COP29 : Road to Baku

Interview conducted by Gabriel Lagrange, Head of the Geopolitics of Climate Change Department at the Institute for Applied Geopolitical Studies, with Dr. Justin Dargin, CEO, Resolve36, University of Oxford, Senior Energy and Climate Change Scholar.

Gabriel Lagrange - As you know, COP28 has been one of the most mediatized COP, due to its importance in terms of agenda and the identity of its chair, the UAE. What is your analysis of COP28 ?

Justin Dargin - COP 28 was notable because it is the first time that fossil fuels were explicitly mentioned within the final document. It does not mean, though, that oil and gas production and demand will or should stop tomorrow. It cannot happen because the world is still transitioning and needs fossil fuels.

The inclusion of a reference to fossil fuels reflects compromises and strategic bargaining. Major oil producers in the Gulf and OPEC resisted language explicitly targeting them, arguing it detracts from the core objective of reducing greenhouse gas emissions.

The COP28 agreement garnered criticism from highly vulnerable states who saw it as riddled with loopholes. However, it ultimately achieved a fragile consensus, reflecting the realities of navigating global climate action. The agreement references "transitioning away from fossil fuels" as a key objective, is one of the weakest terms possible. [1] However, I view this phrasing as a form of "geostrategic norm shaping" – a linguistic strategy to influence international norms. While ambitious in its goals, the COP28 agreement lacked specifics, such as a timeline or quantifiable reductions. This ambiguity offered some flexibility for the Gulf countries.

In addition to that, Gulf countries were pushing for low-carbon technologies[2] that are an entry point for carbon capture and storage (CCS) technologies because they would allow the continued exploitation and consumption, or utilization, of fossil fuels. Another important feature was the "phase down on unabated coal," (art. 28-b) but that is not necessarily important for Gulf countries compared to India or China. A critical element of the COP28 agreement lies in its mention of addressing inefficient fuel subsidies. This is particularly significant for the Gulf states, where natural gas has historically been a key industrial feedstock fueled by the wealth generated from the 1973 OAPEC embargo. A key point of contention for many actors lies in the perceived subsidies embedded within natural gas and power prices across the Gulf region. Critics argue these low prices grant Gulf-based manufacturers an unfair advantage in global trade due to what they argue are artificially reduced production costs.Energy-rich developing countries, particularly those in the Gulf, vehemently oppose the categorization of their natural gas and power prices as subsidies. They argue such labels could hinder their industrialization and economic diversification efforts, critical in the face of a looming "post-oil" world. The agreement's inclusion of phasing out inefficient fuel subsidies represents a concession by the Gulf countries. They view both carbon constraints and subsidy reform as potential impediments to economic development and diversification away from fossil fuels, particularly considering the established downstream industries reliant on these low-cost inputs.

The language emphasizing a "just, equitable, and orderly transition" aligns with a key axiom often expressed by the Gulf countries. They interpret this as flexibility in achieving climate goals, potentially allowing continued oil production within national development strategies. This interpretation, some argue, could be akin to saying "write whatever contract you want, but allow me the interpretation," raising concerns in some quarters about a lack of genuine commitment to climate action.

While the Gulf countries' focus on a "just, equitable, and orderly transition" raises concerns about the pace of decarbonization, it's important to acknowledge their concrete steps. Unlike simple "greenwashing," they are demonstrably investing billions in renewable energy and nuclear power, undertaking domestic decarbonization efforts. However, a key point of contention remains – their continued commitment to exporting as much oil as possible. This focus on fossil fuel exports sits uneasily with the rhetoric of a "just transition," by some climate activists. Critics argue that maximizing oil production contradicts genuine climate action, suggesting a two-step: invest in clean energy domestically while continuing business as usual on the export front.

Climate colonialism was another key issue under consideration at COP27 and COP28. However, this concept has been embedded in every single multilateral environmental negotiation since the beginning of global environmental negotiations in the 1970s. The developing countries' main argument focused on the historical responsibility of developed countries, that they are responsible for most global carbon emissions and therefore developing countries should not bear responsibilities for this. As part of this debate, developing countries perceived international climate negotiations would be a vehicle to disrupt their industrialization programs, particularly the energy-rich countries.

