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The Art of Dispute: Key case law and recent developments in dispute resolution
Our newsletter provides practical advice and a concise analysis of key case law and recent developments in dispute resolution.
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Global | Publication | November 2023
Today, the 28th climate change summit, the Conference of Parties to the United Nations Framework Convention on Climate Change (COP28) convenes in Dubai, United Arab Emirates (UAE). The event will take place from 30 November to 12 December.
COP28 will bring together world leaders and representatives from close to 200 state Parties and will mark an opportunity for the world to jump-start a course of correction on climate change action as parties respond to findings from the first Global Stocktake. COP28 will offer governments, policy makers and the private sector an opportunity to issue a report card on their implementation of the Paris Agreement and progress made towards limiting global warming to 1.5°C, whilst concurrently providing a roadmap for combatting the climate crisis. By the end of the two weeks of COP28, the hope is for leaders to emerge with concrete commitments that serve as a springboard to accelerate greater ambition and quicker government implementation.
This article provides an overview of key issues which we anticipate will be at the forefront of Australian leaders’ minds during COP28 as well as outlines the impact we expect COP28 will have on businesses and the private sector.
In 2015 at COP21, the world agreed to pursue efforts to limit global warming to 1.5°C compared to pre-industrial levels. To remain on target to achieve this goal, emissions must be halved by 2030. With less than a decade remaining, COP28 marks an opportunity to rethink, reboot, and refocus the climate agenda.
The UAE Presidency, via Dr. Sultan Al Jaber of the UAE who is the President-Designate of COP28, has set out four priorities.1
Below are some of the key themes expected to be covered at this year’s COP.
The first Global Stocktake will be finalised at COP28. It is likely to be a frank assessment and recognition that there has been insufficient progress to date, thereby catalysing world leaders and governments to springboard into action and deliver a responsive plan that accelerates the pace and scale of climate action. The UAE Presidency has announced a three-part vision as a means to accelerate action.2
Prior to travelling to COP28, Australia’s Minister for Climate Change, Hon Chris Bowen MP is expected to publish Australia’s latest emissions projections. According to Minister Bowen, the projections will show that Australia’s 2030 target of 43% is ambitious but achievable.
The Government has started a process of gearing up to set Australia’s 2035 target, which is expected to be finalised next year.
In recognition that current actions are insufficient to mitigate the harms that climate change poses, COP27 saw the Parties agree to establish a loss and damage fund (the Fund), which is intended to support countries who are most vulnerable to the impacts of climate change. COP27 established a transitional committee to develop recommendations for the operationalisation of the Fund. The committee has drafted proposals detailing the scope of the Fund, sources of funding and funding arrangements. Such proposals are set to be considered and evaluated at COP28.
A central focus of COP28 will be negotiating how to operationalise the Fund. It is anticipated that there will be discussions in support of the establishment of a board for the Fund, who will be tasked with designing the fund, including the initial resource mobilisation practice (i.e., the ruleset and detailed operations).
To finalise the Fund, questions, such as the source of funding, eligibility criteria for support, and the process for accessing funds, need to be addressed. Australia is of the strong opinion that funding arrangements must deliver for the most climate vulnerable countries, drawing from a broad donor base, including private and innovative sources of finance. In his speech to the Lowy Institute on 21 November 2023, Minister Bowen emphasised Australia’s intention to advocate for the interests of our Pacific partners throughout this negotiation process.3
Australia’s objective for COP28 is to maximise practical outcomes and positive impacts for the Pacific and countries vulnerable to climate change. Accordingly, with significant progress still required to operationalise the Fund, the Prime Minister announced at the Pacific Islands Forum Leaders’ Summit that Australia has re-joined the Green Climate Fund and will contribute to the Pacific Resilience Facility.4
Article 6 of the Paris Agreement creates the ability for international cooperation to establish global carbon markets, by enabling countries to unlock emission reductions and catalyse financial flows through trading activity. The broad rules for Article 6 were finalised at COP26. Whilst COP27 maintained some momentum for the implementation of Article 6, the primary agenda at COP28 is to secure an outcome that demonstrates that Article 6 is progressing as required.
Article 6.2 enables countries and the private sector to initiate mitigation projects and transfer the internationally transferred mitigation outcomes to another country for use towards that country’s NDC. Already a number of countries have entered bilateral agreements and there are a number of pilot projects underway. Key issues that remain to be addressed at COP28 are the nature of authorisations that must be provided by the host country to the receiving country, and whether such authorisations can be revoked, and the types of reporting that must be undertaken by countries that are participating in co-operative approaches under Article 6.2.
Article 6.4 provides a sustainable development mechanism for Parties to use as tool for carbon trading activity. Little progress was made at COP27 in relation to the rules for Article 6.4. Accordingly, there is much to be achieved at COP28 to make this mechanism operational. The work of the Supervisory Body this year forecasts the key areas of focus for Article 6.4.5 In particular, the Supervisory Body has developed recommendations around methodology development and the requirements applicable to removal activities.6 Another outstanding item is whether avoidance and conservation enhancement activities should be included under the mechanism.
