Carbon Sequestration Leadership Forum, the Oil and Gas Climate Initiative, the Net Zero Producers Forum, and the Global Methane Pledge. Transition investment vehicles in GCC nations include state-owned enterprises and sovereign wealth funds. For example, the Kingdom of Saudi Arabia (KSA) plans to invest USD 270 billion in its electricity industry between now and 2030. This includes investments in Combined Charging Systems (CCS) and local EV manufacture. Masdar, the UAE renewable energy firm, estimated its global portfolio of clean energy projects at USD 30 billion in early 2023.[xii]

What should we expect from the COP28?

Global climate finance has almost doubled from $653 billion in 2019-2020 to $1.3 trillion yearly in 2021-2022. However, the proportion of climate financing used for adaptation is declining, falling from 7% in 2019-2020 to 5% of overall climate finance in 2021-2022.[xiii]

The COP27 concluded with a landmark agreement to give "loss and damage" financing for disadvantaged nations bearing the brunt of climate change. The fund was created on the first day of the COP28, representing a way for industrialized nations to distribute catastrophe recovery funds to underdeveloped countries. 

This was a 28-year-long struggle to recognize that those responsible for the greatest emissions should pay for the consequences. However, the fund has only received $429 million, far less than the anticipated $400 billion in annual damages in poor nations, and no promise has been made to expand funding levels. Given that the United States is the leading contributor to total greenhouse gas emissions, the United States' contribution of $17.5 million is pitiful. 

The UAE pledged $30 billion to the ALTERRA fund, including $5 billion for the Global South, in the largest single deal agreed at COP28. ALTERRA is seeking to raise $250 billion in institutional investment by 2030 to support large-scale climate solutions throughout the world[xiv]. Out of the 97,000 individuals attended COP28, 2,456 fossil-fuel lobbyists were present, outnumbering all individual nation delegations.