Rich countries must practice what they preach on fossil fuel phaseout

The much argued over words “fossil fuel phaseout” did not in the end make it into the final declaration at COP28 in Dubai. Yet more than half of the world’s governments expressed support for its inclusion, and all countries signed up to “transitioning away from fossil fuels”. Those pushing hard for “phaseout” in the declaration included the EU, US and Canada. These countries must now ensure that fossil fuel phaseout and transitioning away from fossils is not just negotiating language, but something that happens in the real world. They must begin a rapid phaseout of their domestic production and use of fossil fuels, and provide concessional finance to developing countries to support their transition. And they must ensure that their financial institutions stop enabling fossil fuel expansion around the world and contribute — with the help of derisking mechanisms in developing countries — to the financing of the tripling of renewables deployment and doubling of energy efficiency that is promoted in the final declaration. 

Much of the geopolitical drama at COP28 centered around whether first global stocktake under the Paris Agreement — which does double duty as the COP’s final declaration — would refer to the need to phaseout the use of fossil fuels. None of the previous 27 COP declarations had mentioned the need to reduce fossil use; last year’s declaration was the first to even include the words “fossil fuels” — the overwhelming cause of the problem the climate negotiations are trying to solve. 

Last minute opposition led by the Saudis killed the chance of getting “fossil fuel phaseout” in the declaration. The compromise language settled upon is “transitioning away from fossil fuels in our energy systems, beginning in this decade, in a just, orderly and equitable manner.” But the majority of the world’s countries did go on the record at COP calling for “a global phase out of unabated fossil fuels and a peak in their consumption already in this decade” (1). 

The EU, and even the United States (world’s biggest oil and gas producer), Canada (world’s fourth biggest oil and gas producer), Norway and the UK (Europe’s two biggest oil producers), and Australia (the world’s second biggest exporter of both LNG and coal) all pushed for phaseout language in the declaration. And all the world’s countries supported text in the declaration calling for tripling renewables capacity globally and doubling annual energy efficiency improvements by 2030.

The countries that supported a fossil phaseout at COP include not only many of the world’s biggest producers and consumers of oil, gas, and coal, but also the most important suppliers of public and private finance for fossil fuels globally. They do not need OPEC’s or anyone else’s permission to act on their COP rhetoric. They must walk the talk, starting with ending new oil and gas production on their own soil and seabeds, and rapidly decreasing fossil imports and turbocharging the deployment of sustainable energy.

During COP the US joined the Powering Past Coal Alliance (2). This is a positive move, but it should be followed by rapid action to accelerate the retirement of its coal fleet (still the third biggest in the world), and measures to ensure that US banks and investors pull out of financing coal developers (of both thermal and metallurgical coal) and put funds into just coal retirements overseas. And of course the Biden administration needs to stop supporting new oil and gas projects, starting with an end to the permitting of new LNG terminals and to its financial and diplomatic support for LNG globally (3).

Beyond this, these wealthy countries must stop their fossil fuel companies expanding overseas. And they must ensure that their public and private financial institutions stop supporting new fossil projects and the companies developing them, and ensure the massive increase in funding needed to enable the renewables and energy efficiency targets to be met. As is enshrined as a basic principle in the UN climate convention, developed countries have both the historical responsibility and the capacity to act to support developing countries to transition.

Transitioning out of fossil fuels will also require tens of billions of dollars in concessional and affordable funding to pay for just closures of existing fossil fuel infrastructure, and most immediately coal plants and mines. Various significant developments relating to phasing out coal took place at COP (4). These include: 

• The publication of the final version of a report from the Glasgow Financial Alliance for Net Zero (GFANZ) on financing coal retirement mechanisms (CRMs) in the Asia Pacific (5); 
• An agreement between donors and the Vietnamese government on a “resource mobilization plan” for that country’s Just Energy Transition Partnership (JETP) (6); 
• And the announcement by French President Macron of the launch of a Coal Transition Accelerator (CTA) which includes a commission to help unlock new sources of funding to shut down coal and build clean energies, and an initiative led by the OECD and IEA to establish a “gold standard” to measure the risks of private sector investments in new coal assets (7).
  

The day before the launch of the CTA, Reclaim Finance and 11 other organizations from SE Asia, South Africa, Europe and North America released a set of ten guiding principles for financing CRMs. The principles stress that all finance for new coal infrastructure must stop immediately; power generation lost from phasing out coal must be replaced by sustainable renewables and not high-carbon technologies like fossil gas and biomass; and financing must be provided in the form of grants and concessional loans. 

A large part of the finance for CRMs and clean and sustainable energy technologies for developing countries will need to come from the private sector. Clearly the private sector is only going to provide finance if it believes it can make an acceptable return at a reasonable level of risk. Numerous calls have been made, papers written, and initiatives launched, on various types of “blended finance” mechanisms by which the public sector can take on some of the perceived risks of financing the energy transition in the Global South (8). 

However if governments and multilateral agencies are going to guarantee private banks and investors to make money in developing countries, they must also insist that these financial institutions are not able to continue undermining climate goals with their other activities. This means at a minimum that any financial institution benefiting from public support must immediately cease their support for any form of financing of fossil fuel expansion. 

The strength of the political push for fossil fuel phaseout language to make it into the final text from Dubai was unprecedented. And while “transitioning away from” fossils may seem weaker (the reason why OPEC and friends were prepared to accept it) it in effect means the same thing over the short and medium term – stop measures that expand fossil fuel production and consumption, and instead move funding to sustainable energy and the decommissioning of fossil fuel infrastructure. No one ever transitioned away from an unhealthy habit by doing more of it. In any case, many governments have laid their cards on the table as being strongly in support of the phaseout, and they cannot use the failure to get all 197 governments to agree to it as an excuse to not start acting on what they have said is essential to the future of the world.