What You Need to Know.

  • The thematic focus of the day’s programming was on nature, land use, and ocean, including events on scaling effective solutions that protect, restore, and beneficially manage nature ecosystems, addressing drivers of nature loss, empowering Indigenous Peoples and local communities, and creating resilient livelihoods.  As part of this discussion, the United Nations Environment Program (UNEP) launched a report highlighting that nearly $7 trillion of public and private finance each year supports activities that directly harm nature—thirty times the amount spent annually on “nature-based solutions,” or actions to protect, conserve, restore, sustainably use, and manage natural resources that simultaneously provide human well-being, ecosystem, and resilience and biodiversity benefits.
  • Late Friday evening, various news organizations reported that the head of the Organization of the Petroleum Exporting Countries (OPEC) sent a letter to its thirteen members as well as ten additional countries (altogether known as “OPEC plus”), highlighting the increased pressure to reach an agreement to phase out fossil fuels at COP28.  The letter urged the OPEC plus nations to “reject any text or formula that targets energy i.e. fossil fuels rather than emissions.”
  • Various high-level officials from international organizations or countries central to the energy transition made statements in favor of reaching an agreement to curb fossil-fuel production.  Dr. Fatih Birol, Executive Director of the International Energy Agency, noted that it is “imperative” that countries agree to an “orderly and just decline in fossil fuels in line with our international climate goals.”  These comments were echoed by Xie Zhenhua, China’s climate envoy, who noted China’s desire to see an agreement that would reduce fossil fuel consumption, and Alok Sharma, the president of the COP26 summit in Glasgow, who stated that “If you’re going to keep 1.5C alive” countries need both “language on a phase-out of fossil fuels” and “a credible implementation plan.”
  • The Netherlands launched a coalition to phase out fossil fuel subsidies, along with Austria, Belgium, Ireland, Spain, Finland, Antigua and Barbuda, Canada, France, Denmark, Costa Rica, Luxemburg.  The coalition has three pillars: (1) publishing a list of their fossil fuel subsidies before COP29; (2) working together to identify and address international barriers to phasing out fossil subsidies; and (3) shaping an international dialogue to share knowledge, develop national strategies for phasing out fossil benefits, and seek joint action to minimize carbon leakage.

Why This Matters for Businesses.

  • Though the primary focus of COP28 is climate change, the UNEP report underscores that as the climate worsens, business’s role in biodiversity loss and land degradation will be equally scrutinized by governments, NGOs, and international organizations.  The report finds that $5 trillion of the $7 trillion in “nature-negative finance flows”—or public and private finance that supports activities that directly harm nature—comes from the private sector, a figure that is 140 times larger than private investments in nature-based solutions.  According to the report, half of that nature-negative finance stems from five industries: construction, electric utilities, real estate, oil and gas, and food and tobacco.
  • The competing ambitions of the OPEC plus members and the Netherlands-led coalition to address fossil fuel subsidies put into clear contrast the diverging approaches that national governments are taking to the fossil fuel industry.  On one end, oil-producing countries are striving to protect the industry from production limits; on the other end, countries are seeking to reduce subsidies and phase out oil, gas, and coal.  As we highlighted in our Day 8 Recap, failure to reach a satisfactory resolution of the “phase out versus phase down” debate at COP28 may galvanize efforts to establish a Fossil Fuel Non-Proliferation treaty—particularly given the continued attention to the COP28 host country’s own membership in OPEC and heavy reliance on fossil fuels.

Covington Commentary.

While awaiting resolution of the COP28 ‘phase out versus phase down’ debate and the signal that it will portend for corporate energy and carbon management strategies, businesses should not overlook increasing attention being paid in supply chain management to biodiversity and preservation of natural systems.  It is still early days in the trend of corporate goal setting around protection of these scarce societal resources.  But just as emissions goal setting by large companies grew to a now nearly universal practice, we expect increasing stakeholder demands for greater corporate attention to nature and biodiversity goals.”

Andy Jack, Partner, Co-chair of the Energy Industry Group

More News and Developments.

Covington’s multidisciplinary COP28 delegation includes leaders of Covington’s ESGEnvironmentEnergyProject Development and FinanceCorporate, and Public Policy practices, as well as our unique Carbon Management and Climate Mitigation (CM2) initiative. Our comprehensive and integrated global team is ready to assist clients as they prepare for COP28, engage with key stakeholders while there, and then strategize about and successfully implement ESG corporate policies aligned with COP28 goals.  Follow our Climate Hub for Businesses to stay up to date with the latest developments from COP28.

Martin Levy

Martin Levy is an associate in the firm’s Washington’s office. He is a member of the Environmental and Energy Regulatory practice, focusing on low-carbon and renewable energy incentives, carbon markets, environmental marketing claims, and other corporate climate change initiatives. He advises power generators…

Martin Levy is an associate in the firm’s Washington’s office. He is a member of the Environmental and Energy Regulatory practice, focusing on low-carbon and renewable energy incentives, carbon markets, environmental marketing claims, and other corporate climate change initiatives. He advises power generators, technology companies, and financial institutions on how to better align their business practices with “net zero” commitments. Before joining Covington, Martin was a vetting attorney with the Biden-Harris Presidential Transition, a law clerk at the Eastern District of New York, and an undergraduate environmental law instructor at Boston College.

Photo of W. Andrew Jack W. Andrew Jack

Andrew Jack has a diverse corporate and securities practice with clients principally in the energy, industrial manufacturing, technology and sports and entertainment industries. He regularly represents corporations, board committees, and other forms of enterprises in mergers and acquisitions, strategic alliances, financing activities, securities…

Andrew Jack has a diverse corporate and securities practice with clients principally in the energy, industrial manufacturing, technology and sports and entertainment industries. He regularly represents corporations, board committees, and other forms of enterprises in mergers and acquisitions, strategic alliances, financing activities, securities law compliance, corporate governance counseling, and executive compensation arrangements. Mr. Jack also co-chairs the firm’s Energy Industry Group.