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28 September 202310 minute read

UN Climate Summit: What to watch for in Dubai

The 28th Conference of the Parties of the United Nations Framework Convention on Climate Change, or COP28, may be remembered as a turning point in the emerging low-carbon economy.

The presidency of COP28 will be held by the United Arab Emirates. Multiple work streams initiated by the Paris Agreement are expected to culminate at the conference, which will take place in Dubai in November and December.

The conclusion of the first Global Stocktake, or GST, to assess countries' collective progress under the Paris Agreement, coupled with bold action on climate finance, could be a strong signal to financial markets that emission restrictions are a reliable part of the regulatory landscape.

Building those expectations into domestic laws and business practices will be especially intense from a regulatory perspective, given integrity concerns and the implications for greenwashing.

Additionally, COP28 is expected to deliver progress on the global carbon market under Article 6 of the Paris Agreement and the nascent fund for addressing the impacts of loss and damage associated with climate change in developing countries.

And, as always, a key challenge will be achieving these outcomes in a way that promotes sustainable development without perpetuating historical inequities.

Here's what to watch for when negotiators convene in Dubai later this year.

Global Stocktake

At COP28, the international community will make a formal assessment of its work to date under the Paris Agreement. Under Article 14 of the Paris Agreement, the 195 parties to the agreement pledged to conduct the GST every five years, beginning in 2023, as part of the agreement's ratcheting "ambition cycle."

The outcome of this first iteration will serve both as a progress report and a work plan. The success of the Paris Agreement, in the eyes of many, depends largely upon the effectiveness of this inaugural assessment.

The first GST has the potential to guide governments, industry leaders, advocacy groups, and other stakeholders to chart the path toward 2030 climate goals, and commit to ambitious action to prevent the worst impacts of climate change.

The GST has three components: (1) information gathering and preparation; (2) a technical assessment, which was conducted through a series of multilateral dialogues on solutions and barriers that concluded in June; and (3) consideration of the outputs, which is now underway and will culminate at COP28.

The GST considers mitigation measures, including emissions reductions, adaptation measures to support ecosystems and communities, and international collaboration efforts, and is meant to guide the parties as they update their national climate policies. This first GST will likely reflect that countries' actions and commitments to date are insufficient to achieve the agreement's long-term goals, and that additional actions are needed to limit global warming to 1.5 degrees Celsius above preindustrial levels.

Indeed, in its Synthesis Report, issued in March, the UN's Intergovernmental Panel on Climate Change crystallized both the urgency and attainability of actions and policies that will preserve a safe and sustainable future for all. As regional and global temperatures continue to set record highs, many stakeholders hope this COP28 work stream will provide a road map for course correction.

Countries are set to revise their nationally determined contributions – which represent each party's commitment to steer its climate policy and finance toward the goals of the Paris Agreement – by 2025. The outcome of the GST will inform these revisions.

Governments are also expected to announce new national, bilateral, and multilateral emissions reduction policies at COP28 in response to the outcome of the GST. Those commitments will signal to the private sector the extent to which international markets and the global economy will integrate low- and zero-emissions policies for the next several years.

Global Carbon Credit Market

Negotiators at COP28 are also expected to make progress toward establishing a global carbon credit market. Article 6 of the Paris Agreement established a framework under which countries can voluntarily cooperate to achieve emission reduction targets through what it calls the "international transfer of mitigation outcomes" – more commonly referred to as carbon credits.

Article 6.2 allows parties to the Paris Agreement to trade carbon credits through bilateral or multilateral agreements. Article 6.4 provides for the establishment of a global carbon market that will be overseen by a UN entity. The Article 6.4 market aims to promote the mitigation of greenhouse gas emissions while fostering sustainable development.

Countries can currently trade carbon credits under Article 6.2, but the Article 6.4 global carbon market is not yet operational. Prior estimates have found that trading carbon credits could reduce the cost of implementing emission reduction targets by approximately $250 billion by 2030.

Delegates to COP28 will hammer out the rules that will govern the Article 6 global market. Key issues include developing standards regarding what constitutes "removal" of GHG – eg, through afforestation or carbon capture projects – to ensure that they represent legitimate carbon reductions.

Delegates will also develop accounting standards to avoid double counting of emission reductions. Other topics will include rules requiring countries that trade carbon credits to keep certain information confidential, including the type and quantum of emission units traded, without hindering the transparency of the Article 6 market.

Recent scrutiny of carbon sequestration projects and offsetting programs make this work both more challenging and time critical. Several nongovernmental organizations released reports this year alleging that carbon credits traded through various private registries either do not reflect permanent or additional carbon removal, or are counted by more than one credited entity.

The global supply of carbon credits has swelled in recent years, and now represents a $2 billion global industry. Yet some commentators and litigants have challenged the integrity or value of various types of these units. Notwithstanding those concerns, leaders in the public and private sectors remain committed to continued development of trustworthy and effective trading systems.

