Justifying the transition - why including oil and gas in the COP text matters

Why is the statement on fossil fuels in the COP text a big deal for international relations? In the current context of mistrust between global north and south and perhaps the lowest point in international cooperation since the cold war, the agreed messaging is a triumph of diplomacy. It provides a basis for urgent joint action, especially with regard to just transition for oil and gas producers.

Amongst other things, all 198 governments settled on text which:

“calls on Parties to contribute to the following global efforts…

d) Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science”

Why is this a big deal? Oil, coal and gas make up about 82% of primary energy consumption globally and about 70% of all greenhouse gas emissions caused by human activity, so they're a big deal when it comes to global warming. That part is clear. But in 28 years, this is the first time the term ‘fossil fuels’ has made an appearance in any text negotiated by all countries party to the UN Framework Convention on Climate Change (UNFCCC) which is supposed to lead the way on cooperation to address climate change.

Resistance to explicitly targeting fossil fuels within the COP process relates to real fears of economic losses amongst those countries depending on fuel export revenues and/or with large and powerful domestic industries related to fossil fuels. This has slowed progress on cutting emissions from the very first COP in 1995. But things have moved on since then. The hosting of this COP in the United Arab Emirates has dovetailed with a major movement globally to act faster and fairer on climate. 130 countries called for an official agreement to ‘phase out' fossil fuels. This was modified in tense negotiations and to consternation, especially from small island states for whom the existential threat of climate change is closest.

At least 40 countries are highly dependent on oil and gas exports, some extremely so – like Iraq, Saudi Arabia and Nigeria so it’s no wonder these countries pushed back on terms like phase out. Having said that, their negotiating teams too have accepted the inevitable, in line with the science. There was nuance in major oil and gas-producing country positions. The envoy from the largest oil and gas producer in the world, the US, was vocal on the need to largely phase out fossil fuels. Soon-to-be OPEC member Brazil has called for phase out language and Colombia recently joined the Beyond Oil and Gas Alliance. Kenya, which has reserves but hasn’t yet begun production, has stated its desire to avoid dependence and high carbon lock in and adopt a green growth pathway.

Right now, the language puts in writing what everyone at the table already knows – coal, oil and gas as we know them are on their way out. The text gives a green light to get going with the long-overdue work of super-charging the shift away from burning stuff for energy, while cleaning up the current industry. On the latter, tighter time-lined targets on Co2 and methane emissions from the industry should reflect this.?

But all this will need to happen in tandem with a great deal of work to support countries that depend on the industry for revenues and jobs.

In this respect, the terms “just, orderly and equitable” are welcome. Given that major consumers – including the US, China, EU and UK etc all plan to begin reducing their fossil fuel use within the next decade, some radically, that’s going to affect prices and therefore economic stability in exporting countries. Recognizing oil and gas as well as coal, paves the way for specific, time-tabled action on a just and orderly transition, at the level of companies, countries and the global economy, because without that we face a chaotic and unjust transition.

If we think about oil alone, exploration and production contributed about $5.3 trillion to the global economy in 2023, about the same as Germany’s GDP.

To free up fiscal space for green investment both at home and abroad, rich and higher middle income countries in particular need to work on the agreed phase out of "inefficient subsidies” and reworking of taxation. The International Monetary Fund (IMF) estimated in 2022 that global support for fossil fuels stood at some 7.1 trillion dollars if unaccounted health and environmental damage and tax breaks for extractives companies were taken into account. In theory, this could cushion initial fossil fuel losses, were gains to be effectively rechannelled.

There are responsibilities on all sides of the market. Many countries have been historically encouraged to produce more by consumption, loans and investment from the industrialized countries. Debt servicing and chronic need for foreign exchange drives these countries to extract and export more raw materials. Debt forgiveness as part of just transition packages is therefore an important area to explore.

It takes time to diversify away from large fossil fuels sectors. But having a vision for phasing that industry down or out can bring huge opportunities – health, nature and resources like fertile land and marine life that are becoming more valuable as a result of climate change - as well as attracting the enlarged flows of green finance and investment pledged at COP28.

[updated 20 May, 2024]?