The COP28 deal is missing one big thing - money

Like over-caffeinated college students, Sultan Al Jaber, John Kerry and other COP28 delegates pulled an all-nighter to turn what could have been an "F" on a global climate deal into a respectable "C". Still, in their scramble to produce a historic pact, they left one glaring omission that could doom the whole enterprise in the longer run: They ignored the money.

Give credit where it’s due: The end product of this year’s UN climate confab, an agreement that the world needs to stop using fossil fuels, was the first of its kind and a drastic improvement over most COPs, which are usually failures. Until a couple of years ago, these grand throat-clearings barely acknowledged the existence of fossil fuels.

As my Bloomberg Opinion colleague Javier Blas notes, the final text has the fingerprints of Saudi Arabia and other big fossil-fuel producers all over it.

Loopholes abound, including unseemly attention to carbon capture and storage, an expensive and unproven technology that oil producers likely hope will keep their expensive assets from being stranded underground. This is an inevitable result of the COP process, which requires buy-in from every single party, from polluters like the US to those on the front lines of global heating, like the Maldives.

WHO WILL PAY FOR WHAT?

But perhaps the biggest omission is the absence of firm promises by rich countries to help their poorer cousins meet the commitment to ditch fossil fuels by mid-century. Developing nations will need at least US$6 trillion in financing by 2030 to reach this goal, the UN has estimated. The new COP deal vaguely waves a hand at that mountain of money without getting into details about who will pay for what.

This helps explain why Saudi Arabia and other OPEC nations weren’t the only ones resisting calling for a “phase-out” of fossil fuels. Developing countries had strong reservations about it, too. Without the money to switch from dirty to clean energy, these countries risk hobbling their economies before they even get a chance to grow.

The US, Europe and China all had the luxury of burning copious amounts of coal, oil and gas to get wealthy. It would be unfair to force developing nations to miss that chance, consigning billions to poverty, without at least helping them find a better way.

“Finance is where the whole energy transition plan will stand or fall,” Mohamed Adow, director and founder of Power Shift Africa, a Kenyan advocacy group, said on X, the platform formerly known as Twitter. “This process might deliver an agreement to move away from fossil fuels, but it’s failing to deliver a plan to fund it.”

The COP28 deal does at least acknowledge developing nations need help and possibly a little extra time to transition, which is probably why they signed off on it. But the wording is far too vague and demands nothing of those rich, polluting countries. 

RECIPE FOR MORE FAILURE

In fact, neglecting the money was a common feature of all of COP28’s modest victories. The confab kicked off with a ballyhooed deal to launch a loss-and-damage fund to repay developing nations for the harm global heating is already causing. But the fund attracted just US$792 million in pledges, a comically tiny amount that wouldn’t cover the cost of one run-of-the-mill Florida hurricane. Damages from climate change are already running at roughly US$400 billion a year and rising as the planet warms and the weather grows more chaotic.

COP parties were also tasked with setting specific goals for helping the world withstand future warming. They managed little more than a vague declaration that “adaptation is good” while scraping together just US$188 million for a dedicated fund. This isn’t even an adequate down payment on the US$340 billion a year, rising to US$565 billion annually by 2050, that the UN has estimated adaptation could cost.

The final COP statement issues a mush-mouthed call for “phasing out” some of the US$7 trillion in subsidies the fossil-fuel industry receives every year. But the US bowed out of a more aggressive Dutch plan to end subsidies.

Sideline COP deals to triple renewable energy and nuclear capacity, boost efficiency and slash emissions from cooling were promising. But again, all of those efforts will take copious amounts of money - at least US$200 trillion between now and 2050, by some estimates.

These shouldn’t be seen as costs but investments to avoid the even more extreme costs runaway global warming will inflict. And as the final COP statement notes, the necessary capital is already available. It’s just a matter of directing it to the right places. Instead, for now, the world is essentially ordering its underprivileged kids to go to college without offering them financial aid. It’s a recipe for more failure.