What Does COP28 Mean for the Private Sector?

What Does COP28 Mean for the Private Sector? 

The 2023 United Nations Conference of the Parties (COP28) marked the first Global Stock take to assess progress toward the Paris Agreement since its ratification in 2015 at COP21.  The Paris Agreement is an international treaty that aims to limit the increase of average temperatures to below 2℃ above pre-industrial levels, ideally below 1.5℃. If current practices continue, UN projections indicate that by the end of the century, the average temperature could increase up to 2.9℃. A common critique of the Paris Agreement is that it is largely aspirational and lacks clear metrics and targets for achieving its goals.  

For COP28, over 100,000 attendees assembled in the United Arab Emirates (UAE) from November 30 to December 13, with the major aim of creating a global framework and concrete targets for realizing the Paris Agreement. Here, we will look at the key outcomes of COP28 and examine the role the private sector may play in reaching these new targets and goals. 

Key Outcomes of COP28 

At the conclusion of COP28, Parties reached an agreement known as the UAE Consensus. This agreement calls on all Parties to contribute to doubling energy efficiency and tripling renewable energy capacity by 2030. Additionally, the UAE Consensus calls for the phasing down of coal power, accelerated efforts toward net-zero emission energy systems, and the reduction of all greenhouse gas emissions beyond just CO2, such as methane. 

What some are hailing as the most monumental part of the UAE Consensus is its call for Parties to contribute to transitioning away from fossil fuels in energy systems. COP28 is the first time that a final COP agreement has called upon countries to reduce their fossil fuel usage in some way. However, the verbiage of “transitioning away” from fossil fuels has also been widely criticized, as many hoped for the more definite “phasing out” of fossil fuels. 

While the UAE Consensus provides more guidance than the Paris Agreement on actions countries can take to curb global warming, critics point out that the language of the document is still rather vague. However, the document still provides insight into the direction of the climate action landscape of the coming decade. In particular, the UAE Consensus notes the role the private sector will play in the implementation and execution of these new targets. 

The Role of the Private Sector 

One of the important parts of COP28 is the inclusion of the private sector in the conference itself, with over 1,300 organizations attending the Business and Philanthropy Climate Forum. Not only was the private sector involved in the COP, but the UAE Consensus also explicitly recognizes the need to enhance collaboration between the private sector and governments. To address this gap, the UAE Consensus encourages Parties to strengthen their guidance of the private sector and emphasizes the importance of clear regulations and incentives in facilitating and executing a “just transition” to net-zero emissions. 

The term “just transition” is often highlighted in the UAE Consensus, and it is one area in which the private sector will play an essential role. While there are many facets to a just transition, the document explicitly mentions the need for a just transition of the workforce in creating jobs for the purpose of economic diversification. In this way, the UAE Consensus underscores the role of the private sector in strengthening the social pillar to bring about equitable environmental change. The private sector is a critical aspect of this workforce transition, with the opportunity to proactively integrate ESG practices into the workplace. 

Another area that warrants the private sector’s attention is climate financing. A major aim of COP28 was to mobilize funds for climate action and demonstrate how climate investment can act as an economic opportunity. According to the International Monetary Fund (IMF) and International Energy Agency (IEA), private investment in emerging markets and developing countries will need to increase at least 80% for climate goals to be met, as public funding is projected to be limited. Under this agreement, the private sector is not committed to any investments or targets, but climate financing and investment will be a growing market. 

While the language around the private sector’s involvement is vague, it is still important to see that the private sector was an integral part of the conversation at the COP. COP28 demonstrates that Parties view the private sector as a space for growth and innovation. The relationship between governments and the private sector through regulations, workforce development, and investment will play a critical role in the success of the Paris Agreement. 

What’s Next? 

In an effort to keep countries on track for the Paris Agreement, Parties must establish Nationally Determined Contributions (NDC) outlining their targets for decreasing greenhouse gas emissions and adapting to climate change effects, which often includes a financial plan. NDCs must be updated every five years, and the next round is due to be presented at the beginning of 2025 before COP30 in Brazil. 

COP28 provides a preview into potential upcoming regulations and opportunities for the private sector. It will be important to watch for the new US NDC to see how the US plans to respond to the commitments of COP28 and beyond. 

Capaccio is committed to informing our clients on all relevant emerging regulations and standards. COP28 will potentially lead to new environmental regulations in the coming months and years in accordance with the targets outlined in the UAE Consensus. Capaccio’s EHS-Dashboard™ equips clients with the necessary data to ensure regulatory compliance. The EHS-Dashboard™ is also highly customizable and can track individual company metrics and targets, identifying potential risks and opportunities. To learn more about the capabilities of the EHS-Dashboard™, schedule a demo. As the private sector will increasingly become more involved in climate change action efforts, Capaccio can assist your company in taking informed and proactive steps forward in navigating this emerging landscape.