Herding Cats: The COP28 Outcome Was As Good As It Gets

C-MACC Weekly Sustainability and Energy Transition Report

Herding Cats: The COP28 Outcome Was As Good As It Gets

• Given the very different country agendas, the oil reduction language was good.
• The group missed an opportunity to focus on carbon pricing, which remains vital.
• Fossil fuels still need to be decarbonized as a necessary backup plan in our view.
• US tax incentives to drive metal investments in friendlier countries? Or too hard.
• Otherwise, waste plastic trade, carbon trading, food to fuel, and slower EVs.

First: COP28 – Progress, Some Kicking the Can Down The Road – Huge Challenges

While many will lament another COP with less progress than needed, we should remember that the COP process is an attempt to corral almost 200 countries with very different economic fortunes into agreeing on a plan of action to combat something global but intangible and not fully agreed upon, which, if correct, will cause asymmetric economic pain. Added to this is the very real challenge, and something that has been our focus, which is how to make progress fast enough without causing destructive inflation. As such, an agreement to reduce fossil fuel use is probably as good as it gets, as it provides enough latitude for countries and companies to pursue that goal at different paces, as resources, energy, and financials allow. It is unlikely that we will get any global agreement that is more aggressive, given the very different makeup of many economies, unless and until we get global agreement that the climate challenge is a true battle – placing the globe on a war footing. For that to happen, weather-related damage would have to increase meaningfully, in our view. The language of this year’s agreement places the task firmly in the hands of countries to set policies and incentives to reduce fossil fuel use at rates that make most local sense – i.e., what can they afford. A missed opportunity was a framework to put a global and escalating price on carbon. 

Exhibit 1: This is an old chart, but it illustrates climate inequality – lower slope

Source: Niskanen Center, December 2023