COP28 & François Gemenne: the Private Sector Needs to Be More Involved

Some are labeling the decision text”weak” and “full of loopholes”, others are welcoming it as “historic”. HEC professor François Gemenne was in the UAE capital Dubai to witness firsthand the sessions and debates at COP28. The lead author for IPPC returned to our HEC studios to share his own conclusions from the two-week summit in a Special Masterclass. He was questioned by two HEC students from the Master of Science in Sustainability & Social Innovation, SASI, which Professor Gemenne also co-directs. Here are a few key take-aways.

SASI student Lilly Wehrhahn: In a nutshell, what are the positive outcomes you’ve taken from this COP28?

FG: We can criticize or praise the final agreement, but no one can dispute that the organizers managed to nail an agreement which, I think, is the result of intense preparatory work. Overall, I was impressed by the enthusiasm and positive energy at the COP, in stark contrast with the criticism it had received before starting. The most positive outcome is that this is the first final declaration that mentions fossil fuels explicitly. This might surprise many since they are responsible for three-quarters of emissions. But these changes take time: it was only at COP26 in Glasgow, for example, that coal was first mentioned. This, I would say, marks the beginning of the end for fossil fuels. The second positive is the creation of the fund for loss and damage. This is the cornerstone of climate justice for countries of the Global South, the process through which industrialized countries recognize their responsibility for the impact of climate change and commit to funding the costs of these loss and damage they have caused.

And the third and last takeaway is the renewed support for the energy transition in countries of the Global South, with the launch of a new fund worth billions of dollars. This is crucial since, at the end of the day, the energy transition is first and foremost a matter of investment. Until now, the Global South were cruelly short of these investments.

SASI student Alix Le Corre: Fossil fuels were at the heart of COP28. They are by far the largest ‘contributors’ to climate change. And, as you said, the 197 countries present have agreed on the need to transition away from them. The agreement includes a call to triple the capacity of renewable energy like solar and wind power by 2030 and to accelerate low emission technology like carbon capture storage. However, the COP28 deal does not mention a phase out or phase down policy with a specific timescale, despite the fact that around 100 countries are demanding it. So, in your opinion, do you consider this agreement “historic” like some media have said – or “insufficient”?

FG: I wouldn't call it insufficient. Clearly there are weaknesses, there are loopholes we can all agree on that. It remains a political compromise. In order to judge whether the agreement is historic or not, I think we would need to wait, it's always difficult to judge in the immediate aftermath. But this agreement is a turning point because for the first time these 197 countries - with very different starting points, political regimes and natural resources, or levels of development – have agreed on a common trajectory for the future, away from fossil fuels. I think that we need to consider that agreement as a political agreement. If you consider it as a legal agreement, you will see a lot of loopholes, weaknesses and insufficiencies. But this is a political signal which I think is crucially important, a signal that they are sending to companies, to markets, to investors. They recognize that their future will be away from fossil fuels, and the world has to prepare for this change.

Anita, a viewer of the LinkedIn broadcast of the Masterclass: Considering the global nature of climate change, what role do you believe international companies should play in addressing the challenges outlined in COP28? How can these companies balance their economic interest with the environmental responsibilities?

I think one of the major advantages multinational companies have over governments is that they are not bound by national borders. This means that any initiative they take, any new industrial standard they introduce can very quickly become a world standard with no borders. Clearly, this limits the capacities of governments to act, having to respect their national constituencies and borders. I think multinational companies should use that lever to make a difference. The sooner they will understand that, if they do not become sustainable they will not be profitable in the 21st century, the better for everyone concerned. This is why the text at COP28 is also a very clear signal to companies telling them: ‘You'd better hurry and transform yourself because the world in 2050 will be a world without fossil fuels.’

SASI student Lilly Wehrhahn: Critics warn that the loss and damage fund is not enough to cover the irreversible economic and non-economic losses caused by climate changes that we're already witnessing today. How can we actually mobilize the financing for this fund? $700 million have been pledged so far, which for many seems like a drop in the ocean compared to the vast climate challenges.

FG: These critics are absolutely right. Clearly the money is not there. The condition for the creation of the fund was that it should be funded with at least $200 billion. At present, the amount of funding is a bit under $1 billion. This is a start, but clearly not enough. Obviously, some countries have not donated enough. The US has only contributed $17 million, for example That's the equivalent of a symbolic euro. So, a lot of countries will need to step up their game. If we want to cover the immensity of loss and damage, that has to be

acknowledged. We will need to tap into private funding as well. I see no reason why oil and gas companies could not contribute directly to the fund. After all, they're responsible for much of this loss and damage. They've made huge profits out of the energy crisis last year. So, I think that we need to tap into these private funds because we are aware that there are some limitations linked to public funding. Many industrialized countries don't have the money to put on the table. Again, I think that the private sector should contribute as well. That will be one of the key stakes of COP29 next year, set for Baku, Azerbaijan.