Despite criticism of what was termed as « weak » final language, COP28 holds significance. Viewed holistically, the agreement reflects a tightening regulatory environment, ultimately placing a finite window on fossil fuel exploitation. This dynamic highlights the "green paradox" of COPs: international climate negotiations, while aiming for emission reduction, can incentivize a short-term surge in production as producers race to maximize profits before their assets become stranded. For instance, the UAE presents a case study in the "green paradox." ADNOC's ambitious target of increasing its oil production to 5 million barrels per day of oil production by 2027, backed by a $150 billion spending plan, appears at odds with their positioning as a leader in renewable energy investment. This strategy demonstrates an effort to maximize oil production before the decline in demand. In essence, the UAE is pursuing domestic decarbonization while simultaneously prioritizing oil exports to capture maximum revenue before the window closes.

G.L - Moving forward, the COP29 will be held in Baku in November 2024. Following a highly political COP in Dubai, the COP29 still has important decisions to adopt. What are your expectations for COP29? What does a successful COP29 look like?

J.D - As the window for fossil fuel dependence shrinks, a potential clash between oil-producing nations and the international community intensifies. Azerbaijan, heavily reliant on fossil fuels (90% of its national budget) and lagging in decarbonization compared to its Gulf neighbors, exemplifies this vulnerability. COP29 presents a critical juncture. Azerbaijan has already staked a position that argues for continued investment in fossil fuels during the energy transition. They point to Europe's recent scramble to diversify energy imports as evidence of this need.

Decisions on climate finance, a potential lifeline for countries such as Azerbaijan during the transition, will be a top priority. Here, states will likely engage in intense negotiations to establish a new climate finance goal, replacing the expired $100 billion target set in Copenhagen (COP15) in 2009. Securing adequate climate finance remains a major sticking point. Developed countries face a double bind: fulfilling existing pledges while battling "donor fatigue" at home. Meanwhile, they urge developing countries, already struggling with climate impacts, to shoulder more of the financial burden.

One potential solution emerges from Azerbaijan: the North-South Financial Mechanism. This proposal advocates for a levy on oil, gas, and coal production to fund climate initiatives. Participating fossil fuel producers would contribute a portion of their revenues to a dedicated fund, acting as shareholders and potentially receiving profits from its investments in climate projects. However, environmental groups view this proposal with some skepticism, concerned it might be a way to legitimize continued fossil fuel extraction under the guise of climate action. The Azerbaijan proposal faces an uncertain path forward.

The historical responsibility argument, a mainstay for oil-rich developing countries in past negotiations, is likely to resurface. Previously, relatively wealthy developing countries, such as Saudi Arabia, leveraged the G-77 to advocate for receiving climate finance as compensation for past emissions and support for a low-carbon based industrialization. However, recent indications suggest the Gulf countries, including Saudi Arabia, seem to be shifting their approach.

Securing a successful COP29 hinges on acknowledging the realities of oil-producing nations. While everyone must publicly recognize the climate crisis and aim for ambitious emissions cuts, compromise is key. Oil-rich countries might accept stricter limits outside the fossil fuel sector, if developed couples acknowledge their reliance on this resource during the transition. Developed countries must also recognize the potential inconsistency in their own demands. For instance, pressuring oil-producing nations to reduce exports, instances such as the Biden administration pressuring OPEC+ to increase production or the EU supporting increased hydrocarbon production in Africa while simultaneously encouraging increased production elsewhere undermines the coherent message needed for progress during negotiations.

Therefore, a successful COP29 would also establish a clear roadmap for phasing out fossil fuels, with a focus on a "just transition" that considers the economic dependence of oil-rich countries. This might involve much more significant investments in renewable energy and diversification in developing economies. Additionally, the conference would need to strengthen mechanisms for accountability and transparency, ensuring all countries are monitored and report their emissions and climate actions effectively.

Finally, fostering a spirit of cooperation and trust between developed and developing countries is key. Trust is something that has been lacking since the beginning of the global climate negotiations. Recognizing the specific challenges faced by oil-rich nations and finding solutions that address their concerns is the foundation for building consensus. Yet, it is important to remember that a "successful" COP29 might not achieve all these goals perfectly. However, any progress on these fronts, particularly with the participation of oil-rich countries, would be a significant step forward in the fight against climate change.

G.L - According to their official agenda announced earlier, COP29's priority will be to maintain the 1.5°C target within reach, but Azerbaijan still defends oil and gas investments. Is it compatible?

