NY Climate Week: What does this mean for COP28? - Economist Impact

NY Climate Week: What does this mean for COP28?

New York Climate Week kicked off with 75,000 people marching on the streets, calling on governments, policymakers and businesses to move beyond mere pledges and implement real change.

With the clock running down to COP28, the week was a resounding call to action. However, there was time and space for nuance and strategy – and five key themes emerged from the week’s talks and debates.

We are in the midst of what the UN calls the triple planetary crisis– a climate crisis, a nature/biodiversity crisis and a pollution crisis, all compounding in complex ways. And Climate Week made clear the urgent need to put nature and biodiversity at the heart of the climate change debate.

Nature is now seen as a mitigation solution just as much as an adaptation solution. It is estimated that it can provide up to a third of global mitigation efforts, but current investments in nature-based solutions need to triple by 2030 for this to happen. And there are challenges, including de-risking and measurement of investment key performance indicators.

The energy transition is likely to dominate debate at COP28, and there will be pressure on negotiators and policymakers to ensure that updated nationally determined contributions (NDCs) prioritise nature, both in terms of policy and financing.

EY View:

“Climate is often perceived as the primary focus for action, when actually climate is dependent on nature. With more than 50% of GDP moderately or highly dependent on nature and its services, its profile at Climate Week was an opportunity to recalibrate the focus on mitigation alone and included the launch of the Taskforce on Nature-related Financial Disclosures(TNFD) framework.

“For COP28, it reinforces the adaptation financing and delivery agenda, particularly in how it relates to resilience, financing and economic development opportunities for the Global South. With clear 2030 targets channelling investment, restoration, consumer engagement and the reform of subsidies that are harming biodiversity, we expect this agenda to accelerate much faster than climate change in terms of business and regulatory action.”

Amy Brachio, EY Global Vice Chair, Sustainability

Community inclusion and equity are critical for successful climate action. Climate Week panellists – ranging from large philanthropic and grassroots organisations to major financial institutions – highlighted the need to invest in local, community-led solutions to achieve biodiversity protection, to devise participatory grant-making schemes centred on community-focused impacts, and to design policy models that adequately account for indigenous knowledge and input.

A joint statement by UN Climate Change and the UAE emphasised that COP28 should be “ the most inclusive UN Climate Change Conference to date". Adequate prioritisation of resources in areas such as reskilling, loss and damage, and gender-responsive financing will be important initiatives to watch out for at COP28.

EY View:

“Talk of a ‘just transition’ during Climate Week was not just a lofty concept – there is no solution to climate change, or sustainable development, without equity and inclusion. Putting people at the centre of planning is not just the right thing to do, it makes economic sense.

“Globally, the loss in human capital wealth due to gender inequality alone is estimated at US$160trn. An inclusive, people-centred COP28 negotiation will be expected to make progress in unlocking long-term private-sector finance flows for adaptation, loss and damage. These are vital to not only building capacity and resilience across the Global South, but to reversing systemic issues in gender equity, skills, health and economic development.”

Amy Brachio, EY Global Vice Chair, Sustainability

According to the IEA, recent investments in clean energy solutions are only just keeping open the narrow pathway to limiting global warming to 1.5C.

In 2023 a record US$1.8trn was spent on clean energy globally. This needs to rise to US$4.5trn annually by the early 2030s. Beyond this, however, we also need to focus on transition finance. In other words, directing finance towards the phasing out of fossil fuels.

Taking oil and gas out of the ground, processing it and delivering it to consumers alone accounts for almost 15% of global energy-related emissions. The IEA argues that between now and 2030, emissions from oil and gas operations will need to be reduced by 60%– and this will require upfront spending of approximately US$600bn. This is more challenging, as transition assets can be harder to assess.

There were calls at New York Climate Week for companies to collaborate on a standardised methodology for transition financing, rather than pushing for proprietary solutions. Concerns were also raised about the power of fossil fuel lobbies and their impact on efforts to finance the phase out of these fuels.

