Business giants back fossil fuel ‘phaseout’

Hello from Dubai. Yesterday’s official rest day passed all too quickly, and national officials are now locking horns again in negotiations that will continue until the final day of the conference on Tuesday (or, more likely, some antisocial hour on Wednesday).

As I’ve written before, the debate over a fossil fuel “phaseout” agreement is central to this event. COP28 president Sultan al-Jaber has made clear his opposition, arguing that it would be economically ruinous.

But some of the world’s biggest companies have now thrown their weight behind the idea, in an open letter to world leaders. Read on for the details. — Simon Mundy

COP28 in brief:

• Azerbaijan said it wants to host next year’s COP29 summit, and that it had secured the vital support of both Armenia and Russia.

• A coalition of indigenous groups and non-profit organisations called on world leaders to protect indigenous peoples’ rights in the energy transition.

• Today is officially designated “youth, children, education & skills day” at COP28, with a range of events and discussions on related subjects.

How much good is big business doing at COP28?

Vladimir Putin may have bypassed COP28 on his way to laughter-filled meetings with Gulf state leaders in Abu Dhabi this week, but Gazprom — the Russian state-controlled fossil gas giant — was very much present.

In an event at the Russian pavilion here in Dubai’s Expo City, Gazprom vice-chair Oleg Aksyutin gave a presentation on the company’s “climate strategy until 2050”.

Aksyutin is an interesting character, having previously claimed that renewable energy is as bad for the planet as coal power (and much worse than Gazprom’s gas, of course). This week he stressed Gazprom’s work to promote gas-powered road vehicles, and to reduce methane leaks from its pipelines.

I also noticed Gazprom this week in an online tool provided by think-tank InfluenceMap, which tracks companies’ lobbying around climate and energy issues. This special COP28 database shows whether the companies covered are attending the conference, and grades them on how far their public lobbying is aligned with the goals of the Paris Agreement.

Of all the companies in the database that are attending COP28, Gazprom has the most problematic lobbying record, with a woeful “E” grade. But 18 other big companies attending COP28 got a grade of “D-minus” or worse.

The bulk of them are oil and gas companies, including ExxonMobil and Chevron of the US, South Korea’s SK and GS conglomerates, Canada’s Imperial Oil, Austria’s OMV, Saudi Aramco — and the Abu Dhabi National Oil Company, headed by COP28 president Sultan al-Jaber.

There’s also German metals company Aurubis and its Japanese peer Nippon Steel, South Korean construction business Samsung C&T, and French shipping company CMA CGM.

All these companies would surely dispute InfluenceMap’s assessment of their lobbying record; even Aksyutin, after all, publicly stressed Gazprom’s support for Russia’s stated goal of net zero carbon emissions by 2060.

But this data set is an uncomfortable read for anyone who has noticed — and you can hardly miss it — the swollen presence of big business at COP conferences. This is a major factor behind the extraordinary overall tally of more than 97,000 registered delegates at COP28 — roughly double the previous record set last year in Egypt, and many times the attendance at COPs five or 10 years ago.

In one respect, this is obviously a good sign, reflecting the vastly increased private sector interest and enthusiasm that must be a central part of a successful energy transition and wider climate action.

But to the extent that corporations are influencing the outcome of these conference — and clearly they are not just passive observers — it is reasonable to worry that this influence may not always be towards the greater good.

Even companies with comparatively good lobbying records are coming under pressure to do better. See, for example, one sharp exchange that caught my eye on LinkedIn, which has become a useful forum for debate on green business and finance (follow me here if you like).

Kate Brandt, chief sustainability officer at Google, posted a cheerful update explaining “why I’m leaving COP28 with optimism for the future”. Bill Weihl, founder of non-profit group ClimateVoice, noted that “you are also leaving without Google taking a public stand on the most critical issue for the planet’s survival: the phaseout of fossil fuels”.

Google’s parent company Alphabet has a relatively respectable “B” grade from InfluenceMap. But companies are coming under pressure to use their platform at COP events to help strengthen momentum around climate action, as well as showing a friendly green face to the world.

