‘Transitioning away’ from fossil fuels

COP28 has ended with a compromise solution. There was one side, led by the developed countries, and climate activists which emphasized fast-tracked and definite end to fossil fuel. There was another side, led by oil producing countries mostly, which opposed fast track approach and asked for a gradual approach.

The final text of COP28 has for the first time explicitly called for “transition away from fossil fuels –in a just, orderly and equitable manner accelerating action in this critical decade so as to achieve net zero by 2050”. It avoided the more explicit and hard language of “phase out or phase down fossil fuels”.

It has, however, been explicitly against coal calling nations “to accelerate efforts towards the phase down of unabated coal power”. So it was a fight for Transition away from fossil fuels vs phase down.

The UN Secretary General’s comment on the outcome of COP28 reflects both optimism and frustration. He said: “to those who opposed a clear reference to phase out of fossil fuels during the COP 28 climate conference, I want to say; whether you like it or not, fossil fuel phase out is inevitable. Let’s hope, it doesn’t come too late”.

One can summarize the main aspects of COP28 agreement as the following: 1.transition away from fossil fuel; 2. no to coal power; 3. net zero by 2050; 4. development of low emission technologies such as renewables, hydrogen and nuclear; 5.carbon capture, storage and utilization; 6.climate finance; and 7. Loss and Damage Fund.

Loss and Damage Fund

The most positive and practical action taken in the conference was regarding Loss and Damage Fund. This fund is meant to help those countries which suffer from the consequences of climate change in the form of floods, droughts, land use damage, food loss, etc. The fund was agreed to in COP27 held at Sharam al Sheikh. It has been operationalized. Five countries have pledged 420 million USD, although much more is required. It is hoped that more would come along with meaningful approaches and strategies.

Tripling renewable energy by 2030

The agreement calls for tripling the installed capacity of renewable by 2030. An associated provision requires doubling the rate of increase in conservation. Both combined should reduce the demand of fossil fuels. It appears to be a clever device which will automatically affect the role of fossil fuels. When demand goes down, supply goes down. The question is if enough supplies of solar and wind power equipment would be available.

Win-win for the developed countries

Although there is a common future in adopting policies which contain temperature increase by or below 1.5 deg C by the turn of the century, for developed countries, all is well: fossil or no fossil. They benefitted from exploiting the fossil and the dirtiest fuels and almost exhausted those. They were producers and exporters of fossil fuels. There are and were some developing countries, which were lucky enough to discover and produce fossil fuels. And now that alternative energy is approaching near perfection and wider availability in near future, they would be equally on top of it.

In fact, they would be better off. Their dependence on fossil fuel, especially oil, would be no more there. They would be independently producing alternate energy like solar, wind and hydrogen.

Developing countries’ energy predicament

India gets its 70% electricity from coal. Recently, it announced its plans to install an additional power capacity of 80,000 MW based on coal by 2032. India has been arguing to relate emission measurements with countries’ economies as measured by GDP. It means that emission reduction responsibilities should be proportional, i.e., emission per unit GDP. India in COP27 along with China fought for coal termination by 2070.

9- This time, it appears, India played it quiet. Its interests seem to be equally divided between renewable energy and coal. It is creating hydrogen production and electrolyzer manufacturing capacity on a fast track. It would thus benefit both ways, an ideal situation. India has been developing solar and wind power. It plans to install 500GW of renewable energy capacity by 2030 and 5 million tons per annum of hydrogen capacity by 2030 also.

OPEC countries opposed the phasing down of fossil fuels and won in getting it is substituted by transition. OPEC countries’ main income is from oil & gas .They would suffer from income cuts if oil and gas are cutoff drastically. However, most OPEC countries, including the UAE and Saudi Arabia, are heavily investing in renewable energy, solar, sind and hydrogen. In this respect, they too are part of a win-win situation as developed countries are.

There are other developing countries having large populations (Pakistan, Egypt, Bangladesh, etc.) and are short of energy resources already. Although developing countries have started developing solar and wind power, it would be quite hard for them to develop and produce hydrogen. Their dependence would increase. Fairness demands that the developed countries devise programmes of technology transfer to developing countries. It is obvious that all developing countries would not be able to benefit from it. They would be importing hydrogen in place of oil and gas.

What to do?

China has already announced that it would not install any coal power plant outside its own territory. There is no reason to assume that it does not apply on Pakistan and CPEC (China Pakistan Economic Corridor). A repetition of firm denunciation of coal power is an additional reason for implementing what can be called a coal power embargo. Thar coal is the only large energy resource that Pakistan has which it has started utilizing lately. Pakistan can increase its Thar coal mining capacity for firing its cement plants. Almost all cement plants are working on imported coal.

Adoption of EVs, especially motor cycles, is already being talked about due to the pollution and smog impact of motor Bikes. COP28 agreement may enhance the incentives of EV motor-cycles. If EV car prices come down to affordability level, this may happen to EV motor-cycles as well.

Investment in new refinery project is on the table for more than five year or more. Will COP28 increase the motivations of oil producing countries to spread their oil sector investment or will it dissuade them? All kinds of incentives have been provided for the new oil refineries. However, expansion projects of existing oil refineries may be considered a low risk investment.

E&P oil and gas sector has been on the low key for several decades. No major discovery has been made in this period. Foreign companies have been leaving due to low prospects and high risk. OGDC (Oil and Gas Development Company) and PPL (Pakistan Petroleum Limited) are already diversifying into the mineral sector. Will new investment come to this sector?

There are good prospects of investment in solar, wind and biogas sector. Local and foreign investment can come in this area. Local manufacturing capability may also be enhanced under these investments.

Pakistan has been high on Climate Risk Index among top ten. Pakistan can benefit from Loss and Damage Fund that has been operationalized. Suitable projects should be developed in water sector.

Nuclear power has been supported in COP28 discussions. China may be more inclined to invest in this sector. If fossil fuels are not there or supply reduced, nuclear power can be the only energy source to stabilize the grid and provide dispatch-able power. We have discussed this elsewhere in our last piece in detail.

Concluding, the controversy and heated debate leading to a soft statement has disappointed many policy intellectuals in the West. It may be noted that according to the existing rules, all members of UNFCC have to agree; even if one member disagrees, decisions cannot be made. They are thinking to change the rules to the acceptance by some majority measure like 67-75% of the members. COP process can be wound away.

The world policies are shaped by the consensus of the developed countries which are strongly in favour of Net Zero by 2050. Carbon tax may be levied on fossil fuels and imports or exports of the countries using fossil fuels in defiance.

Copyright Business Recorder, 2023