J.D - The 1.5°C goal and unabated hydrocarbon exploitation seem inherently contradictory. However, some see a potential benefit when hydrocarbon-producing countries host COP meetings. The spotlight cast on the host nation compels them to explicitly outline their decarbonization plans. Azerbaijan, heavily reliant on fossil fuel revenue, exemplifies this tension. Unlike the UAE at COP28, Azerbaijan might be more inclined to defend its hydrocarbon dependence during the conference.

G.L - Azerbaidjan seems to be quite fond of having climate security at COP29, embracing the will to be a "COP truce". Which way should it take? What could be the main hurdles?

J.D - International agreements often lack robust enforcement mechanisms, relying on "name and shame" tactics for non-compliance. However, simply agreeing to an agreement creates pressure. Even if a country doubts its ability to meet the goals, the agreement sets a standard and compels them to gradually improve over time. The concept of "threat multiplier" increasingly links climate change to security concerns. The US Department of Defense, for instance, began integrating climate change into military planning scenarios in 2008-2009. As a result, climate references have become more prominent in military guidelines and operational requirements.

The recent conflict in Ukraine has further demonstrated the issue of conflict-related emissions and compensation. The aspirational Declaration signed last year could serve as a foundation for future formalized agreements addressing these concerns.

G.L - With the UAE trying to develop a powerful and vocal environmental and climate leadership, tensions have appeared within Arab, OPEC, and GCC coalitions. Do these groups still develop a common position on climate change? Can UAE dethrone KSA as climate leader of the Arab/Gulf/OPEC group?

J.D - Saudi Arabia wields significant influence within various coalitions relevant to international climate negotiations, including the G77, GCC, OPEC, Like-minded Developing Countries group, the G20, and the Arab Group. This clout allows them to advocate for the interests of oil-rich developing countries. However, tensions simmer beneath the surface due to the vast disparities within the developing world. Countries such as Saudi Arabia and Namibia have fundamentally different economic priorities, highlighting the inherent challenges of forging a unified front. The UAE and Saudi Arabia, despite sharing a reliance on oil, exhibit contrasting approaches to climate negotiations. The UAE prioritizes international goodwill, promoting itself as a leader in renewable energy. Though this doesn't preclude continued oil production, it fosters a more conciliatory image. Saudi Arabia, on the other hand, openly advocates for its oil interests at the negotiating table.

Azerbaijan, as the upcoming host of COP29, presents an interesting case. We will almost certainly them adopt a position even more entrenched in favor of fossil fuels than even Saudi Arabia's previous stances.

Even though aligned and collaborating on many issues, competition for regional power and influence between the UAE and Saudi Arabia extends beyond traditional economic spheres – it now encompasses "green diplomacy." The UAE actively cultivates an image as a green leader, attracting multinational firms and positioning itself as an economic and fiscal hub through initiatives in renewable energy. This ambition directly challenges Saudi Arabia's historic dominance.

However, despite this strategic competition, a broader alignment persists within OPEC regarding climate change. Member countries, including Saudi Arabia, generally prioritize their economic dependence on oil. They often utilize the "climate colonialism" narrative, arguing that developed nations have historically benefited from fossil fuels and should bear greater responsibility for emissions reductions.

The facade of OPEC unity regarding climate change displayed cracks at COP28. The UAE's active promotion of green initiatives stood in stark contrast to Saudi Arabia's stance, even though the Kingdom did highlight its green investments. This dissonance left the UAE more vulnerable during negotiations. A country's negotiating position weakens significantly when its actions contradict its pronouncements. Conversely, a nation that openly pursues its self-interest, like maintaining oil exports, can potentially face less criticism because its goals are transparent.

However, the UAE's approach doesn't necessarily signal a permanent break from OPEC. It's more about how each country chooses to operate within the organization. Despite their contrasting strategies – the UAE's "green gambit" and Saudi Arabia's focus on oil – both countries likely share the same ultimate goals of economic prosperity and global influence, while still attempting to maximize revenue generation from their oil exports as much as possible They've simply chosen slightly different paths to achieve them.

G.L - We know that oil states are particularly reluctant and conservative at the COP, as any decision can harm their national economic interests. Which leverages or entry-points do exist enabling the international community to push and advocate for deepening oil states' climate efforts?

