In Paris eight years ago, world leaders agreed to limit global warming to “well below” 2 degrees Celsius. Six years later, in Glasgow, Scotland, they pledged to phase out coal. And on Wednesday, negotiators patted themselves on the back for the first-ever deal to begin “transitioning away” from fossil fuels.

If the past is prologue, it won’t prompt a significant shift in energy markets anytime soon.

The deal — brokered at the U.N. climate summit, known as COP28 — comes as global emissions from fossil fuels continue to climb in 2023. Global coal consumption is on pace to break records. Oil and gas production is booming in the United States. And strong demand for gas in Asia and the Middle East is offsetting waning consumption in Europe.

The dynamic highlights one of the main challenges facing global climate efforts: It takes time for the aspirations espoused at climate talks to produce real-world impact.

But time is now the world’s most precious commodity. The planet has seven years at current emission levels before global warming breaches 1.5 C, the most ambitious target in the Paris Agreement, according to the Global Carbon Project.

“The phase-out from fossil fuel use must be swift if we are to avoid the most dangerous impacts of climate change,” said Jonathan Overpeck, a climate scientist at the University of Michigan.

Yet there is little evidence to suggest that a fossil fuel phase-out is on the horizon.

Strong demand for coal in Asia continues to offset plummeting consumption in North America and Europe, pushing total global coal consumption higher. The 8.3 billion tons of coal consumed in 2022 was a record, according to the International Energy Agency. Coal consumption then grew by 1.5 percent over the first half of 2023, IEA said.

Global oil consumption, meanwhile, is on track to hit 101 million barrels a day in 2023, another record, according to the U.S. Energy Information Administration.

Just last week, Nigeria announced a major new refinery had received its first shipment of crude oil, the latest sign that many developing nations see fossil fuels as a way to grow their economies. The U.S. is also pumping more oil than ever. S&P Global Commodity Insights estimates the U.S. is on track to produce 12.7 million barrels a day in 2023, a 154 percent increase over 2005 levels.

Analysts said those trends speak to the world’s enduring appetite for fossil fuels.

“There are desires that get pronounced at COP, and then there are practical realities of the world that will drive transition,” said Bobby Tudor, the founder and former CEO of Tudor, Pickering, Holt & Co., an investment bank specializing in energy. “Yes, there is a desire by consumers to transition to cleaner forms of energy. But it is only going to happen if those cleaner forms of energy come at the same price or less and at the same level of reliability or more.”

Tudor called the impact of global climate deals on energy markets “de minimis,” saying technology and cost are far greater drivers in the world’s energy mix. He noted that former President Barack Obama oversaw a rapid expansion of U.S. oil production, even as he pushed for deep emission cuts. By contrast, former President Donald Trump championed the revival of coal, only to see the industry’s fortunes plummet in the U.S.

“That is not meant to say policy has no impact because policy can and does have impact. It just tends to be not as powerful as markets,” said Tudor, who now leads Artemis Energy Partners, an investment firm specializing in early stage energy transition projects. “My bias is that it is going to be a very, very long, slow transition.”

Sending a ‘warning signal’

The world’s climate outlook has improved substantially since Paris.

When 196 nations signed the Paris accord in 2015, global emissions were on track to increase 16 percent by the end of this decade. A recent U.N. analysis found they’re now on pace to grow 3 percent by 2030.

Investment in renewable energy ($659 billion) also now exceeds money spent on oil and gas production ($508 billion), according to IEA.

The Paris Agreement moved the needle on emissions in the U.S. and China, while European countries have been making strides to green their energy systems since the Kyoto Protocol in 1997, said Kelly Sims Gallagher, a professor of energy and environmental policy at Tufts University.

But she added, “I do not see the COP28 agreement doing more than sending a warning signal to the market due to the vagueness of the text.”

The agreement hashed out in Dubai, United Arab Emirates, calls for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner.” The language marks the first time a global climate pact has included an explicit reference to reducing fossil fuel consumption.

Its insertion came after fierce negotiations in Dubai, with oil-producing nations like Saudi Arabia and developing nations like India arguing against an explicit call for phasing out fossil fuels. They contend fossil fuels remain critical to economic development.

That position was reflected in the agreement’s provision recognizing “that transitional fuels can play a role in facilitating the energy transition while ensuring energy security.” Many observers took that as a reference to natural gas.

Indeed, the agreement was hailed by oil- and gas-producing nations. The Gas Exporting Countries Forum (GCEF) and the OPEC issued a joint statement praising the UAE for the talks’ “excellent organization, the record participation, and the consensual and positive outcome.”

GCEF Secretary-General Mohamed Hamel and OPEC Secretary-General Haitham al-Ghais said the “oil and gas industry will play a constructive and critical role in sustainable development and poverty eradication, while contributing to a just, orderly and inclusive energy transitions, in particular through enhancing efficiencies and developing and deploying advanced technologies, such as carbon capture utilization and storage (CCUS).”

Sims Gallagher called the focus on fossil fuels in negotiations “bizarre,” given that most countries committed to net-zero emission targets in Glasgow two years ago. Achieving net zero requires no emissions from fossil fuels, she said.

The agreement’s pledge to triple global renewable production and double energy efficiency by the end of the decade are likely the most consequential elements of the deal “because they are near-term, measurable and actionable,” she said.

Michael Mehling, deputy director of the Center for Energy and Environmental Policy Research, said the history of the Paris Agreement suggests that global climate deals do make a dent in emissions. But the impact can be subtle, and felt over time, he said.

That is because agreements like the one in Dubai do not contain enforcement mechanisms to ensure pledges are met. Instead, they are valuable as a way of shaping public expectations and establishing a yardstick to measure countries’ progress, Mehling said. He pointed to the establishment of voluntary carbon markets in recent years as an example of the type of action that is unlikely without global climate agreements.

“It verbalizes the political consensus across all these countries and all these different circumstances. That’s valuable,” Mehling said. “It trickles through in a very loose fashion with no direct correlation.”


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