COP28: What to expect and implication to Thailand

The world paid close attention to this meeting as it tracks the progress of the committed pledges ‘1.5°C scenario’ and urges accelerated efforts to battle against climate change.

2023 was the hottest year on record and global temperatures have increased 1.1°C above pre-industrial levels, leaving only a 0.4°C gap to the 1.5°C target. Climate change has many impacts e.g., severe weather, extreme heat and drought, causing many global catastrophes such as wildfires in Canada and unprecedented floods in Pakistan, Somalia and Kenya.

These events accelerated the urgency to call for resolute actions to alleviate foreseeable catastrophes and mitigate the consequences. 

Highlighted areas at COP28 can be summarized into 3 topics: (1) global debate on the pledge of phasing out fossil fuels; (2) Climate Finance with the developments of  “Loss and Damage Fund” and ”Blended Finance” in response to climate mitigation and adaptation initiatives (3) tangible climate actions in response to the first UN Global Stocktake results. 

Global debate on the pledge of phasing out fossil fuels. 

The decision between phasing out and phasing down. At the heart of this year's COP28 discussions is a pivotal decision: should the world's nations collectively agree to phase down or completely phase out their reliance on fossil fuels?

The debate is a continuation of last year's efforts, spearheaded by the G7 countries who are advocating for a total phase-out of fossil fuels. These proposals, however, have been met with resistance from several nations calling for a more gradual shift towards clean energy; highlighting the complexities and varied pace of global energy transition.

In this COP28, the “fossil phase-out” in the first Global Stocktake has been replaced with ambiguous terms, paving the way for prolonged debate. While the Global Stocktake's language on fossil fuels remains open to interpretation, the declaration of intent on mutual recognition of the low-carbon hydrogen certification scheme signals a commitment to cleaner energy solutions and transparency from production to consumption.

As the meeting progresses, the consensus on fossil fuel usage is set to profoundly influence global energy policies, with an expected push for more rigorous initiatives. The discussion goes beyond the simple decision of whether to phase down or phase out fossil fuel use, but to embrace the adoption of innovative solutions such as green hydrogen to promote sustainable and robust energy security and mix for the future.

This global effort is further bolstered by the International Renewable Energy Agency's (IRENA) ambitious 'Double Down, Triple Up' strategy, which aims to triple global renewable energy capacity to approximately 11,000 GW and double energy efficiency improvements by 2030, highlighting the necessity for enhanced international cooperation and expedited policy action. 

Thailand is at a crossroads in its climate strategy, urgently needing tangible action plans that focus on revolutionizing and transforming its energy and financial sectors.

Embracing the 'Triple Up Renewable Energy Capacity Double Down Energy Efficiency’ initiatives offers a promising path forward, potentially catalyzing a new renewable energy auction round. This could accelerate Thailand's shift from fossil fuels dependence to renewable energy such as solar and wind energy.

A transition is already underway with the country's renewable capacity target of 12 gigawatts. This is approximately 20.6% of renewable energy share from total installed capacity, to increase to 34.2% by 2037. This is a step that would not only advance Thailand’s clean energy transition but also strengthen its financial sector against climate risks, setting a robust precedent for holistic environmental policy reform.

Climate Finance with the developments of Loss and Damage Fund and blended finance in response to climate initiatives 

Climate finance was another leading topic at COP28. The major discussions revolved around the financial flows that were needed to achieve global goals. So far, the COP28 has secured over USD 83 billion, setting a momentum for new era of climate action.

Meanwhile, an estimation of USD 1 trillion per year is required to support developing countries for climate mitigation and adaptation. Initiatives such as “Loss and Damage Fund” and “Blended Finance” played vital roles in driving the financial efforts. The Loss and Damage fund to get an alignment on the contribution from developed countries and processes to mobilize the fund to developing countries in response to climate change impacts.

COP28 concluded that the World Bank will host the fund with an initial resource of USD 726 million from large economies. In addition, Blended Finance was brought up as another strategic tool to reduce the financing gaps. In 2022, the cumulative flow of Blended Finance reached approximately USD 180 billion, which falls markedly short of the estimated USD 4.2 trillion needed annually to achieve the Sustainable Development Goals (SDGs).

Blended finance has been gaining more attention from both government and private sectors. Effective intermediaries that connect potential investors and project executors play a vital role in bridging the unmet needs.

During COP28, The Green Climate Fund has injected new money of USD 3.5 billion to support climate initiatives. Also, the Catalytic Climate Finance Facility announced that USD 2.4 million will be granted for new blended finance vehicles for a transition to low-carbon and climate-resilient economies in Sub-Saharan Africa and Latin America.

The facility will open for applications in mid-March 2024. Other Specialized Green Financial Intermediaries such as Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs), with a few adjustments, have pledged to support USD 31.6 billion and are also well-positioned to play a key role. By leading the charge to simplify and enhance the impact of Blended Finance, they can make significant strides in advancing the global goal of reaching the 1.5°C target—a crucial step in the worldwide battle against climate change.

Tangible climate actions in response to the first UN Global Stocktake results

The first Global Stocktake on the technical dialogue was issued in 2023 to highlight how the global situation is still lagging in implementing the Paris Agreement actions. The pressure was put on both public and private sectors to accelerate the efforts with tangible action plans.  In 2024 – 2025, the biennial transparency report and progress on nationally determined contributions will likely encourage each country to move from commitments to execution plans.

Thailand should prepare the environment to support international funding policies and attract foreign investors by creating an ecosystem that supports green investment initiatives that are taxonomy-aligned and draft guidelines for the Climate Change Act.

These initiatives aim to raise climate change awareness and impact across all sectors and create the firm position to embrace international assistance. It will support financial institutions to embed sustainability and encourage the distribution of funds and financial products for energy transition, climate mitigation and adaptation initiatives, and sustainability-linked projects. The use of these sustainable finance products and loans is an opportunity for the private sector to fund their transition to lower carbon organizations.

At this moment, Thailand is on its journey to achieve NDCs with many initiatives and actions on the way. However, further collaboration across sectors is necessary to mitigate challenging issues such as climate change adaptation in response to sea levels and scope 3 emissions which requires commitments not only from the whole supply chain to transform but also from the government for policies and regulations supported to make it happen.

In this challenge, Thailand must enhance its technical capabilities - aligning market mechanisms with international standards, developing the domestic ecosystem with supportive policy frameworks with monitoring systems, and incentivizing private engagement to narrow down the financing gaps. It is more important than ever to act now. 

Bordin Vongvitayapirom

Center of Excellence, Deloitte

December 12, 2023