COP28 Finance & Fossil Fuels Challenges

Two of the most anticipated topics for COP28 are the financing of energy transition and the phase-out of fossil fuels.
Prominent leaders stressed the importance of financial support for progress in climate initiatives. Other participants in the COP process have expressed skepticism about developed countries’ fulfillment of financial obligations, as they have not fulfilled their financial commitments up to this point.

With regards to financing of climate-related projects, there are challenges developing countries encounter such as: high cost of capital; mismatch of currency as projects are not funded with local currency; and risk discrepancy when it comes to financing renewable energy projects, as there is a perception of risk that is considered to be higher than the actual physical and market realities.

Achieving the phase-out of unabated fossil fuels is more plausible with strict fiscal and regulatory measures, ensuring alignment with the climate objectives of the Paris Agreement. Participants are looking forward to reaching an agreement and setting a date for peaking of emissions.

The High Ambition Coalition have urged a worldwide peak in greenhouse gas emissions by 2025 and a shift away from fossil fuels. The EU also echoes the phasing out of unabated fossil fuels. EU Climate Commissioner has stated that abatement measures, including carbon capture and storage, should not grant heavy-emitting industries a free pass to continue their reliance on fossil fuels.