J.D - Effective engagement with Saudi Arabia on climate change requires a nuanced understanding of their evolving position. Gone are the days of the early 2000s, when Gulf countries like Saudi Arabia dismissed climate science entirely. Their recent engagement in domestic decarbonization efforts represents a significant shift, we could even say psychological in nature. Additionally, their acknowledgment of the role of fossil fuels at COP28 suggests a potential willingness to make concessions.

To capitalize on this shift, continued international cooperation is key. We need to establish open communication channels to understand Saudi Arabia's priorities and explore mutually beneficial trade-offs. CCS might be a potential area of collaboration, but its viability hinges on demonstrating its economic and environmental effectiveness.

Another promising avenue for cooperation with Saudi Arabia lies in climate finance. Providing targeted financial resources can significantly incentivize their transition away from fossil fuels. This support could be channeled not only through traditional multilateral mechanisms, but also through bilateral investment and technology sharing agreements. This approach, however, hinges on a significant commitment from developed nations. They must not only fulfill their existing climate finance pledges but potentially expand them to demonstrate genuine partnership.

The perception of COP negotiations as a zero-sum game, where gains for one party come at the expense of another, remains a significant hurdle. By addressing Saudi Arabia's concerns through open communication, exploring areas of potential collaboration like CCS and climate finance, and demonstrating a strong commitment from developed nations, we can move beyond this perception and foster a more collaborative approach to climate action. As the economist Thomas Sowell stated, there are no solutions, only trade-offs.

G.L - To conclude, you will be publishing in 2025 your next book "The Gulf's Climate Reckoning: Decarbonization, Development, and the Future of the Petro-States". Can you please give us a bit more information on it?

J.D - My book, dismantles the outdated image of the Gulf states as unwavering defenders of fossil fuels. It unveils a surprising shift – a growing recognition by these oil-rich countries that decarbonization is not just an environmental imperative, but a strategic move to ensure their long-term economic prosperity and, ultimately, national security.

The book traces this evolution from its roots in the 1960s, when the establishment of OPEC cemented hydrocarbons as the linchpin of economic and geopolitical power for oil-rich developing countries, especially in the Gulf. These countries leveraged their vast oil reserves to fuel rapid industrialization, establish themselves on the world stage, and accumulate immense wealth.

The 1973 oil embargo, while initially a financial boon for the Gulf states, also planted the seeds for a conceptual revolution: overdependence on a single resource was inherently economically dangerous. This vulnerability became painfully clear in the natural gas shortages of the late 2000s, which threatened to derail their ambitious macroeconomic growth plans. The socio-political unrest of the Arab Spring acted as a powerful catalyst for change in the Gulf. Witnessing the uprisings in neighboring countries, Gulf states recognized the need to re-evaluate their economic model. Unsustainable hydrocarbon consumption patterns were not just an environmental concern; they were placing a significant strain on their treasuries.

This realization, coupled with the long-term threat of overreliance on a single resource, redefined national security for the Gulf states. Decarbonization emerged as a critical strategy, not just for environmental reasons, but to ensure domestic socio-political and economic stability and avoid a potentially catastrophic dependence on a dwindling oil market.

My book delves beyond historical context, exploring the present forces shaping the Gulf's surprising pivot towards decarbonization. A key driver is the evolving geopolitical landscape, where energy security and diversification are paramount. The book also investigates how these countries are strategically leveraging climate diplomacy to bolster their global position. This includes targeted green investments in developing regions like Africa, showcasing that economic and ecological goals can be intertwined and create a mutually reinforcing drive to build a sustainable future.

However, I also move beyond the historical and offer practical insights for the future. Drawing on extensive research, it recommends optimal designs for national carbon trading schemes, an essential tool for managing their own decarbonization journey.

Looking ahead, the book analyzes the potential social and economic impacts of these policies in the next 10-15 years, all within the context of a constantly morphing geopolitical landscape.

[1] Article 28-d of the COP28 Global Stocktake: "calls on Parties to contribute to […] Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science.

[2] Art. 28-e of the COP28 Global Stocktake "calls on Parties to contribute to […] Accelerating zero- and low-emission technologies, including, inter alia, renewables, nuclear, abatement and removal technologies such as carbon capture and utilization and storage".