Good afternoon from Dubai, where the targeted end time for COP28 — to the surprise of no one — passed this morning without an agreement.
Intense negotiations are now under way following the COP presidency’s publication yesterday of a draft agreement that excised all mention of a fossil fuel “phaseout”. Speculation has it that the UN climate conference could continue for another couple of days. We’ll be here till the bitter end.
In the meantime, let’s take stock of how far the conversation around fossil fuels has moved forward here in comparison with previous COPs, with several major producers now pushing for a phaseout. It’s nowhere near enough. But it’s not nothing, either. — Simon Mundy
COP28 in brief
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The conference formally approved the hosting of next year’s COP29 by Azerbaijan, and of the following year’s COP30 by Brazil.
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Licypriya Kangujam, a 12-year-old Indian climate activist, stormed the COP28 plenary stage to call for a phaseout of fossil fuels.
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The United Arab Emirates held a mass trial of political activists in a crackdown on dissent during COP28, the FT reported.
Some fossil fuel producers are changing their tune
In 2007, after a giant oil discovery was made off Brazil’s coast, President Luiz Inácio Lula da Silva said the find “proves that God is Brazilian”.
A lot has happened since then. Lula left office, went to prison and then returned to the presidency last year. And while the offshore oil reserves have given Brazil a place among the world’s top 10 crude producers, its government’s messaging on oil and gas has become far more sober — highlighting a shift among several of the world’s biggest fossil fuel-extracting nations.
Yesterday I sat down at COP28 with Marina Silva, Lula’s high-profile environment minister. “The discussion needs to happen on accelerating the speed of renewable energy, and at the same time decelerating fossil energy,” she said.
“We need to have language on fossil fuels,” she added, referring to the “global stocktake” text that is the central task of this conference.
Shortly after our conversation, the COP28 presidency issued a draft of the text, missing any mention of the fossil fuel “phaseout” that has been the subject of the most heated debate here in Dubai.
Silva later told a crowd of reporters that the text was “completely unsatisfactory with regard to the issue of fossil fuels”, including the “lack of effort towards phasing out”. She was far from alone. Developed nations including Germany, Ireland, Australia and the UK publicly attacked the draft, demanding a phaseout agreement. Climate-vulnerable island nations condemned it in even stronger terms — notably Marshall Islands natural resources minister John Silk, who said his team “did not come here to sign our own death warrant”.
The fossil fuel language in yesterday’s draft text is indeed dramatically weaker than the options provided in the previous draft published last week.
The key section here is clause 39, which lists various interventions that countries can make, including:
“Reducing both consumption and production of fossil fuels, in a just, orderly and equitable manner so as to achieve net zero by, before, or around 2050 in keeping with the science.”
But, crucially, the text prefaces this and other suggestions on energy systems by saying that it:
“calls upon Parties to take actions that could include, inter alia: . . . ”
In other words, these are just helpful suggestions, and countries are free to take whatever steps they like. As David Waskow of think-tank E3G put it, this is a “choose your own adventure” approach to climate diplomacy.
As I write, negotiations are raging over whether and how to strengthen this and other language in the draft text. And while the outcome of those talks is still unclear — and could remain so for days — it’s worth taking stock of how far the public messaging from some major fossil fuel producers has moved.
Until now, fossil fuels have never been mentioned in a COP closing text, except in a mealy-mouthed reference to “inefficient fossil fuel subsidies”, and a specific mention of phasing down unabated coal power.
Now, some of the world’s biggest oil, gas and coal producers are publicly calling for a phaseout of all fossil fuels. Three of the world’s top 10 oil-producing nations — the US, Canada and Brazil — have backed calls for a fossil fuel phaseout, along with 13th-placed Norway. So too have Australia and Colombia, both major coal exporters.
At a press conference this morning, youth climate activists rightly highlighted the incongruity of some of these nations calling for a phaseout even as they target new fossil fuel production. In particular, the UK’s public call for a phaseout sits awkwardly with Prime Minister Rishi Sunak’s pledge to “max out” production from its North Sea oilfields.
Meanwhile, Gulf state oil producers are fiercely resisting talk of a phaseout — perhaps, it will turn out, successfully. Yet given the bizarre squeamishness at previous COPs about saying “fossil fuels” out loud, this push for a phaseout deal by several major producers still feels like a moment of sorts.
But Susana Muhamad, Colombia’s environment minister, gave some vital context to her country’s position at Sunday’s ministerial discussions. After her government announced in January that it would end fossil fuel exploration, she noted, Colombia’s currency and credit rating both took a hit. Talk of a “phaseout”, Muhamad made clear, must go hand in hand with increased financial support by developed countries for developing ones.
As Silva told me yesterday: “If we have demands on mitigation activities, without appropriate means of implementation, it will not be taken seriously. There is an issue at stake, which is credibility.” (Simon Mundy)
Quote of the day
“A lot of countries are talking a lot. But we need to focus on what the science says.”
— Saber Hossain Chowdhury, Bangladeshi climate envoy at COP28
Beyond COP28: A fresh look at bitcoin’s ESG credentials
Could BTC be ESG? A recent rise in the price of bitcoin is reviving a debate on whether the digital currency could be considered an ESG investment. The recent growth is coming on the heels of a possible approval of a spot bitcoin ETF as early as next month.
Bitcoin has often been criticised for its heavy electricity use. Yearly electricity use from bitcoin mining is 137.91 terawatt-hours, or the equivalent of the power usage of Ukraine, according to estimates by Digiconomist’s Bitcoin Energy Consumption Index.
But investors such as Daniel Batten at CH4 Capital say there is potential for bitcoin to be environmentally friendly, or to push beneficial social outcomes. “Bitcoin energy consumption is high and will continue to go up. This is for certain. However, it is a mistake to say this means it is anti-ESG,” he told me.
Bitcoin’s large electricity usage could turn out to be a benefit, Batten said, since it soaks up excess supply of energy generated via renewable sources such as solar or wind. A KPMG report looking at bitcoin and ESG notes potential social benefits, too. The cryptocurrency could allow previously unprofitable, small electrical grids linked to local renewable energy to become “financially viable” in developing countries and in turn improve electricity access, it said.
Of course, prices of bitcoin and other cryptocurrencies are volatile and pose significant regulatory risks. This was especially notable following the downfall of cryptocurrency platform FTX and more recently, Binance founder Changpeng Zhao pleading guilty to money laundering. It may be a long road ahead before bitcoin establishes itself as an ESG asset. (Kaori Yoshida, Nikkei)
Smart read
Big donors to top US universities are exerting their clout amid controversy over alleged antisemitism on campus, this FT Big Read explains.
This edition of Moral Money was edited by Jonathan Moules
