LONDON and NEW
YORK, Nov. 20, 2023 /PRNewswire/ -- Just days
away from this year's United Nations Conference of Parties (COP) 28
meeting, what's clear is that that global energy systems will need
to achieve historic and unprecedented levels of innovation to
redress climate change and meet the world's energy needs.
COP28 will deliver the first
completed global stocktake of the world's progress toward meeting
climate goals. Key findings include an implementation gap, with
countries falling short of their targets, and an emissions ambition
gap recognizing that current targets fall far short of the needed
levels of commitments to reach Paris goals.
Saugata Saha, president,
S&P Global Commodity Insights, said, "Given the competing
geopolitical, economic, and financial pressures – and increasingly
domestic-oriented policy directions – a key success at COP28 will be all countries taking part and
remaining around the negotiating table. A good result beyond
participation would be the build-up of trust, cooperation on
sharing technologies, opening channels for needed capital flows,
and bridging the North-South divide to solve the Energy Trilemma of
affordability, security, and sustainability."
To help understand the challenges to reaching the emissions
targets, experts at S&P Global Commodity Insights have
developed three plausible scenarios and two net-zero cases
extending to 2050 and featuring in-depth coverage of trends in oil,
gas, coal, power, renewables, emissions and hydrogen markets at the
global, regional and country levels:
- S&P Global Commodity Insights' base case – or
'Inflections' scenario, projects transformative change that
would result in a reduction in fossil fuels' share of total energy
demand from the present 80% to 58% and greenhouse gas (GHG)
emissions dropping 25% from today's levels by 2050. This brings
global warming to about 2.4 degrees Celsius, which is short of what
is needed to achieve Paris Agreement goals.
- An aggressive decarbonization – or 'Green Rules'
scenario includes revolutionary transformation toward a sustainable
low-carbon economy but does not reach net-zero emissions until
2085, and sees average global temperatures rise of 1.7 degrees
Celsius by 2100. It envisions more efficient energy use and fossil
fuels dropping to less than 40% of total energy demand and total
emissions falling nearly 60% from today's levels.
- A 'Discord' scenario foresees a world fractured by
successive crises that cause long-term damage to the geopolitical
and macroeconomic environment, with rising costs creating
uncertainty, hindering investment, and causing market volatility.
This scenario expects higher reliance on fossil energy with
significant GHG emissions and a warming by 3 degrees Celsius by
2100.
The results of S&P Global Commodity Insights' scenarios work
indicate that the world still needs to innovate toward commercially
viable technologies to bring net-zero within reach. The chart below
provides a sense of the emissions paths of the different scenarios
(including the two net zero cases) and the shortfalls as compared
to NDC goals and net zero targets. However, what happens at COP can
impact the trajectories. Watch for signposts across a number of key
themes.
S&P Global Commodity Insights Eight
Key Themes to Watch at COP28:
- Emissions mitigation targets are off track. The first
global stocktake report found that the current emissions reduction
targets that countries have established, as part of their
commitments under the Paris Agreement, are insufficient to meet the
overarching goal of the Agreement to ideally limit the global
temperature rise to 1.5 degrees Celsius above pre-industrial
levels. According to S&P Global Commodity Insights' global
stocktake analysis, the current ambitions would result in GHG
emissions levels almost double those that are needed to keep the
world on the Intergovernmental Panel on Climate Change's
1.5-degree-Celsius trajectory. Whether countries respond with more
aggressive plans and conviction will be key.
- Language around a phase out of fossil fuels to be a key
negotiating point. The European Union has announced that it
will be bringing a proposal to phase out unabated fossil fuel use
to COP28. If countries agree to such
a pledge, expect debate regarding the exact language used. Key
terms to watch will be "phase down" versus "phase out" and
"unabated" versus "all."
- Success to hinge on negotiations around financing from
developed nations. In 2009, developed nations pledged
$100 billion a year to developing
nations for climate mitigation and adaptation, to be met in 2020.
That goal was not met until 2023 and is well below what developing
nations have indicated is necessary for them to meet their most
aggressive climate-related targets. Negotiators will work this year
on developing a post-2025 finance goal, but continued disagreement
between developing and developed nations will put the ability and
willingness of developing nations to scale up climate mitigation
efforts at risk.
- Expect a focus on industry-led solutions and low-carbon
innovation. One of the United Arab
Emirates' key goals for COP28
is a tripling of renewable energy capacity by 2030 globally, a
target in line with the S&P Global Commodity Insights
Aggressive Decarbonization scenario but out of range in the base
case Inflections scenario. Methane is likely to be another key
action area as the COP28
president-designate has called on the oil and gas industry to
"eliminate methane emissions by 2030." Technology around carbon
management and carbon capture is expected to feature in
discussions, with hydrogen solutions expected to attract
significant attention.
- Developed and developing nation differences slow progress on
Loss & Damage and adaptation. After an historic agreement
at last year's COP27 on developing a
funding mechanism for loss and damage, developed and developing
nations have not agreed on the location, legal status, fund
contributors, or allocation of the fund's resources. This has
brought the operationalization of the fund into question. In early
November, negotiators struck a tentative deal on the structure of
the fund, which could be proposed and adopted at COP28. However, the proposal contains contentious
elements, which have yet to be resolved, slowed further by a divide
between nations about the use of targets and metrics.
- Opportunity for further progress on operationalizing Paris
Agreement Article 6. COP26 saw
the finalization of the Paris Agreement Article 6 rulebook for
international funding and accounting of carbon emissions reductions
across borders. This next step is necessary to drive greater
reductions at lower costs to achieve and go beyond nationally
determined contributions (NDC) targets. The Article 6.4 Supervisory
Board is tasked with addressing technical details (e.g.,
methodologies for crediting and inclusion of carbon removals), and
recommendations from this Board are expected to be presented for
formal adoption at COP28. With the
Voluntary Carbon Market under increased scrutiny, policymakers want
to ensure that the UN rules avoid unnecessary pitfalls.
- Reform of multilateral development banks and the role of
private sector investment in financing the energy sector transition
remains a key topic of discussion. As multilateral development
banks undergo a period of structural reform, questions remain
regarding their role in financing the energy transition in
developing nations. Project developers will watch to see if these
banks will be able to change their mandates to drive additional
investment to the developing nations and whether reform can create
a structure to crowd-in private sector investment.
- COP has become a proxy for other issues and relations
restoration. Using climate as a proxy, nations in recent years
have used these meetings to establish positions and leverage
negotiations on other topics. For example, climate action has been
an area that the United States and
China have found common ground
even when publicly at odds on other geopolitical issues. However,
using these negotiations as a proxy for other geopolitical issues
can also slow action on climate.
At this link, find Unraveling Uncertainty: 2023
Scenarios and Net-Zero Cases – the energy transition is in
flux.
S&P Global Commodity Insights executives, experts and news
teams will be on the ground at COP28
in Dubai,
United Arab Emirates, assisting
hosts and attendees' needs for essential intelligence, insights and
data. For more on COP28 and the
energy transition, visit the Markets Insights section of the
website, or the dedicated Energy Transition Insights page.
Media Contacts:
Americas: Kathleen Tanzy + 1
917-331-4607, kathleen.tanzy@spglobal.com
EMEA: Paul Sandell + 44 (0)7816 180039, paul.sandell@spglobal.com
Asia: Melissa Tan
+ 65-6597-6241, melissa.tan@spglobal.com
About S&P Global Commodity Insights
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