All hands on deck for decarbonization
COP27 was deemed the ‘implementation COP’ – the COP that would take us from ambition to action. With this weekend’s outcome, you’ll have to decide if you can deem a COP, that leaves us more or less at status quo, a success. Starting with the positive: the establishment of a Loss and Damage Fund constitutes a leap forward. Although it is still unclear how this fund will be filled, establishing a principle whereby the polluter agrees to pay for the impact on developing and vulnerable communities is nothing but fair. It demonstrates solidarity with the developing countries in their efforts adapt to climate changes and secure a just transition.
Secondly, it is clear to everyone that the energy transition will not be binary. COP27 was held against the backdrop of war, energy supply, and security challenges and ramping inflation. We should not lose focus on what we are trying to solve for, though, namely decarbonizing of the energy complex. To achieve this, we cannot be dogmatic with respect to technological pathways, but need to develop all available avenues to secure accelerated decarbonization. Low emission energy solutions, such as sustainable aviation fuels (SAF), biodiesel, and low carbon hydrogen are currently available, proven, and scalable, which makes them crucially important to deliver on society’s ambitions.
COP27 did not deliver a strong respond to the climate crisis
The biggest task, though, has been to hold world leaders accountable for the promises and pledges they made during COP26 in Glasgow. We are now at a critical point where it has already become questionable whether the Paris Agreement target of 1.5 is at all achievable. Unfortunately, the key question that a Climate Conference should address, i.e. solutions to the current climate crisis, became a secondary issue and does not sufficiently figure in the final conclusions. The critical need to re-confirm clear and ambitious decarbonization targets and define a path to phase out fossil energy sources has been largely ignored. Initiatives, such as the loss and damage fund, are only a temporary and inadequate band-aid, if we fail to cut emissions. A carbon tax, which has been discussed at length, is the only way to address these issues in the long run – in combination with ambitious targets on phasing out fossils.
Important steps have been taken by policy makers to move society forward by way of REPowerEU, Inflation Reduction Act in the US etc. But it is far from enough. We have less than a decade to achieve a reduction of 50% of Global Carbon emissions below 1990 levels, which is necessary if we want to keep any hope alive that we can restrict global warming to an acceptable level. It will take broad policy reforms to address topics like faster permitting, supportive investment conditions, level international playing fields, and access to financing for new, riskier technologies to accelerate the transition to meaningful decarbonization.
Real change driven by industry and civil society coming together
The good news is that the transition is entirely possible.
The additional investments needed to make the transition to a hydrogen-based economy is estimated to be in the order of USD 460 billion through 2030, equivalent to less than 15 percent of the investment committed to upstream oil and gas in the past decade.
On the back of COP27, one conclusion is clear: We cannot rely on the World leaders to solve the climate crisis alone. The real change happens between COPs, is continuous, and driven by industry and civil society coming together. This partnership will be able to push the political leadership to create the enabling environment for the transformation.
It is still too early to say if today’s energy shock and high inflation will be a setback for clean energy transition or a catalyst for faster action. COP27 itself did not give us a clear answer. But from what we saw around the COP – at side events, in partnerships, and industry announcements – I remain an optimist. We can reach net zero by 2050 if we get all hands on deck.