Looking ahead to Conference of the Parties (COP) 28
What do 140 heads of state, and senior government leaders, over 70,000 participants and more than 5,000 media professionals attending an event in a country that has based its economic development on extracting fossil fuels and you have in common?
Helene Winch, Head of Responsible Investing, highlights the practical impacts the annual COP summits could have on climate policy here in the UK.
For information purposes only. The views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
A burning platform
Summer of 2023 was Earth’s hottest since global records began in 1880, according to scientists at NASA’s Goddard Institute of Space Studies (GISS) in New York.
This new record comes as exceptional heat swept across much of the world, exacerbating deadly wildfires in Canada and Hawaii, and searing heat waves in South America, Japan, Europe, and the U.S., while likely contributing to severe rainfall in Italy, Greece, and Central Europe.
Since last year’s COP meeting, the world has seen severe weather events including heatwaves, droughts and floods which continue to destroy people’s homes and crops, impact their ability to earn a living and encourage migration. This led the Chief of the UN to say that we have “entered the era of global boiling”.
COP out or COP in?
Every year, world leaders gather to discuss climate change at COP, which stands for Conference of the Parties. Since 1995, the United Nations has brought together the 197 signatories to the UN Framework Convention on Climate Change (UNFCC) to work on how to tackle climate change.
As weather events become more intense and frequent worldwide, this year’s meeting, COP28 is a critical opportunity to take meaningful action to reduce global emissions and support countries that are already experiencing the worst physical impacts of climate change.
Could embracing a low carbon transition be an election vote winner?
Considering the UK, you could look at the practical policies it has put in place and argue strongly it is behind the curve. For example, the US with the introduction of the Inflation Reduction Act has propelled itself forward in the race, the EU is responding through various Directives linked to the European Green Deal, while China has already built almost as much wind and solar power capacity as the rest of the world combined.
Yet as an international consensus forms on the need for a robust low carbon or “green industrial strategy” that maximises the economic benefits, the UK stubbornly refuses to take part. As the UK falls behind, and especially as the EU begins to introduce import tariffs on high-carbon products, there is a serious risk to the UK’s global competitiveness.
Should we then be viewing the UK’s response to this year’s COP as an economic one rather than an environmental one and in that context a potential vote winner at next year’s general election?
From missed chances to green advances
Looking at the Institute for Public Policy Research paper ‘From missed chances to green advances: The case for a green industrial strategy.,’ the transition to net zero is the economic opportunity of the 21st century. While the UK has made considerable progress in reducing emissions, it has failed to ally these environmental gains with comparable economic ones.
According to this paper from the Institute for Public Policy Research, the UK employs fewer people in renewable energy as a proportion of its working age population than most other European countries. For example, in the wind industry if the UK was performing as well as Denmark it could enjoy an additional 98,000 jobs, or as well as Germany, an additional 20,000 jobs. UK public investment commitments into low-carbon technologies are among the lowest in the G7.
The Confederation of British Industry (CBI) recently estimated that promoting key green growth opportunities such as electric vehicles, heating and insulation could deliver between £37–£57 billion of annual UK GDP by 2030, representing 1.6–2.4 per cent in UK GDP and 14–20 per cent of the total GDP growth between now and 2030.
But this will only happen with coordinated, long-term public policy, substantive public support, and dedication from the government to work in partnership with industry, unions, local communities, and workers themselves.
A deflated wind industry?
The failure to translate leadership in renewable energy asset deployment into economic benefits is perhaps most evident in the UK’s wind industry. The UK is the second largest installer of offshore wind in the world, after only China. However, despite strong deployment figures, the UK has squandered the opportunity to create domestic manufacturing supply chains and the associated jobs. By contrast, Germany, Denmark, and the Netherlands have all substantially developed their wind manufacturing capacity and in 2020, these three countries alone accounted for 70 per cent of exports of wind farm components. Meanwhile, the UK is a net importer of offshore wind components, again referencing the Institute for Public Policy Research paper ‘From missed chances to green advances: The case for a green industrial strategy’.
The transition to net zero remains a huge economic opportunity for the UK, but we need strong guidance form clear, long-term, robust industrial strategy alongside a credible carbon reduction pathway to realise it.
Curiously, we may be able to look to the home of COP28 – the United Arab Emirates for a potential model to follow.
Unlikely leadership from the UAE
Reduced global demand for fossil fuels has long represented an existential threat to the region’s economy growth and wealth.
Saudi Arabia and the UAE have positioned themselves as leaders in providing clean energy globally with both expertise in hydrocarbons and a potential advantage in renewables and energy transitions. GCC (Gulf Cooperation Council) states have announced ambitious long term renewable energy targets supported with plans for carbon capture and reduction technology, and widescale decarbonization targets across the economy.
Could do better
Learning from the forward aggressive planning from the UAE, the actions the UK government takes now could set us on a path to achieving our low carbon future that balances environmental, economic and social outcomes. But the clock is ticking, and rapid progress demands priorities and action both inside and outside of the high-profile COP events, including:
- Provision of detailed strategy plans with clear accountability beyond political cycles.
- Bold action in incentivizing the market and mandating change including supporting investment from domestic investors such as pension schemes.
- Boost innovation through increased funding.
- Improve the design and delivery of green initiatives.
- Promote a whole-of-society, people-centered approach and lead and control the communications.
- Embed local supply chains and expertise from steel to universities.