Gloomy businesses urge COP28 to act on carbon price, fossil fuel subsidies

Smoke rises from chimneys at a factory in the port of Dunkirk, France Jan 19, 2023. REUTERS/Yves Herman//File Photo

LONDON – Businesses say more ambitious policies are needed urgently to drive the transition to clean energy, including an end to fossil fuel subsidies and agreement on a global carbon price, as climate talks begin in Dubai this week.

Their expectations the COP28 U.N. summit, beginning on Thursday, will deliver clear action are low as governments disagree over the future role of fossil fuels, leaders are distracted by war, and global economic weakness has led to backtracking across the world on climate promises.

At COP28, more than 70,000 expected attendees will discuss the failure so far to stem planet-warming carbon emissions, as well as how to help the most vulnerable countries and pursue efforts that have dragged on for years to agree a global price on carbon dioxide that businesses say can guide decision-making.

READ: Climate leaders gather ahead of ‘challenging’ COP28

The U.N. talks will be the first global assessment of progress since the landmark Paris Agreement in 2015, which set a goal of limiting global warming to well below 2 degrees Celsius (3.6 degrees Fahrenheit), while aiming for a cap of 1.5C.

In September, the United Nations said more action was needed to ensure global warming of no more than 2C above the pre-industrial average.

“This COP we need to see accelerated action from all parties,” Matt Bell, EY Global Climate Change and Sustainability Services Leader, said.

While trumpeting their own efforts to reduce emissions, corporate executives also say that are limits to what business is willing to do without incentives or policy shifts from governments.

“Business will drive this transition if appropriately motivated to do so,” Bell said.

Originally focused solely on talks between countries, the private sector has increased its presence at U.N. summits in recent years as governments seek the sector’s financial backing to drive change in the real economy.

COP28 President-designate Sultan Al Jaber, who is also head of the UAE’s state oil company, has said he will include the oil and gas industry in the climate discussions, presenting the decision as a constructive way forward.

Climate campaigners have questioned his appointment and raised concerns his position in the oil industry will prevent progress on curbing emissions.

Support for renewables

A group of 131 companies, with a combined $1 trillion in revenue, in October urged governments to commit to a full phase-out of unabated fossil fuels, a tripling of renewable energy and a doubling in the pace of energy efficiency reforms.

A draft letter seen by Reuters shows strong support for the renewable energy goal, although geopolitical tensions, especially between the world’s biggest polluters China and the United States, have dampened the hopes of many.

“Our expectations for COP28 are limited,” said Virginie Derue, head of ESG Research at French asset manager AXA Investment Managers, citing “the lack of international consensus over priority actions and the increased multi-polarity of the world that is slowing international collaboration.”

Consultants Accenture said a survey of 1,000 business leaders showed a need to focus on decarbonizing the capital-intensive heavy industries, with 38 percent of respondents saying they could not afford to decarbonize in the current environment.

“One thing is clear: the business case for low-carbon investments is often weak, and businesses are looking for government to help create the market incentives to change that,” said Katherine Dixon, partner at consultants Bain & Company.

READ: Big Oil, heavy industry discuss emission curbs ahead of COP28

The business and finance sectors have long called for a global carbon emissions price that they say would level the playing field for polluters and make the switch to low-carbon more cost-effective.

“We are in need of a more global approach that would include a higher share of the economy,” Victoria Leggett, head of Impact Investing at asset manager UBP.

While such a deal is unlikely to be struck at COP28, smaller steps can be taken, including shoring up the fledgling market for trading carbon credits among companies. Confidence in voluntary carbon markets has fallen this year as critics question the environmental credibility of projects.

“The last 10 percent of a (corporate) carbon reduction plan will always include some carbon removal credits,” Leggett said, adding that “the market needs clarity on what that means.”