The “landmark” deal on phasing down fossil fuels to achieve net zero carbon dioxide emissions, tripling renewables and doubling energy efficiency is here. But where’s the money to help poor, developing economies transition away from the dirty fuels?

The deal called the UAE Consensus closed last week at the United Nations Climate Summit (COP28) is being hailed as the “beginning of the end” of the fossil fuel era. The agreement lays the ground for the world to transition away from fossil fuels in energy systems in a just, orderly and equitable manner to achieve net zero emissions by 2050. In order to pull it off, the agreement includes a commitment to triple renewables and double the energy efficiency by 2030 that should see wind and solar energy displace some coal, oil and gas.

The world must cut greenhouse gas emissions 43 per cent by 2030 and 60pc by 2035 relative to 2019 levels to limit global warming to 1.5-degree Celsius, a 2015 Paris agreement goal. But the 2023 UN Emissions Gap report says the world is currently on track to produce 110pc more fossil fuels by 2030 than would be consistent with limiting warming to 1.5-degree Celsius,and 69pc more than consistent with two-degree Celsius.

In spite of a broader agreement on the first ever Global Stocktake, differences remain between the developed and developing worlds on the availability of financing required for achieving the goals set in it. During climate negotiations, the middle-income developing countries were very uncertain about the phase-out of fossil fuels. Nigeria, Uganda, Colombia and others pointed out that “they needed revenues from the sale of coal, oil and gas to ensure they could pay for transition to greener energy”. Colombia complained that by moving away from fossil fuels, credit agencies had downgraded their rating, meaning that international loans to go green would cost them far more. Likewise, several developing countries, including Bolivia, Cuba, China and others, expressed dissatisfaction with the final text on fossil fuels, stating it eroded the principles of equity and climate justice.

Developing countries worry ambitious commitments could be used against them to bear a larger burden of the climate battle

Ulka Kelkar, executive director at Climate at World Resources Institute India, observed that the text of the agreement… appears to absolve developed countries of the responsibility for phasing out their fossil fuel use in this critical decade (2020s). “In fact, the reference to ‘transitional fuels’ explicitly gives gas-producing countries the licence to sell more gas rather than invest in renewable energy.”

One of the hottest topics at the climate summit was the “necessity for the rich countries, which have historically produced the most greenhouse gas emissions, to fund developing countries to help transition their energy sectors”. The latter underscored the absence of concrete commitments on financial support for their transition away from fossil fuels. Cuba pointed out that “1.5-degree Celsius has been characterised as the North Star but there is a whole constellation of purposes like eradicating poverty, sustainable development, etc. For this, we need huge resources in addition to our domestic resources.”

While developing countries, still dependent on fossil fuels for energy, income and jobs, are left without robust guarantees for adequate financial support in their urgent and equitable transition to renewable energy, richer nations are avoiding to commit to more ambitious goals and instead engaging in lesser ambition, attempting to rope in developing countries to follow suit. This amounts to passing on the responsibility to poorer countries while allowing rich economies to maintain comfortable targets, experts have observed.

No wonder that developing countries are worried that any ambitious commitments could be used against them to bear a larger burden of the climate battle. “The same countries saying we need to push out fossil fuels are the countries that are expanding fossil fuels,” said Diego Pachego of Bolivia. According to the Oil Change International, the United States, Australia, Canada, Norway and the United Kingdom are the “richest planet wreckers responsible for oil and gas exploration.” These five countries alone plan to develop 51pc of the projected oil and gas fields by 2050.

The United States’ cumulative emissions from oil and gas between 2023 and 2050 are estimated to be equivalent to 454 new coal plants, and it remains the world’s top producer and consumer of crude oil (20pc of the global total) despite advocating for fossil fuel phase-out at COP28. UK Prime Minister Rishi Sunak has pledged to “max out” the country’s oil and gas reserves.

Australia is committed to ending overseas fossil fuel funding but it has approved numerous domestic projects, including coal development. Former Australian climate commissioner Lesley Hughes highlights how the country’s fossil fuel production has remained constant since the enactment of the 1999 environmental protection law.

‘The hypocrisy of wealthy nations — particularly the United States as it continues to expand fossil fuel operations massively while merely paying lip service to the green transition — stands exposed’

“The hypocrisy of wealthy nations, particularly the United States, as they continue to expand fossil fuel operations massively while merely paying lip service to the green transition, stands exposed,” Harjeet Singh, head of Global Political Strategy at Climate Action Network International, was quoted by Illuminem.

Despite an early breakthrough on launching a fund to pay for “loss and damage” from climate change, developing countries were disappointed by a lack of new financial commitments for transitioning away from fossil fuels and adapting to climate impacts.

Rachel Cleetus, policy director for the Union of Concerned Scientists, observed that the UAE Consensus represents a critical step forward in addressing fossil fuels but “falls significantly short” in its considerations of finance and equity provisions needed to ensure a transition to clean energy.

Ali Tauqeer Sheikh, a climate change and sustainable development expert, wrote in this paper the other day that the total pledges amounted to over $57bn in the first four days of the conference, including $725 million for the loss and damages fund, $3.5bn for green climate finance, $2.7bn for health, $2.6bn for nature-based solutions, $2.5bn for renewable energy, $1.2bn for relief recovery and peace, $1.2bn to reduce methane emissions, $568mn to encourage investment in clean energy manufacturing and $467m for urban climate action.

Besides, the UAE banking sector has pledged to leverage $270bn in green finance lending by 2030 aimed at financing climate projects in countries like Pakistan. The Arab Coordination Group will allocate $10bn to support energy transition. But these pledges fall far short of the needs to achieve the climate action targets as developing nations require as much as $5.9 trillion for the pre-2030 period to alleviate the impact of climate change, which is being compounded by difficult macroeconomic circumstances.

The climate negotiators projected that the adaptation finance needs of the Global South stand at between $215bn-$387bn annually until 2030, while $4.3tr per year needs to be invested in renewable energy over the next seven years. Besides, much of the money will be available in the form of loans or investments rather than in grants, severely hindering the ability of developing countries to take meaningful climate action. As stated by Colombia, “We cannot jump from one rope to another if the other rope is not ready.”

In 2010, industrialised nations like the United States pledged to give $100bn each year by 2020 to help developing countries adapt to climate change and transition away from fossil fuels. While they repeatedly reference a report suggesting the goal might be achieved, the lack of a transparent mechanism to track and measure finance flows casts doubt on its accuracy. As Bolivia remarked, “Developed countries say we have achieved the $100bn goal, but we don’t see the money.” Experts say $100bn is still far short of the climate finance that’s really needed. For example, the last year’s catastrophic flooding in Pakistan is believed to have caused $40bn in damages alone.

Experts say vulnerable peoples and countries cannot be left with the burden to fund this transition to address a crisis they did not cause.

The polluting countries and companies must deliver the funding to achieve a just and equitable transition away from fossil fuels, they argue. Ani Dasgupta, president and CEO of the World Resources Institute, has summed it up aptly: “The COP28 outcome opens the road for a fossil fuel free world, but this road is full of potholes, dangerous distractions and, if allowed, could lead to a dead end. The shift from fossil fuels must be fair and fast — and no one can be left behind.”

Published in Dawn, The Business and Finance Weekly, December 18th, 2023