These questions will continue to be pressing at COP28, given some of the controversies surrounding the central role that oil and gas producers are set to play at this year’s conference.

EY View:

“Announcements from the US Treasury and the Glasgow Financial Alliance for Net Zero (GFANZ) on efforts to define transition financing reflected a wider theme in Climate Week: the need for credible plans to convert commitment to action.

“In financial services, the urgent priority is to establish the consistent and credible practices and targets and metrics that will enable measurable, tracked financing for the net-zero transition. In principle, the approach targets financial support of net-zero solutions including clean energy, the managed phase out of assets, and finance for companies with credible transition plans.

“As pressure grows for an agreement on fossil fuel phase down and phase out at COP28, the consultation will be welcomed and closely watched by participants and commentators alike.”

Matt Bell, EY Global Climate Change and Sustainability Services Leader

Technology and techno-optimism was inevitably a key feature of Climate Week. And, of course, there are promising advances in science and technology, from innovations in food cultivation, thermoplastics and thermal energy storage that could prove critical to staying within the 1.5C limit for global warming.

A focus on scalability and long-term impact is still critical and intentional policy changes and changes to business models are essential. It is vital that negotiations at COP28 do not lose sight of this.

In this context, the Inflation Reduction Act was widely hailed at Climate Week as a significant policy win for climate action. However, panellists argued that we must not “take the pedal off the electrical vehicle” yet. Enforcement of the legislation is critical to diverting investments away from fossil fuels.

EY View:

“At the intersection of sustainability and technology, there won’t be one big bang solution. Sustainable change depends on how multiple emerging tech, tools and platforms are tested, evolved, and applied in different ways. As the IPCC report pointed out, solutions exist now that can be scaled and deployed, with policy and incentives playing a critical role.

“A call during Climate Week by 250 businesses for unambiguous language at COP28 to agree a global target of tripling renewable electricity by 2030 reflects a wider urgency for negotiators. As detailed transition plans dither, the costs and implications of further delay become far clearer. The IEA illustrates that if clean energy does not expand quickly enough by 2030, nearly 5bn tonnes of carbon dioxide would have to be removed every year from 2050.”

Matt Bell, EY Global Climate Change and Sustainability Services Leader

Across the priority areas – such as nature, community inclusion, transition finance, or balancing technological innovation with policy reform – the role of business is undeniable. But there is a danger of businesses over-indexing on compliance and reporting, and disproportionately allocating resources to simply reacting to policy measures.

According to a We Mean Business Coalition survey, business leaders believe that government regulation is the most important “accelerator” of the energy transition. But businesses need to be proactive, and complement their targets, commitments and compliance efforts with action and innovation.

COP28 should act as a rallying point for businesses that are serious about the triple planetary crisis to collaborate, put pressure on negotiators and innovate for climate action.

The recently released Global Stocktake, the most comprehensive review ever of our slim successes and substantial failures in addressing climate change, is damning. But it is also, argues UN climate change executive secretary Simon Stiell, “a moment for course correction” for governments and business.

“The Global Stocktake is an ambition exercise. It’s an accountability exercise. It’s an acceleration exercise,” Mr Stiell says. “It is intended to make sure every party knows where they need to go next and how rapidly they need to move to fulfil the goals of the Paris Agreement.” COP28 is the chance for governments and business to course correct.

EY View:

“At Climate Week, the overriding message for business and society was that, with just over six years to halve emissions and to deliver on the Sustainable Development Goals, the time for incremental progress is over. Reporting requirements – voluntary or mandatory – are not just about exposing compliance, but driving companies to plan and act.

“Closing the gap between commitments and action is complex but critical. At COP28, supply-chain collaboration is a big opportunity for business to contribute to progress on finance flows, adaptation, mitigation and a just transition.

“SMEs account for 90% of global companies, and collaboration with large corporations across value chains can build capacity and broaden the shoulders for the scale of investment, change and skills transfer needed between developed and developing markets.”

Veli Ivanova, EY Americas Chief Sustainability Officer