Funding for Climate Action, Businesses Need Plan
The selection of Dr. Sultan Al Jaber as President-designate of COP28 highlights the need for cooperation. Appointing the CEO of ADNOC places the energy sector at the forefront of achieving Net Zero.
Dr. Al Jaber has urged for a "major course correction" and emphasised the need for business action, particularly in the energy industry. By collaborating with finance and governments, the industry can take action to limit global warming to 1.5 degrees.
The energy sector has the potential to drive the shift to Net Zero and offer new business opportunities. As they have technical capabilities, financial strength, and talent, they can create solutions for the energy transition, and this could vary across companies and countries with potential global applicability.
The necessary changes will be guided by transition plans, which have long been established at the national level. However, more attention is now being given to company-level transition plans due to the private sector's crucial role in this regard.
With COP28 approaching and the UAE set to host it, there is a distinct chance for energy companies to work together and establish the components of a trustworthy company transition plan. By pooling industry-wide efforts, a framework and key metrics, including carbon reduction goals, investment decisions, and support for clean energy, could be implemented.
In the lead-up to COP26, a similar process took place within the financial sector. The Glasgow Finance Alliance for Net Zero (GFANZ) was established to establish a consistent approach to how financial institutions should develop Net Zero-aligned policies, targets, and practices.
Over the course of two years, the financial sector devised an industry-wide strategy based on banks collaborating with clients to finance their transition. The funding is now readily available, but the next challenge is deploying it on the scale needed to support the Net Zero transition.
Energy companies can take specific measures to unlock this capital and direct it towards the areas where it is most needed. The creation of an industry standard for company transition plans in the energy sector would boost market and investor confidence.
Practical implementation should be the focus of transition plans, as it is the most useful. Initial steps may involve transitioning the energy mix, expanding clean infrastructure and renewable energy, and lowering emissions. In due course, a project pipeline could be established to help banks and investors recognise and fund the necessary changes.
By collaborating with the energy sector, banks can assist in providing the necessary capital investments for large-scale emissions reductions. However, it is necessary to keep financing oil and gas supplies at declining levels as demand decreases to ensure an orderly transition.
The more comprehensive the transition plans become at the company level, the more funding banks will be able to supply to energy companies leading the transition.
The process of course correction will be intricate and demanding. Achieving the goal of limiting global warming to 1.5 degrees Celsius necessitates a significant reduction in emissions by 2030. However, the energy industry possesses immense potential to spearhead the necessary changes.
Cooperation within the energy sector is a crucial initial step. By doing so, banks will be better positioned to provide the financial support necessary to achieve Net Zero, promoting change on a large scale. Public policy is gradually inclining towards incentivising change, as evidenced by the US Inflation Reduction Act and the European Green Deal, with an unparalleled amount of public funding involved.
The objective is evident - to speed up emission reduction efforts through groundbreaking partnerships, solutions, and results. COP28 can provide an opportunity for the energy sector to take the lead and offer novel solutions. By working together more closely, we can realise the commercial prospects that are opening up and create a more secure, sustainable energy future.
Source: Gulf News