Weihl’s specific gripe with Brandt was that her company has yet to join more than 200 global companies in signing an open letter to world leaders, calling for more ambitious government action on climate change.

The letter, co-ordinated by the We Mean Business Coalition and other non-profit groups, has so far been signed by companies with combined annual revenue exceeding $1.5tn. They range from German utility Eon to US ecommerce group eBay; from drugmakers AstraZeneca and Bayer to tech companies Sony, SAP and Hewlett-Packard; from food giant Nestlé to clothing behemoth Inditex.

The wording of the letter might not be quite ambitious enough for some: it calls for governments to agree “to transform the global energy system towards a full phaseout of unabated fossil fuels”, rather than a phaseout of all fossil fuels, full stop.

But that language is a heck of a lot stronger than anything that has appeared in a COP agreement to date. And this support for a phaseout, from some of the world’s biggest companies, will be useful ammunition for negotiators taking on peers who argue that such a thing is economically unworkable.

The letter also calls for “100 per cent decarbonised power systems” by 2035 in developed countries, and 2040 everywhere else. It demands “clear pricing signals through a meaningful price on carbon that reflects the full costs of climate change”.

Crucially, the companies have also backed the argument that developing-nation negotiators have been battling to make at COP28: that “wealthier countries have the responsibility to be first movers” and support other nations in their climate mitigation and adaptation work, including through financial assistance that doesn’t add to unsustainable debt burdens.

Corporations’ powerful influence over government policy has drawn attacks across the political spectrum, from rightwingers like Vivek Ramaswamy to Bernie Sanders on the left. Both of those men argue that big business should keep its nose out of policy debates.

But there’s another school of thought that holds that corporate political clout will remain strong for the foreseeable future, like it or not — and that business leaders have a moral duty to exercise it constructively, especially around climate action.

That argument was made pithily this week at COP28 by Chris Hohn, the hedge fund billionaire, who argued that serious new taxes and regulation were needed to drive serious decarbonisation.

“In order to get that regulation, the companies themselves need to ask for it,” he told a panel discussion. “Because that’s who the regulators listen to.” (Simon Mundy)

Quote of the day

“COP28 is focused on raising ambition and delivering practical action that will help reduce emissions by 43 per cent by 2030, to keep 1.5C within reach.”

— Sultan al-Jaber, COP28 president, in public remarks yesterday.

Beyond COP28: A new climate assessment tool for sovereign bonds

A group of investors working with the London School of Economics and Political Science on Thursday unveiled a new climate assessment tool for sovereign bonds.

The assessment tool called Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) has been in the works for two years and was developed in an effort to support investor decision making for that asset class. 

Until now, climate assessments of sovereign bonds were “not uniform,” Esther Law, a co-chair of ASCOR and senior investment manager at Amundi, told me. “Investors were observing a lack of transparency and a standard framework to analyse climate risk,” she said.

“No one was talking about this asset class,” Victoria Barron, head of sustainable investment at Brightwell and another co-chair of ASCOR told me. When looking at net zero targets, investors would primarily focus on companies, even though sovereign debt forms a significant part of institutional investors’ portfolios, she explained. 

“There’s so many bits of data all over the place, and honestly you need a PhD to really go through everything,” Barron said, adding that there was demand for the tool not only from the investor side but also sovereign bond issuers.

For its inaugural assessment, ASCOR looked at 25 countries, including high emitters such as the US, China, UK and Brazil, together contributing roughly 70 per cent of global emissions. It found that none of the 25 countries it examined had emission reduction targets for 2030 that would help limit global warming below 1.5C, based on standard models used by IPCC.

The findings weren’t all doom and gloom though. Emissions did fall in more than half of the countries. And 13 of 25 countries passed climate laws that map out national response policies and strategies.

In the future, ASCOR aims to expand its assessment to 75 countries. “Over time, we want to have an engagement with countries . . . We want to see collaborative and supportive engagement,” Barron said. (Kaori Yoshida, Nikkei)

Smart Read

For those who read French — or are willing to pop it into a translation engine — here’s a delightfully sardonic account of a day at COP28, from Loup Espargilière, editor-in-chief of Vert.