In this blog, I explore three key areas that we believe can drive global climate efforts forward: maintaining momentum from COP28 to provide businesses with the predictability they need, expanding effective carbon pricing mechanisms, and increasing private finance with support for a broad array of net-zero technologies.
Building on COP28 for greater business stability and climate progress
COP28 in Dubai last year increased predictability of global policy, resulted in decisions on energy transition and sent a positive signal to investors. Countries agreed to transition away from fossil fuels in the energy system and pledged to triple the use of renewables and to double energy-efficiency levels. We need to keep this momentum going at COP29 and beyond. Hopefully, Baku does not become an “intermediate” event but continues the drive and lays the foundation for ambitious new commitments by countries during 2025 ahead of COP30 in Brazil.
We at Fortum stand firmly behind the goals of the Paris Agreement. Business participation is important in ensuring the green transition in the long term. To play our part, companies require predictability and outlook on the global policy framework and global rules for the coming decades.
Carbon pricing is key – Article 6 should be put into full operation
Carbon pricing will play an indispensable role in the energy transition, as it offers a straightforward, cost-effective and technology-neutral solution for climate change mitigation. In addition to emission reductions, carbon pricing attracts new low-carbon investments; and by using carbon pricing revenues, it is possible to accelerate innovations and to support economic growth.
Article 6 of the Paris Agreement to regulate carbon trading has been in the making for a long time. Operationalising Article 6 at COP29 could unlock a global carbon market that drives the energy transition and supports decarbonisation on an international scale. Currently about 23% of global greenhouse gas emissions are subject to a direct carbon price. Additional regions need to apply carbon pricing in order to have a more level playing field; this is also important from the European competitiveness point of view.
Private finance is crucial for the green transition – all net-zero technologies should be eligible
COP summits do not curb climate change. The practical mitigation actions take place through companies planning their investments, investor decisions, and consumer choices. It is imperative that climate goals look credible in the eyes of companies and investors and that climate finance criteria are not too restrictive. Only then will private investments be triggered.
COP29 has been branded the “Finance COP” and is expected to result in a New Collective Quantitative Goal on financing for the post-2025 period. Public funding for climate action is inadequate, so the private sector’s involvement in this needs to be ramped up. The International Energy Agency (IEA) has estimated that 75% of investments should come from the private sector.
The financing of mitigation measures should be based on technology neutrality and diversity and on project excellence. This applies both to international finance and for example upcoming negotiations on the EU multiannual finance framework (MFF). All relevant net-zero mitigation technologies, including nuclear and carbon capture, utilisation and storage (CCUS), should be utilised in the mitigation efforts and they should have fair access to financing.
