By Dr Venkatachalam Anbumozhi, Director of Research Strategy and Innovation: The 28th edition of the Conference of the Parties (COP) is underway in Dubai. This climate summit is another attempt to reach a collective commitment to hold global temperatures to no higher than 1.5°C above preindustrial levels by the end of the century. Despite countries unanimously agreeing that humanity will collectively bear a huge price if these temperature limits are breached by nature, COPs result in a torrent of self-congratulatory words but often fail to unleash concrete actions that accelerate climate investments in the Global South, which is home to over 80% of the world’s population, including those most vulnerable to climate change. What can we expect from Dubai’s COP28?

Three major issues are at the centre stage of COP28 deliberations: the conclusion of the Global Stock Take (GST), the operationalisation of the Loss & Damage Fund, and the bolstering of carbon markets.

The first Global Stocktake was a key part of the Paris Agreement machinery and is at the heart of a 5-year ‘ambition cycle,’ which consists of reviewing country pledges for climate action, a global assessment of progress, and renewed bottom-up -Nationally Determined Contributions (NDCs). By assessing aggregate progress in mitigation, adaptation, and support mechanisms of technology transfer and finance, the GST is meant to drive the ratcheting up of country pledges.

Developing and least-developed countries of the Global South argue that the GST must look at past efforts and bring accountability for the failure of many developed countries in the Global North to do what they argue is consistent with equity. Industrialised countries argue that emerging economies will account for the bulk of future carbon emissions, and the GST should focus on limiting emissions going forward. The outcome of this negotiation in COP28 will shape whether the disproportionate responsibility of developed countries for emissions is adequately reflected in future benchmarks for climate investments in the Global South. For example, one way to recognise responsibility is to expect developed countries to reach net zero emissions earlier than the Global South. To give implementation concrete form, COP 28 is likely to include language that calls for countries to triple renewable energy and double energy efficiency – ideas that were notably included in the recent G20 Delhi Leaders’ Summit Declaration. A particularly contentious issue under global stocktaking is a call for a timebound phase-down of fossil fuels. While coal is indeed the most polluting, addressing climate change requires addressing its abundance and affordability in the Global South. Oil and gas are much larger sources of energy in the developed world and critical to petrostates such as UAE. An escape hatch would be part of the climate diplomacy in Dubai.

Financing of loss and damage normally refers to the destructive impacts of climate change that cannot be or have not been avoided by what is known as ‘mitigation’ or ‘adaptation.’ COP28 is an opportunity to set a unified fund with consistent targets for enhancing the resilience and adaptive capacity of the Global South. These have proved challenging to frame the investment modalities, because of varying contexts across vulnerable countries and what is required for adaptation and resilience. As with other issues, the question of ‘who pays’ is also likely to be prominent in COP28. Since the last COP, a fragile consensus was won on several thorny issues, including who will pay into the fund – developed countries are ‘urged’ and developing countries are ‘encouraged’; and who will receive – the vaguely worded ‘particularly vulnerable’ countries. Perhaps most contentious, the World Bank was agreed as an interim host of the fund, but under strict governance guidelines to provide a greater say for recipient countries in the Global South. Whether this consensus holds or unravels will be a key issue for COP28.

COP28 would be careful to call for ambition not only in climate action but also support for those actions, notably finance. Over a decade ago, developed countries had pledged to provide an arbitrary US$100 billion a year by 2020. In addition to the deadline being unmet, the amount was too little to meet the climate investment needs of the Global South. Coming up with a number is only a starting point; the contentious issues remain around how it will be mobilised. How important are public versus private funds? Will private capital flow in response to efforts to ‘de-risk’ investment opportunities?

COP28 is poised to bolster carbon trading as stipulated by article 6 of the Paris Agreement, which can lower the cost of climate actions by mobilising private capital. Climate negotiators representing more than 190 nations in Dubai have already started discussing the standards for credits that allow their holders to compensate for carbon pollution at home by investing in projects elsewhere to cut emissions or remove carbon dioxide from the atmosphere. The UN-backed programme aims to ensure high-quality carbon credits are generated within an internationally agreed framework, offering investors greater certainty amid concerns that some existing voluntary projects do little or nothing to curb climate change. The mechanism enables a buyer country to financially support projects in host countries. In exchange, the host country agrees to forgo the emission reductions from these projects in its own NDC, transferring this right to the buyer country which can subtract it from its NDC instead. Host countries, particularly those in the Global South, stand to gain substantially from internationally transferrable mitigation outcomes. Deals could facilitate investments into otherwise unobtainable low-carbon projects and generate co-benefits such as job creation, technology transfer, and capacity building. For buyer countries, these internationally traded carbon transactions provide a means to fulfil their NDCs by financing projects in regions where emissions reductions or removals can be achieved more cost-effectively.

Despite the promise of carbon markets several uncertainties and challenges remain. Very few supplier countries in the Global North have developed national legislation and frameworks for the issuance and authorisation of carbon trading, and this will take time. This will include defining what they will authorise, who will authorise trades, and establishing processes to comply with reporting requirements. Further, host countries in the Global South must balance their investment opportunities with the likelihood of meeting their own NDC to avoid overselling. If a host country transfers too many mitigation outcomes, it may be left with an insufficient amount of capacity to reach its own NDC. To avoid this, the Global South can create a whitelist of project types that can be traded, for example, only from sectors in its conditional NDC.

Nevertheless, the Global South believes that COP28 is a beacon of hope for them to deliver on pressing issues unresolved in COP27. While not a homogenous group, the Global South broadly comprises a wide range of developing countries with differing levels of climate risks and development levels. Yet over time, the term has become synonymous with the Group of 77, a coalition of developing countries and China bloc has struggled to be heard at some of the past COPs. Much of them lacks the finance and technology needed to achieve net-zero emissions. Indeed, in an earlier summit of G-77, the UN Secretary-General Antonio Guterres announced that the world is failing developing countries and called for a new climate world order with equality for the Global South. Moreover, Sultan Al Jaber promised that COP28 will deliver a plan of action that is both ambitious and practical, focused on results that address the needs of the Global South. With the Global Stocktake sending a message that the world is not on track to meet the climate change challenge, the UAE as the host of COP28 will have its task cut out.

This opinion piece was written by ERIA's Director of Research Strategy and Innovation, Dr Venkatachalam Anbumozhi, and has been published in The Jakarta Post, and Bangkok Post. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.