To date, Australia has not made a public announcement in relation to its use of Article 6, however the Climate Change Authority has recommended that the Government update its institutional and regulatory infrastructure to enable participation in Article 6.7
COP28 seeks to simultaneously accelerate the energy transition and reduce emissions, to stay on track with the 1.5°C target. Despite emissions slowing, greenhouse gas emissions are at their highest level.
To meet the targets of the Paris Agreement, discussions surrounding long-term low-emissions strategies are to be expected. Discussions are likely to focus on delivering a balance between fast-tracking the energy transition and positively impacting developing nations, to initiate a just and equitable transition. In the Letter to Parties, the COP28 Presidency indicated its goal to deliver strong mitigation outcomes through an ambitious energy package with the following elements:
Discussions regarding Australia’s ability to support decarbonisation should be anticipated during COP28. Australia has the capacity to contribute significantly to the renewable energy sector, and endeavours to drive the energy transition as a renewable energy superpower.
Last week, Minister Bowen announced a significant expansion to the Capacity Investment Scheme (CIS) that aims to increase investment in wind, solar and batteries. The expansion is forecasted to more than double renewables within Australia, as it is intended to expand the CIS from the current pilot stage to 9 GW of dispatchable capacity and 23 GW of variable capacity nationally – for a total of 32 GW nationally.8
At COP28, Australia will likely communicate its plan to accelerate renewables integration, promote electric vehicles uptake, implement the expanded CIS and incentivise industrial decarbonisation through the Safeguard Mechanism. On a global scale, Minister Bowen has indicated that Australia will advocate for stronger mitigation action and will support a tripling of renewable energy capacity by 2030 to phase out fossil fuels. In delivering such action, it is also anticipated that there will be a strong emphasis on community consultation, ensuring that free, prior and informed consent is obtained from interested parties to ensure an equitable roll-out of energy projects.
The outcomes of negotiations and policy decisions following COP28 will have implications for the private sector and from a business perspective. This is because governmental action and implementation of policy measures which support the delivery of a net-zero future will likely increase confidence and thereby influence strategic decisions on corporate governance processes, investment, and decarbonisation pathways within the private sector.
There is also an expectation that COP28 will encourage businesses participation and investment in the Fund. The Fund constitutes a commercial opportunity for both public and private sector investment in new projects in developing countries. It is therefore important that businesses are cognisant of how they could contribute towards blended financing solutions in emerging economies, particularly in countries where they have an operational presence.
If Article 6 is fully operationalised, the private sector is likely to become increasingly involved in the global carbon market. Overtime, businesses can anticipate integrating decarbonising projects into their operations to increase capital flow and decarbonise hard-to-abate assets. Furthermore, with inclusivity being a key pillar of COP28, decarbonisation of supply chains will likely emerge as a hot topic, consequently encouraging businesses to turn their minds to, and be ready to take action on, their scope 3 emissions (value chain upstream and downstream).
COP28 will be the first COP since the adoption of the Kunming-Montreal Global Biodiversity Framework (Framework) [refer to our previous legal update here]. Accordingly, the UAE Presidency has voiced its commitment to promote the Framework goals by encouraging initiatives and action which protect nature and biodiversity. Following the release of the Taskforce on Nature Related-Financial Disclosures [refer to our previous legal update here] and the Legal Opinion on Nature-related risks and directors’ duties [refer to our previous legal update here], it is possible that merging the priorities of the climate and biodiversity COPs will further accelerate Australia’s implementation of mandatory reporting of nature-related risks.
The growing recognition that immediate and significant action is required to meet the 1.5°C target has generated a mindset shift as we approach COP28. Entering COP28, there is a renewed ambition to deliver the goals of the Paris Agreement, with key drivers being that 2023 is going to be the hottest year on record and has been marked by international conflict, energy security concerns and economic pressures.
Minister Bowen recently stated that it is ‘crunch time’ for Australia’s transition,9 with its key objectives for COP28 being to maximise practical outcomes and positive impacts for the Pacific and countries vulnerable to climate change. In pursuing a bid to host COP31 in 2026 in partnership with the Pacific, Australia hopes to emerge from COP28 as a harbinger of change.
Implementation will constitute a key objective following COP28, as a raft of policy changes and private sector action is required across capacity building, adaptation and finance, making all aspects of COP28 vital to achievement of the aspirations of the Paris Agreement.
The NRF team will be at COP28 to monitor the negotiation process and to report on outcomes from the Conference, which will be communicated on our COP28 portal. Register here to receive COP28 updates and to remain informed on key developments.
This article was co-authored with Hannah Duke and Phoebe Doddrell.
Climate Change Authority, Review of International Offsets, August 2022 | https://www.climatechangeauthority.gov.au/sites/default/files/Review%20of%20International%20Offsets%20-%20Report%20-%20August%202022.pdf.
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