Several organizations have recently promulgated new principles and reporting standards to achieve that end. These efforts to harmonize carbon trading will likely be top of mind at COP28 as parties develop guardrails for the Article 6.4 global market. COP28 may additionally attempt to tackle human rights risks that may be associated with carbon credit projects, such as forced labor, forced relocations, and environmental degradation. Proposed mechanisms for avoiding or limiting human rights abuses include requirements for new projects to prepare environmental and social impact reports, to consult with local and Indigenous communities, and to submit to independent monitoring.

Loss and Damage Fund

One of the major achievements of COP27 was the establishment of the Loss and Damage Fund, which aims to provide financial assistance to climate-vulnerable developing countries that experience irreversible loss and damage impacts attributable to climate change — eg, rising sea levels and desertification.

A transitional committee has been tasked with operationalizing the Loss and Damage Fund, and is expected to make recommendations at COP28 addressing topics such as establishing the fund's institutional arrangements, structure, governance and terms of reference; identifying the elements required for new funding arrangements; identifying sources of funding; and ensuring coordination with existing sources of climate finance.

Additionally, questions remain regarding how funds will be distributed to countries – eg, whether over a specific time horizon or annually – how loss and damage will be assessed and quantified, how to ensure the fund is adequately capitalized through contributions from developed countries, and whether recipient countries will be restricted in how they use loss and damage funds. Proponents of the fund have also asserted that it should take into account climate justice considerations. In their view, climate impacts perpetuate and exacerbate socioeconomic inequities by causing displacement, political unrest, famine, and poverty in developing countries.

Although these topics are expected to be discussed in detail at COP28, the Loss and Damage Fund may not become operational until 2025 or potentially later. The fund's success will depend, at least in part, on the capital contributions it receives. Negotiators in Dubai have an opportunity to structure the fund in a way that inspires confidence in the wealthy countries that will soon be asked to contribute.

Net-Zero Regulations

A likely outcome of the GST, as well as of COP28 generally, is a raft of new and revised commitments to reach net-zero by 2050, as the Paris Agreement's 1.5 degrees Celsius goal requires. UN Secretary-General António Guterres has called on developed countries to reach net-zero by 2040, or as soon as possible thereafter, and the wealthiest countries are expected to lead the way both in limiting emissions and financing the green transition in developing countries.

In total, more than 70 countries representing more than 75 percent of global emissions – including the US and the UAE – have made net-zero pledges to date, joined by thousands of cities, educational institutions, financial entities and businesses that have committed to reach the Paris Agreement's 2030 benchmark of 45-percent reduction in global emissions.

Current commitments by governments, however, remain far short of even the 2050 goal. And some of the biggest emitters have set less ambitious targets. For example, China, the largest emitter by volume in the world, aims to neutralize its climate impact by 2060; India, the third-largest emitter, aims for 2070.

Greenwashing will also be on the minds of delegates, attendees, and spectators during COP28. In the US, government enforcement and private actions challenging environmental marketing claims have increased drastically in recent years.

Policy developments like the European Union's proposed Green Claims Directive and, in the US, the Federal Trade Commission's review of its Green Guides indicate global regulators' desire to ensure integrity in sustainability advertising by businesses – including net-zero commitments. Leaders in Dubai may announce new guidelines to address these concerns.

National governments shape economies not just through policy, but also through their purchasing power and procurement policies. Programs like the Net-Zero Government Initiative launched by the US at COP27 send a strong demand signal for zero- and low-carbon products to the private sector.

As major consumers of goods and services, national governments are critical market drivers. These commitments thus stand to have wide-ranging effects on the cost, availability and advancement of zero-carbon technologies.

The 23 members of the Net-Zero Government Initiative will publish a road map ahead of COP28 charting the path for participating governments to achieve net-zero no later than 2050. Their pledge may gain new signatories in Dubai.

This work also advances the Breakthrough Agenda launched at COP26 and elaborated at COP27. The Breakthrough Agenda consists of a cohort of governments, representing more than 70 percent of global GDP, that committed to deliver 25 collaborative actions to accelerate decarbonization in seven high-emission industries – power, road transport, steel, hydrogen, agriculture, building, and cement – by COP28.

Through the Breakthrough Agenda, the US, UAE, and more than 40 other governments aim to define guidelines for low-emission and near-zero industries, make renewable energy and clean technologies more accessible and affordable, bolster food security, prioritize clean infrastructure projects, boost global demand for low- and near-zero-carbon industrial products, and agree on a common target to phase out gas-powered vehicles.

As temperatures rise and pressure mounts to operationalize the Paris Agreement, climate solutions remain available and affordable. Leaders at COP28 have another opportunity to leverage existing technology and capital to address these solutions. Whether they share sufficient interest and political will to do so remains to be seen.

This article was originally published in Law360 on September 22, 2023.