Student Blog: A Realist’s Provocations on COP28
As the curtains came down on COP28 in Dubai, there was a familiar rush to work out whether the summit was a “success” or a “failure,” who “won” and “lost.” After all, such binary characterizations make good headlines. But COP is a bottom-up, multi-layered process, far too nuanced to judge in binary terms. What I saw first-hand in Dubai was a complex stew of market forces and national priorities that, despite best efforts, refuse to boil down into a “takeaway.”
So instead of a takeaway, I’ll offer a theme: incentives.
In every room and event at COP28, I saw private, public, and civil society actors angling for the best outcomes for the interests they represent. Viewing the event through a realist’s lens, I saw the value in leaving behind narratives – including narratives that I, myself, find compelling and have amplified — about ‘greedy’ corporations and ‘bad faith’ actors. At COP28, I saw that, with the right set of incentives, any state or business could be induced to act. A deep understanding of market realities, business drivers and national priorities of all those involved is not just valuable but necessary to decarbonize at pace. Using this lens, below are a few thematic provocations that struck me most at COP28.
Beyond the Climate Finance Cliché
In the words of the COP27 High Level Champion Mahmoud Mohieldin, climate finance is “insufficient, inefficient and unfair”. Nothing controversial there, right? And repeated enough that it is, at this point, cliché. COP28 did little to help, punting finance issues to COP29 by providing a limited framework to anchor next year’s ‘New Collective Quantified Goal’. The Global Stocktake (GST) text yet again acknowledged that countries failed to meet the $100 billion goal (already “noted with deep regret” at COP26). The framework and acknowledgement, as many pointed out, do little to address the trust vacuum between developed and developing nations and certainly don’t solve the problem. After all, $100 billion, even if disbursed effectively, is a fraction of the $2.4 trillion needed by 2030[1].
For some, multilateral development banks (MDBs), offer hope of bridging this gap. However, in 2023, net payments from MDBs to developing countries, were…(drum roll please)…zero.[2] In Dubai, World Bank President Ajay Banga repeatedly promised to “reflect the WBG’s devotion not just in words but action”. Time will tell.
And whether or not Banga’s promises are kept may not matter so much. I observed at COP28 that, while public finance certainly has a role to play, we need to harness domestic capital markets, which depend less on the next COP cover decision. Currently, $1 of public money only leverages $0.37 cents of private investment.[3] We need bigger, better blended finance deals that lower the effective cost of capital – operating as mechanisms to discover rather than subsidise smart green investments. To do this, we need a systemic overhaul – tackling regulation on financial disclosures, capital provision & absorption challenges and the risk-return imbalance in EMs. Only by making the ‘bad’ cost, can we get private markets to shift cash flows towards green solutions.
So let’s focus on promises that have the potential to meet the scale of the challenge – the promises of MDBs and capital markets.
Green Washing or Green Blushing?
This brings me to big business – the easiest climate scapegoat. A study by PR company Edelman shows that the majority of people across the world distrust business to do the right thing on climate.[4]
Yet COP28 showed many signs that businesses are making progress, characterized by Nat Keohane as the “coming-out party for private sector climate action”.[5] I share many people’s skepticism of the unwieldy influence exercised by fossil fuel companies at the COP, further exacerbated when the COP President is a petro-boss himself. However, greenwashing criticisms have been levelled against the entire private sector which has paralysed businesses into inaction out of fear of being accused of lip service. A report from South Pole found that one in four of the largest 1,200 private companies have decided not to disclose their climate action efforts.[6] Without public statements, how do we keep them accountable? Surely some accountability is better than no accountability. Have critics gone too far?
This COP had the strongest business participation of any COP, marked by the first-of-its-kind Business & Philanthropy Climate Forum (BPCF) – a marquee gathering of the private sector’s most powerful, from Bill Gates to Bank of America chief Brian Moynihan.
Some fellow COP attendees expressed disapproval about the scale of business presence at this ‘climate negotiation’ (better characterised by Rob Stavins as a ‘climate expo’ in 2023). I, too, once criticized businesses for exploiting the COP for PR and business development rather than serving as agents of high ambition. However, as usual, the reality lies somewhere in between. I witnessed first-hand how, on the sidelines of the negotiations, non-state actors advocated for ratcheted ambition through bilateral dialogues with key governments.
COP28 also provided a forum for businesses to learn, share best practices, and build cross-sectoral partnerships. This sparks new ideas and amplifies the desire to be in the ‘in-group’.[7] During the BPCF closing event, the CEO of a large insurer exclaimed “if each of us in this room raised just $10 million, we would change the course of green finance.” Purists might find this reprehensible, but we do need the private sector to be all in — so why not play to their incentives?
Even if shrouded in inappropriate glitz and smugness, it is forums like BPCF that will convince business leaders to put their money where their mouth is – but out of FOMO rather than fear.
The Climate Politics of Mainstream Politics
COP28 was characterized by surplus crises and a deficit of trust. This was evident in the room of 26 Heads of States/Climate Envoys during the High Level Event on Mitigation. The usual inter-state dynamics played out – Russia restated that it would not back away from the use of natural gas as a ‘transition fuel,’ China alluded to geopolitical barriers coupled with Covid-19, and the Small Island States (SIDS) yet again made heart-wrenching pleas in pursuit of their survival.
However, where there are inter-state tensions and divergent narratives, there are also common incentives. Most leaders often subordinate geopolitics to domestic survival in office. 2024 will be an unprecedented year in the political cycle with ~50% of the world’s population going to the polls.[8] The question remains – how do we make it politically expedient for leaders to progress the climate agenda?
To me, it seems we need to promote climate action the same way states promoted the Marshall Plan after WWII – on the basis of self-interest. The language of self-interest needs to trump the narrative of assistance.
In Summary – Good COP or Bad COP?
After working on COP26, I was disillusioned with the UNFCCC. After COP28, that disillusionment has morphed into skeptical optimism. I now see COP as a signalling mechanism, not a forum for action. These signals are for markets, businesses, and 196 countries — but more importantly, shaped by them. The direction of causality runs bottom up, not top down. So, if we can align enough actors and their incentives with the climate cause, we have what looks like a shot.
I emerged from COP28 feeling that it is possible to have both the mind of a pragmatist and the heart of an activist. The magic of incentives, to me, is that realism and optimism really are perfectly compatible. Only by harnessing both can provoke radical change.
With thanks to COP26 High Level Champion, Nigel Topping for the inspiration and to Professor Rob Stavins for his guidance.
[1] https://www.cop28.com/-/media/Project/COP28/PRs/PDF-Files/160823_IHLEG_Press_Release-2_Eng.pdf?rev=0c52a4d37e984b0a87c7c43b08142cd6
[2] https://www.ft.com/content/b0ba46e4-77ae-495b-9166-2d11a077858d
[3] https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2022/11/IHLEG-Finance-for-Climate-Action-1.pdf
[4] https://www.edelman.com/trust/2023/trust-barometer/special-report-trust-climate
[5] https://www.c2es.org/2023/12/nat-keohane-on-the-conclusion-of-cop28/
[6] https://www.southpole.com/publications/net-zero-and-beyond
[7] https://www.uschamber.com/climate-change/business-delivered-at-cop28-2
[8] https://www.economist.com/interactive/the-world-ahead/2023/11/13/2024-is-the-biggest-election-year-in-history