Time for Change
The COP climate process needs to change before change happens to it
Originally published today in the form of an op-ed on Citywire Investment Trust Insider.
I have been attending the United Nations Conference of Parties (COP) on climate change for 15 years, since 2009. This year it’s being hosted in Baku, Azerbaijan. Baku was the first location in the world where oil - a key fossil fuel for the climate debate - was extracted on an industrial scale. It was commercialised by the Nobel Brothers, the Rothschild family and, later, following the country’s independence after the collapse of the Soviet Union, by BP.
Although it is hosted by a country where oil and gas constitute 90% of export revenues and two thirds of its GDP, the mood at the conference while I was there last week was as well meaning and collegiate as it ever was. But expectations for progress were moderate at best and the high hopes from senior UN representatives that I travelled out with were that negotiations wouldn’t in fact go backwards. Similarly, the discussion at the Baku COP was fundamentally the same as it ever was. And so far it’s not working. So now it’s time for a change, and coming from a low base, the upside could be enormous.
First, there could and should be a breakthrough moment of cathartic honesty.
Developing nations complain that developed nations should pay for the climate change that they caused, and that in the meantime, their populations should be able to use fossil fuels, which caused it, to allow their economies to have their turn to grow. Rich, developed countries, they say, should pay for the developing world to deploy more expensive clean energy, to adapt to climate change, and for the loss and damage caused by it. Particularly if rich countries want developing nations to leave fossil fuel resources in the ground. Azerbaijan’s President Ilham Aliyev challenged an audience that had come to discuss transitioning away from fossil fuels, which he called a ‘gift from God’, by stating that countries ‘should not be blamed for having [oil and gas resources], and … for bringing these resources to the market, because the market needs them. The people need them’. The problem is that 80% of the world’s primary energy supply is oil, gas and coal, and all foods and transport depend on them. Wind and solar, on the other hand, are less than 3% of primary energy supply.
The ‘trillion-dollar question’ then becomes how much money is needed and why it isn’t flowing, either at all or at anything other than exorbitant interest rates. Negotiators talk about needing to secure the support of development banks and private investors and the need for ‘transparency’. But the real breakthrough would be if they had a real discussion about the lack of governance (or if we were being honest, about levels of corruption) and legal security, which makes project finance so hard and expensive to deliver. Fix that, probably supported by guarantees from the World Bank, and investment will be made wherever there’s a decent business case.
Second, there should be a focus on commercial sustainability. Renewables and other forms of clean and efficient energy are cheaper than fossil fuels in many if not most countries. The focus needs to be on delivery of useful energy services like power, heat and fuel on a basis that is lower cost and more reliable than the grid or any other alternative. The technology exists today to deliver cheaper, lower carbon solutions everywhere, particularly if they are built close to the point of use, or in other words ‘decentralised’. Just because developed markets have built centralised generation so far from the point of use that most energy is lost or wasted before it gets there, doesn’t mean that either developed or developing markets should continue to do so.
Third, efficiency could and should be the lens through which all clean energy decisions are viewed. If an application, fossil or otherwise, is expensive for the energy service it delivers, or if it fails to convert a primary energy fuel source into useful energy efficiently, then don’t do it. One of the more thoughtful underlying messages from the incoming United States administration and the new ‘Department of Government Efficiency’ is that not only government but the energy economy as a whole is wasteful. In the United States, some 2/3rds of the primary energy is lost before getting to the point of use, wasting trillions. This is the opening contention of Elon Musk’s 2023 ‘Tesla Masterplan’. Internal combustion engine cars that use fossil fuels are extreme examples of energy inefficiency if you consider than less than 30% of the primary energy used turns the wheels, compared to over 80% for electric cars.
These changes of narrative might yet happen at this COP at the instigation of negotiators. For example, for the first time, energy efficiency was twinned with renewable energy as the first call to action in the agreement resulting from the Dubai COP last year. However, so far, in the days I spent in Baku this time round, the only thing that seemed to have changed was arguments over one confusing acronym - NDCs or ‘Nationally Determined Contributions’, moving onto another even more confusing and contentious one - NCQGs or ‘New Collective Quantified Goals’. These are quasi-diplomatic shields for the key money questions as to who is going to pay how much to who and for what to mitigate and adapt to climate change.
Last week, an open letter signed by a former UN Secretary-General and a former UN climate chief wrote to all states that are parties to the UN Framework Convention on Climate Change to call for reform to a COP process that ‘simplify cannot deliver’. Over the past 28 years, the process has galvanised nearly 200 countries to commit to limit global warming, to phase out fossil fuels, to end inefficient fossil fuel subsidies, to stop deforestation and to limit methane leaks. But now good intentions need to turn into meaningful and measurable outcomes. So far, carbon emissions and energy use just keep going up.
Unless the COP process changes, it risks losing close friends, as well as those with far less time and inclination to help, like the incoming Trump administration.
Indeed, unless the COP changes fast, and it can and must, the real fear is that unwelcome changes might happen to it.
Picture credit: ChatGPT 4o
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