The end of the fossil fuel era?

Good morning from New Economy Brief.

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Nearly 200 nations have agreed a text that ‘calls on’ every country to transition away from fossil fuels at COP28, but what does this actually mean and how does it affect the UK?

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This week’s New Economy Brief looks at the outcome of the COP28 negotiations and how they might affect domestic UK climate policy and politics through and after the next general election. 

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The final agreement. 

Delegates from around the world have been in Dubai over the last couple of weeks seeking to secure new commitments on tackling climate change. While various blocks of countries fought over the wording of the final text, the Conference of the Parties (COP) settled on an agreement that “calls on” national governments to “contribute to global efforts, in a nationally determined manner, taking into account the Paris Agreement and their different national circumstances, pathways and approaches”, which includes the hotly contested phrase: “transitioning away from fossil fuels in a just, orderly and equitable manner”. Much of the debate at COP28 focused on this wording, and on whether the conference would declare the end of the fossil fuel era.

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Battling over semantics. The text is not legally binding and the agreement merely ‘calls on’ governments, which is the UN’s legal jargon for an ‘invitation’ or ‘request’ - as Carbon Brief’s Leo Hickman explains, this is “the *weakest* of all the various terms used for such exhortations”. The original text included a stronger wording implying a complete phase-out of fossil fuels by 2050, which was pushed for by ‘high ambition’ parties such as smaller island states and progressive European governments. But this was opposed by countries whose income depends heavily on fossil fuel sales, such as Saudi Arabia, Russia and Iraq. The final agreed text is a compromise, and the BBC’s Sameer Hashmi explains that “transitioning away” from fossil fuels was acceptable to objecting parties as it gives them “a fair bit of flexibility on how to achieve the end objective without being tied to any firm commitments”.

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Why phasing out fossil fuels is still controversial. It isn’t just petrostates who object to the concept of phasing out fossil fuels. Although much media commentary focused on the opposition from major oil producers, developing countries like Uganda and Bolivia object to the idea because they say they need the money from selling fossil fuels to eradicate poverty in their economies. They argue that developed countries got rich by burning fossil fuels, creating the climate crisis in the process, so developing countries must get the chance to industrialise as well as funds from richer nations to help decarbonise their energy systems. 

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Who is going to pay for the energy transition?

Getting nearly 200 countries to agree to ‘transition away’ from fossil fuels is one thing, but finding a way to pay for the transformation of the global energy system is quite another. Developing countries urged that any agreement should be contingent on developed countries providing climate finance to help poorer nations with the energy transition, but developed countries have so far failed to honour their promises of $100bn a year in climate finance to the developing world - a target widely seen as an ‘acid test’ for whether richer countries are serious about tackling climate change.  

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Who should transition first? Developing countries also argue that developed countries should move away from fossil fuels first (hence the inclusion of “just, orderly and equitable manner”). Civil Society Equity Review suggests that for fossil fuels to be phased out equitably and justly, “wealthy countries must provide significant amounts of climate finance and international phase-out support to the transition in poorer, [fossil fuel] dependent countries”, because these countries have both the most ability to pay, and the greatest responsibility for historic emissions. The report also explains why richer nations like Canada, the US, Norway, Australia and the UK must end fossil fuel extraction by the very early 2030s “to leave highly-dependent, poorer countries with enough carbon budget to phase out extraction in a reasonably just manner”. Without financial support from the developed world, there is a risk that a rapid transition away from fossil fuels would mean more poverty, debt and economic crises in the developing world. (Power Shift Africa’s Mohamed Adow provided suggestions for a final text that recognises poorer nations’ need to develop sustainably.)

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Loss and Damage fund. In UN climate negotiations 'loss and damage' is the term for the principle that rich countries should compensate poor ones for the climate costs their historical emissions have caused. For many countries in the global South this is central to climate justice. Developed countries have always resisted it; they fear it is the slippery slope to being held liable in international courts for trillions of dollars in damages. This year a permanent Loss and Damage Fund was established to provide financial transfers, but Climate Action Network (CAN) UK argues that accountability is lacking. For instance, the UK immediately pledged up to £60m to the fund, but CAN says this is mostly just existing commitments from the Overseas Development Aid and climate finance budgets. Over $700m has been pledged to the loss and damage fund so far, but this is less than 0.2% of the losses developing countries are facing every year.

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What does this mean for the UK’s transition to net zero?

Under the Paris Agreement, every five years the COP negotiations include a ‘global stocktake’ which reviews the progress that has been made to inform the next round of ‘Nationally Determined Contributions’ (NDCs). COP28 was the first to do this, and future negotiations should set out stronger emissions targets for each country from late 2024. The UK’s current NDC commits the government to reduce emissions by at least 68% by 2030 from 1990 levels. However, there are no international legal mechanisms to ensure countries meet their NDCs. (And even if they did meet the targets they already committed to, the International Energy Agency calculates that they will only get us 30% of the way to keeping warming below 1.5C.)

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Domestic legal targets under the Climate Change Act. Domestically, however, the Climate Change Act of 2008 legally binds the UK government to carbon budgets that limit our greenhouse gas emissions during each five-year period. This includes a target to get at least three quarters of the way to net zero within the next 13 years. Following a successful case against the government by ClientEarth, Friends of the Earth and the Good Law Project, the High Court recently declared the government’s climate plans unlawful for lacking detail. Further, the Climate Change Committee’s recent progress report concluded that around half of the UK’s emissions reduction targets are at risk of being missed by 2030, or have insufficient plans to meet them. So a stricter NDC in 2024/25 might not cause trouble with international law for the UK government, but it would increase domestic political pressure for more ambitious climate action.

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Climate politics and the next general election.

COP28 sent a signal to the world that the phase out of fossil fuels is ‘inevitable’, in the words of UN Secretary-General Antonio Guterres. In this context, the Conservative government’s support for new oil and gas licences looks increasingly out of step with the international consensus. Remember: staying within the global carbon budget of 1.5C of warming requires no new fossil fuel exploration. This also poses a challenge for Labour. Though the Opposition have committed to decarbonising the energy system by 2030 through their Green Prosperity Plan, and stated they oppose any new oil and gas developments, they have not pledged to cancel the most recent round of oil and gas licences in the North Sea; including the controversial Rosebank oilfield. Uplift has calculated that the emissions from this development alone would exceed the share of the UK’s carbon budgets that should come from oil and gas production, from 2028 onwards. (Also, see Common Wealth’s recent explainer of who owns petroleum licences in the North Sea.)

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Protectionism vs climate finance? Given that providing climate finance for developing countries is essential to retain international coordination in the fight against climate change, the protectionist turn in UK politics is a problem. Rising populism is making it harder for politicians to pledge to send taxpayer money abroad when there are so many other priorities in fixing the domestic economy. (Labour’s Lisa Nandy clarified that restoring the UK’s development aid budget isn’t a ‘day-one’ priority if they win the next general election.) 

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Restoring the UK’s international climate leadership role. In this context, the original architect of the Paris Agreement, economist Laurence Tubiana, was using COP28 to propose a new international tax on fossil fuel polluters to fund climate adaptation. Annual fossil fuel subsidies amount to $7tn a year, funding oil and gas industry profits of $4tn, while developing countries need around $300bn a year to adapt to the most damaging aspects of climate change. Making big polluters and not taxpayers provide climate finance could help overcome political obstacles in richer nations. Whoever wins the next election, the question of how the UK can play a meaningful role in global decarbonisation will remain a live one.