Dr Sultan Al Jaber’s appointment as the president-designate of COP28, the UN Climate Change Conference, signals the importance of collaboration. Choosing the CEO of the Abu Dhabi National Oil Company positions the energy sector at the heart of global efforts to reach net zero.
Since his appointment, Dr Sultan Al Jaber has called for a “major course correction” to accelerate efforts to address the climate crisis. Governments cannot achieve that alone. It will require business action, particularly within the energy industry. Collaboration at an industry level, with finance, and with governments can shift the dial towards 1.5 degrees.
Opportunity for energy to lead
Oil and gas companies and the broader energy sector could lead the transition to net zero. Energy companies possess the technical capabilities, financial firepower and talent to create the new solutions required for energy transition. The pathway towards net zero will vary by company and country. This will open new business opportunities, as solutions which work in one market could potentially have global applicability.
Transition plans are the maps which will guide these changes required to reach net zero. While national country plans have been around for some time, attention is fast turning towards company level transition plans in recognition of the critical role of the private sector.
As the United Arab Emirates prepares to host COP28, there is a unique opportunity for energy companies to collaborate towards defining the characteristics of a credible company transition plan. An industry-wide effort could establish a framework and key indicators – such as carbon reduction targets, capital investment decisions, and enablement of clean energy.
Partnering with finance
A similar process played out across the financial sector in the lead up to COP26. The Glasgow Finance Alliance for Net Zero (GFANZ) was created to standardise an approach to how financial institutions should set net zero aligned policies, targets and approaches.
Over two years, the financial sector developed an industry-wide approach which is premised on banks partnering with customers to finance their transition. So the money increasingly stands ready. Deploying it at the scale required to fund the net zero transition is the next challenge.
There are steps which energy companies can take to unlock that capital and direct funding to where it is needed most. An energy industry standard on company transition plans would enhance market and investor confidence.
Plans which place emphasis on practical implementation will have the greatest utility. A starting point may be steps to transition energy mix, scale clean infrastructure and renewable energy, and reduce emissions. In time, a project pipeline will help banks and investors to identify and fund the changes required.
By partnering with the energy sector, banks can facilitate the capital investment needed to reduce emissions at scale. But we know that an orderly transition requires continued financing to maintain oil and gas supplies, at declining levels as demand for oil and gas declines.
So, we are committed to finance energy companies who play an active role in the transition, supporting them to invest in new technologies. We want to be by the side of companies as they have the capabilities required to deliver this change - technical expertise, strong balance sheets, and experience in delivering big infrastructure projects.
The more granular transition planning becomes at a company level, the more banks will be able to finance energy companies to lead this transition.
This course correction will be complex and challenging. Keeping the 1.5 degrees target within reach requires a sharp fall in emissions by 2030. What maintains my optimism is the huge potential for the energy industry to lead the change required.
Collaboration across the energy sector is a critical first step. That, in turn, will better enable banks to deliver the financial firepower which has aligned behind net zero, to deliver change at scale. We are witnessing public policy increasingly tilt towards incentivising change. From the US Inflation Reduction Act to the European Green Deal, the quantum of public financing is unparalleled.
In November, the United Arab Emirates will host COP28. The ambition is clear – to accelerate emission reduction trajectories through game-changing partnerships, solutions and outcomes. This can be a moment for the energy sector to lead and step up with new solutions. Through deeper collaboration, we can realise the commercial opportunities opening and deliver a more secure, sustainable energy future.
This article first appeared in the EIC Energy Focus