COP28: What we can expect at Dubai

The 28th conference of the parties to the UNFCCC gets under way in Dubai on 30 November 2023. Four paradigm shifts have been identified by the COP28 President as necessary to achieve meaningful progress in addressing climate change:

• fast-tracking the energy transition and slashing emissions before 2030;
• deliver old promises and set the framework for a new deal on finance;
• put nature, people, lives and livelihoods at the heart of climate action; and
• mobilise for the most inclusive COP.

These themes are to be applied to the key agenda items at COP28, which seek both to protect and achieve the goals of the Paris Agreement. We briefly summarise the current state of play on those key agenda items, what we can expect at COP28 and what Australia's position is likely to entail.

Global Stocktake and Nationally Determined Contributions

COP28 will see the first Global Stocktake (GST), a process established under the Paris Agreement which is intended to provide an important mechanism to "ratchet up" emission reduction commitments by parties in their Nationally Determined Contributions (NDCs) by providing for the periodic review of global action on climate change.

While the GST process has been successful in focusing global efforts on emissions reductions at least at a political level, it has also exposed that efforts to achieve emissions reductions have been spectacularly unsuccessful, and that more urgent action is required to keep the goals of the Paris Agreement, including to 1.5 degree goal, within reach. This is as much a reflection of the inadequacy of current party NDCs as well as failures by parties to implement domestic policies and actions to give effect to commitments in those NDCs.

Parties will be urged to consider the outcomes of the GST in formulating their NDC, and Australia has signalled that it will be supporting a decision text which seeks to calibrate global approaches which leverage the technical work of the GST to meet the Paris goals. Parties are expected to communicate their updated NDC in 2025.

Mitigation ambition and energy transition

The mitigation work program developed at COP26 in Glasgow, parts of which were operationalised at COP27 as part of the Sharm El-Sheikh Implementation Plan, has been a focus of inter-sessional dialogues. Given the COP28 Presidency's focus on energy transition, it is entirely unsurprising that this will be a key element for a country like the UAE in raising mitigation ambition.

Elements of the energy transition package being championed by the COP28 Presidency include:

• tripling renewable energy capacity and doubling the rate of energy efficiency improvements across sectors by 2030, including ramping up electrification to enable phase-down of fossil fuels;
• halving scope 1 and 2 emissions from the oil and gas industry, and net-zero methane emissions from such projects by 2030;
• scaling up use of low carbon technologies (such as hydrogen), carbon capture and storage (CCS), and carbon dioxide removals in heavy emitting sectors;
• transforming transportation energy use away from fossil fuels to electrification;
• accelerating the "inevitable and responsible" phase-down of all fossil fuels, the phase-down of all unabated coal, to lead to an energy system free of unabated fossil fuels in the middle of this century, and phasing out fossil fuel subsidies.

Australia continues to argue for stronger mitigation language and action, and Minister Bowen in a speech to the Lowy Institute on 21 November signalled support for the UAE's proposal to triple renewable energy capacity and to double energy efficiency by 2030. This is entirely consistent with Australia's ambition to be a "renewable energy superpower".

Carbon markets a work in progress

Technical issues will continue to be a focus of negotiations to operationalise and make market-ready the carbon markets established under Articles 6.2 and 6.4 of the Paris Agreement. Although the rulebook for these market mechanisms was agreed at COP26, further work is necessary to ensure that these markets emerge quickly and flourish. We identified some of the outstanding technical issues in our report on COP27. Among the issues likely to be addressed at COP28 are:

Article 6.2: co-operative approaches

The UNFCCC Secretariat released a technical paper this year dealing with a number of outstanding issues concerning the operationalisation of the cooperative approaches mechanism under Art 6.2 which facilitates the transfer of International Transferred Mitigation Outcomes, or ITMOs, between parties. One of the unresolved issues concerns the requirements under the rules that ITMOs be "authorised", with significant differences of opinion still remaining on how and what is required to be authorised – does it extend to the authorisation of the particular cooperative approach, the entities involved or just the ITMO? It is also unclear if authorisations can be revoked or amended, and whether authorisations should be based on a common template.

Article 6.4: Sustainable Development Mechanism

Processes for the development and assessment of Article 6.4 methodologies still remain to be agreed although there is an expectation that work undertaken during 2023 by the Supervisory Body established under the Paris Agreement responsible for the mechanism will finally land a set of draft recommendations. These recommendations, if adopted, will address key issues including additionality and leakage risk.

Less likely is a resolution on the treatment of carbon removal and emissions avoidance activities which we have previously reported on. Carbon removal activities involve the removal GHG from the atmosphere and destruction or storage of the GHGs, such as CCS, and are expressly provided for under the Art 6.4 rules. The primary concern in relation to carbon removals relates to the treatment of reversal risk and actual reversal events. While the Supervisory Body has developed a set of draft recommendations for removal activities, there is less confidence that these will be adopted at COP28. The issue whether emissions avoidance activities would be allowed under the Art 6.4 mechanism was left open and remains largely unresolved, chiefly due to the challenges and uncertainties in measuring avoided emissions from such activities.

