Economy Watch Rod Oram: The key test ahead now COP28 has agreed to a transition away from fossil fuels
Following COP28's call for a transition away from fossil fuels, a key test will be how quickly a rethink of the market capitalisation of oil and gas companies starts emerging, says Rod Oram.
Fresh from attending COP28 in Dubai, Newsroom journalist Oram spoke to interest.co.nz for the latest episode of our Of Interest podcast.
COP28, or the 28th meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change, was overseen by its president Sultan Ahmed al-Jabar, managing director of Abu Dhabi National Oil Company, or ADNOC, the United Arab Emirates' state owned oil company.
Fossil fuels did, however, make it into the final agreement in a substantial way for the first time at a COP, Oram says. Whilst it's "weaker and slower and less specific [language] than is actually required," it's still significant progress.
The "UAE Consensus" text agreed by 198 countries also includes a global renewables and energy efficiency pledge.
"That does start to send a signal. Not only to governments as they prepare their next commitments under the Paris Agreement, by 2025 countries have to come back with an improved commitment, but it sends a powerful signal to them that they must be working more on fossil fuel reductions in consumption and production, and it also starts to send a stronger message to financial markets," says Oram.
The Paris Agreement is a legally binding international treaty on climate change.
"I think the key test in financial markets, both of that language on fossil fuels but then [also] on this language of a big increase in renewables, is how quickly we start to see a reappraisal of the market cap of oil and gas companies. And how quickly we'll see an appraisal that says 'oh, maybe they aren't going to be producing as much as we thought, say over the next 10 years, because people won't be burning as much because governments have started to shift, consumers have started to shift, renewables are escalating at a rapid pace.' And that to me is going to be the acid test as how soon we start to see that revaluation in the stock market of oil and gas companies," Oram says.
In terms of the annual COP meetings, Oram points out they require consensus across all 198 countries so it's not the place for really big breakthroughs. Instead COP, once a year, provides "a really good scorecard about what the state of play is on all of these issues."
"This isn't anymore just about negotiations between government officials and politicians. This is very much an all-of-society meeting, and that's why the numbers [of delegates attending] were so big this year."
In the podcast Oram also talks about the New Zealand presence at COP28, NZ winning fossil of the day, the first official recognition of and finance mechanism for helping developing countries cope with economic losses and physical damage from storms, droughts, and other climate impacts, the first time there has been a COP declaration on agriculture, and the "deeply, deeply, deeply fascinating" experience of attending a COP in person. Oram also addresses criticism of people flying across the world to discuss climate change, and his hopes for COP29 next year in Azerbaijan.