Although the much argued over wording on a “fossil fuel phaseout” did not make it into the final declaration at COP28 in Dubai, all countries have signed up to “transitioning away from fossil fuels”. This puts the emphasis not on the final objective but on how to achieve it, which raises the issue of financing, and also of the energy supplies and technologies to be developed and maintained between now and an eventual phase-out of fossil fuels. As well as providing concessional finance to developing countries to support their transition towards sustainable energies, developed countries must ensure that their financial institutions stop enabling fossil fuel expansion around the world and that they contribute, partly through derisking mechanisms, to financing a tripling of renewables and doubling energy efficiency as promoted in the final declaration.
Beware of those pushing of false solutions
While the final text reiterates the need to triple renewable energy and double energy efficiency, it is very lenient on coal, referring only to the need to reduce related emissions, and leaves the door open to the development of gas and expensive and unproven technologies such as CCS, which could unnecessarily — and dangerously — slow down the exit from fossil fuels.
The risk of developing gas is reflected in the Coal Transition Accelerator, the French initiative to phase out coal. The signatory members undertake to support the development of renewable energies in countries heavily dependent on coal, but the initiative does not close the door on massive conversions of existing power stations to gas. The initiative would take one step forward, two steps backward if it supports gas or other false solutions such as ammonia, locking in emissions that are incompatible with a 1.5°C trajectory for decades. By contrast, the IEA’s Net Zero scenario projects a total decarbonisation of electricity production by 2040 throughout the world, which cannot be achieved with new investments in gas and other high-emission technologies.
The need for concessional finance
It is important to note that a majority of the world’s governments were strongly behind the inclusion of the word “phaseout” in the final declaration and that those pushing for it included the EU, US and Canada.
These countries must now ensure that “fossil fuel phaseout” is not just negotiating language, but something that happens in the real world. While they must immediately act to stop the expansion of their domestic fossil fuel industries, they must also provide the concessional finance needed for developing countries to retire their fossil fuel infrastructure, and to supercharge their build out of renewables and energy efficiency.
No public subsidies for fossil fuel developers
Transitioning out of fossil fuels will require a massive volume of financial flows from developed to developing countries. According to the IEA, more than 80% of this financing must come from the private sector.
Governments need to provide the de-risking mechanisms and other processes needed to create the conditions for their private financial institutions to invest in the transition in developing countries. But we also need to avoid a fool’s bargain with private banks profiting from public subsidies to cut emissions while still financing polluters. Let’s remember that even French banks, who claim to lead on climate, remain the biggest European financiers of fossil fuel developers. Countries like France and the UK must ensure that their financial institutions stop enabling fossil fuel expansion around the world and guarantee that any banks or investors who benefit from public sector subsidies and guarantees for investing in the transition have committed to ending their financing of fossil fuel expansion.