Australia has adopted a consistent position supporting the development of robust, transparent and credible carbon markets, and will continue to be actively engaged in the negotiations. This will be particularly important in assisting Australia to implement its cooperative initiatives in the Pacific region.

Climate finance to make (some) progress

Finance permeates almost every agenda item of COP28, including the Loss and Damage Fund established at COP27 (see below). The COP28 Presidency has set as one of its goals aligning finance flows with the temperature, transition and resilience goals consistent with clause 2.1(c) of the Paris Agreement.

Developed countries are thought to be confident of finally achieving the goal set in 2009 of mobilising US$100bn annually by 2020 to support climate action in developing countries. While three years late, if achieved, it will enable focus to shift to establishing the new collective quantified goal on climate finance (NCQG) due to be agreed by 2024. At COP26, a work program for the NCQG was agreed and work addressing considerations such as sources of funding and access will continue during COP28 prior to finalisation next year.

Australia has recently rejoined the Green Climate Fund with the intention to make a "modest" contribution to the fund this year. This initiative was seen as an important step in restoring Australia's credentials in the Pacific region, along with its support for a new Pacific Resilience Facility, a Pacific-built trust fund that will be established to invest in small-scale climate and disaster resilient projects. Unlike the COP28 host country, Australia is unlikely to make a contribution to the Loss and Damage Fund this year. It is expected that Australia will wait until the fund is operationalised before making a financial contribution with its focus being on ensuring that the fund is best suited to supporting action in the Pacific region.

Loss and damage

One of the successes of COP27 was the agreement to establish the Loss and Damage Fund which is intended to assist mainly developing countries impacted by climate change events to speed up recovery and build up resilience. Since COP27 a transitional committee has been working to operationalise the new fund. Issues which the committee was required to address included:

• Establishing institutional arrangements, modalities, structure, governance and terms of reference for the fund;
• Defining the elements of the new funding arrangements;
• Identifying and expanding sources of funding;
• Ensuring co-ordination and complementarity with existing funding arrangements.

The committee developed a set of recommendations and draft text for the governing instrument of the Fund in early November which it will present at COP28. Interim governance arrangements include a recommendation that the World Bank be appointed to host the fund for an initial four-year period. Perhaps surprising in the context of the history of finance negotiations at COPs, the committee recommended that there be no set requirement for Parties to contribute to the fund. Other proposed institutional elements of the Fund include:

• it will operate as a separate legal entity with equitable and balanced Party representation on the Board;
• developing countries that are particularly vulnerable to the adverse effects of climate change will be eligible to receive resources from the Fund;
• it will seek to promote and strengthen national responses for addressing loss and damage through pursuing country-led approaches;
• it will seek to utilise, where appropriate and available, existing national and regional systems and financial mechanisms;
• it may provide support to activities relevant to preparing and strengthening national processes and support systems. This may include support for loss and damage planning activities and the establishment of national loss and damage finance systems;
• it will be able to receive contributions from a wide variety of sources of funding, including grants and concessional loans from public, private and innovative sources; and
• it will provide financing in the form of grants and highly concessional lending.

Whether these recommendations are adopted remains to be seen given finance, and eligibility to receive funding, is always a contentious issue at negotiations. For example, disputes may arise over whether funding is available to meet non-economic losses, and the criteria to determine if a developing country is "particularly vulnerable" to climate change impacts.

Australia's goals for COP28

COP28 is expected to attract some 70,000 participants and Australia will be taking a large official delegation. Australia will also be playing a leading role in some of the negotiations, with Assistant Minister for Climate Change and Energy, Senator Jenny McAllister, facilitating consultations on climate adaptation. Key areas of focus for Australia will include:

• increasing mitigation ambition with an emphasis on global acceleration in the transition to renewable energy sources;
• economic opportunities presented by the transition to net zero, showcasing Australia as a destination for investment in renewable and clean energy technologies;
• delivering a just transition, particularly for workers and communities impacted by that transition;
• strengthening bilateral relationships, particularly with the Pacific region while ensuring that the activities and mechanisms established by the COP are fit for purpose in supporting mitigation, adaptation and resilience in Pacific countries;
• operationalising the market mechanisms under Article 6 in a way that facilitates investment at scale in emissions reduction projects; and
• ensuring the adoption of a comprehensive and robust framework for the Global Goal on Adaptation under Art 7 of the Paris Agreement, as means to enhance adaptive capacity, resilience and reduce vulnerability to climate change impacts, again with emphasis on suitability for the Pacific region.