TODAY: It’s a fossil fuel standoff as COP28 final negotiations progress

Good morning, ladies and gents. COP28 is nearly over and final negotiations are in progress over the next 36 or more hours — and it’s not impossible talks will stretch past tomorrow’s deadline. We have a full rundown on where discussions stand this morning and what we missed over the weekend. But first…

THE BIG CLIMATE STORY EVERYWHERE- COP28 pledges will not limit global warming to 1.5 °C: The 2030 pledges made so far at COP to triple renewables capacity, phase out methane emissions, and end routine gas flaring, represent only a third of the greenhouse gas abatements needed to meet the Paris-agreed 1.5 °C warming threshold, according to the International Energy Agency (IEA). To bridge the emissions gap, a large-scale financing mechanism, a solid global agreement to divest away from fossil fuels, and bringing an end to the commissioning of unabated coal plants, are needed to mobilize renewables investments for developing markets, the IEA says. More than 100 countries and 50 oil and gas companies have made pledges at COP.

The story made headlines in the international press:Financial Times | Reuters | CNN | Euronews

A BRIEF LOOK AT COPLAND-It’s a fossil fuel standoff: With COP28’s final negotiations in progress and the release of the COP28 Global Stocktake inching closer, negotiators are still disagreeing over reaching a unanimous verdict on phasing out or phasing down fossil fuels, according to Reuters. If the final text is to deliver a verdict on globally phasing out fossil fuels, it would be crucial that the phaseout be fair and “financed by developed countries,” representative for the developing countries bloc Diego Pacheco said.

OPEC’S WHIPPING MEMBERS INTO SHAPE- The division over the draft text has widened as OPEC nudges its members to reject a draft that targets a fossil fuel phaseout, Bloomberg reports, citing a letter sent to OPEC’s 13 members by Opec Secretary-General Haitham Al Ghais. The oil cartel — spearheaded by Saudi Arabia — has been pressuring the UAE to avert the focus of negotiations away from phasing out oil and gas production, according to the Financial Times.

EUROPE IS CRYING FOUL- Saudi’s lobbying prompted backlash from EU negotiators. EU officials are calling Saudi and OPEC’s actions at COP28 “out of whack” and “unhelpful” — even “disgusting.”

THE US IS ALSO NOT GAME ON PHASING OUT- The US has refused to join a Dutch-led coalition made up of 12 nations who have agreed to disclose their fossil fuel subsidies within a year, with the aim of setting up a comprehensive phaseout strategy to eliminate them.

BUT OPEN TO COMPROMISE- Some are trying to build consensus on the idea of phasing out fossil fuels for power plants and other facilities that don’t have carbon capture and sequestration technology. China and the US — the world’s two largest emitters of greenhouse gasses — are also pushing for a compromise.

THE STANDOFF IS CRITICAL- Any one of the 198 countries attending can prevent the adoption of a final text. Saudi foil Fatih Birol, the head of the International Energy Agency, is demanding delegates reach a consensus on an “orderly and just decline in fossil fuels in line with our international climate goals” before the summit wraps up, he told the Financial Times.

ON THE CLIMATE FINANCING FRONT-Russia is trying to unfreeze its gold reserves to contribute to financing the recently operational loss and damage fund, Reuters reported on Saturday. Russia’s international reserves — amounting to around USD 300 bn — were frozen last year after the war on Ukraine started. The country is doing “everything possible” to stop the West from seizing its frozen reserves, the newswire wrote citing comments made by Russia’s climate envoy at the COP28 summit.

AND THE UAE WON’T RETAIN COP PRESIDENCY- Azerbaijan to the rescue: Azerbaijan is set to host COP29 after the Eastern European bloc agreed to have its capital city Baku as the host of the UN climate summit, Bloomberg reported on Saturday. The petrostate won backing from the 23 members of the Eastern European bloc after it pushed Armenia to withdraw its own bid.

Geopolitical tensions (read: the Russia-Ukraine war) made things difficult: The UN had been struggling to find a host for COP29 due to threats by Russia to veto any bid by a European Union member. Prior to agreeing on Azerbaijan, Moldova and Serbia had both applied to preside over the COP29 climate summit. Under the UN’s guidelines, the COP venue rotates among the five UN regional groups yearly, with this year being the Eastern European bloc’s turn.

WATCH THIS SPACE #1- Gulf of Suez wind farm to begin commercial operations: Vestas’ 250 MW wind farm in Egypt’s Gulf of Suez is set to begin commercial operations by the end of the month, a government source tells Enterprise Climate. Vestas will hand over operations to Egypt’s New and Renewable Energy Agency (NREA) and handle maintenance on the farm for three years after commercial launch. The project will also see the capacity of wind-generated energy in Egypt reach a total of 2 GW, Youm7 reported on Friday. Vestas began trial operations on the wind farm last month before the start of commercial operations and the handover to NREA.

WATCH THIS SPACE #2– The EU’s central bank gains power to intervene if banks fail to manage climate risks: The European Central Bank (ECB) is set to gain increased authority in monitoring how lenders plan to transition to a net zero carbon economy as EU lawmakers expand its powers to include climate change risks, Bloomberg reported on Friday, citing the text of the provisional agreement yet to be formally approved by EU’s Parliament and Council. The new update in the provisional text allows the ECB to act “when there are risks arising from transition trends toward” the climate targets within the EU, the newswire adds.

The EU also extended a mandate on cutting gas imports: The EU has reached an agreement to grant member states the authority to halt gas imports from Russia and Belarus, the Financial Times reported on Friday. “The proposal could provide a basis for EU energy companies to get out of contracts with Russian gas providers without having to pay hefty compensation,” a senior official of the bloc said, according to FT. This would push EU countries to accelerate the diversification of their fuel sources away from natural gas and towards green energy. Last year, the EU Commision set a target for the bloc to cut off Russian fossil fuels by 2027.

WATCH THIS SPACE #3-Maersk to launch first large methanol-enabled vessel on AE7 string: Danish shipping giant Maersk is set to deploy the first of 18 large methanol-enabled vessels on the AE7 string — the trade lane connecting Asia and Europe through the Suez Canal — on 9 February 2024, according to a statement released on Thursday. The vessel is equipped with a dual-fuel engine, meaning it can run on methanol as well as biodiesel and conventional bunker fuel.

REMEMBER- Maersk wants to eventually make its own green fuel: Maersk and its parent company AP Moller Holding established a new company called C2X to produce and sell green methanol back in September. C2X is investing USD 3 bn for the annual production of 300k tons of green methanol and its derivatives in the Suez Canal Economic Zone.