Takeaways from COP28 from a European perspective

The 28^th UN Climate Change Conference (COP28), which was held in Dubai, was considered a crucial step toward speeding up the energy transition and cutting emissions. The goals set at the summit include tripling renewable energy capacity and doubling energy efficiency by 2030, a topic on which the European Union will have much to say. COP28 also addressed multilateral financing of climate action, seeking to place people and the environment at its center.

Cristina Lobillo, head of the European Commission’s Energy Policy, and Luis Cabrera, head of ESG at G-advisory, discussed all of the above, but with a special focus on energy issues from a European perspective, in a new edition of the Garrigues Sustainable dialogs, moderated by Gonzalo Valencia, a partner in Garrigues’ Corporate and M&A practice and an energy specialist.

Cristina Lobillo began by clarifying that “COPs always need to be seen with perspective, considering how they relate to previous COPs and remembering where we are coming from; otherwise, all of these summits would appear to be a failure if seen through a more ambitious lens. The EU view of this COP28 is positive. While it is true that the goal of establishing a road map for eliminating fossil fuel waste was not achieved, a commitment was reached to move forward in its elimination and in the energy transition.” She recalled that the Paris Agreement at COP21 marked an unprecedented worldwide commitment. In this regard, although “the overall assessment of COP28 is perhaps that it is not that ambitious, it is a significant step toward meeting the Paris goals.”

Luis Cabrera, who participated actively in COP28, offered some context by noting that it is the most complex event that the United Nations has to organize, precisely because of the need for unanimous agreement among 200 countries, meaning that there will always be someone who is not satisfied. “We can’t describe it as a success but it does offer encouragement and some headlines on the climate neutrality agenda for 2030 – 2050,” he underscored. In his opinion, it has been “a stopover” and “the aim of tripling renewable energy targets and doubling energy consumption reduction targets by 2030 is very significant.”

Gonzalo Valencia recalled that the goals set by the European Union are even more ambitious and encouraged Cristina Lobillo to speak about the measures that the European Union intends to adopt to achieve the targets set at the summit. Cristina explained that the EU has one of the most ambitious sets of greenhouse gas reduction targets. And she recalled that there are two fundamental proposals regarding renewable energy and energy efficiency. Furthermore, she noted that since April, the European Commission has been working with numerous countries and there are now 135 nations that see tripling renewables and doubling energy efficiency as the way to go. The mission now, she remarked, is to work to see how these targets can be implemented and how they can be met from now to the next COP.

Against this backdrop, Gonzalo Valencia emphasized that the agreements are ambitious and the commitment is firm, but there are limitations in many areas that need to be resolved through regulation: “What are the limitations that affect the Member States the most when it comes to achieving these renewables and energy efficiency targets?”, he asked. Cristina Lobillo replied that “the limitations that we have in the EU are not the same as in the rest of the world. Investments need to be stepped up and the first thing is to create the appropriate regulatory framework to attract these investments.” She explained that, for example, more than 30% of the NextGen funds must be earmarked for the energy transition, which has led the Member States to introduce a raft of measures in this regard. However, she noted that there is another obstacle: “In Brussels we provide the legislative framework, but now each Member State must implement it, and there are problems such as the time frames for obtaining clearance to set up renewables plants (seven years on average). This is holding us back. We should adopt measures to shorten these time frames.” In her view, this obstacle, alongside the obstacle of how to store the renewable energy that is produced, are the two main challenges facing us.

From the energy sector’s perspective, Valencia identified the same set of concerns: “There are two paths: optimize regulation to make the path smoother and avoid bottlenecks so that the processes are not delayed.” Cristina Lobillo remarked that in addition to the EU powers in this regard there are the powers of the various Member States and even, in the case of Spain, those of the autonomous regions.

Looking toward the most relevant factors to be borne in mind in the short and long term, Luis Cabrera underscored as well that “the agenda designed in the EU needs to be passed down to the Member States. From the standpoint of the COP and the macro commitments that we achieved, the headline would be decarbonization.” As he explained, “companies are announcing clear decarbonization targets as a competitive advantage and now it is time to be consistent in these decarbonization plans, which poses a big challenge for companies.” And there is another point, namely, reporting, where he noted that: “The EU imposes standards on how the carbon footprint must be addressed and we know that companies are looking at what their impact might be in order to establish the most appropriate strategies.”

An unprecedented energy crisis

Cristina Lobillo also expects “a revolution in how energy is consumed.” She said that the main focus will be on a transition which is fair in terms of environmental impact. To this end, she was in favor of holding public consultation periods in which EU citizens could express their opinion: “This would be a way to see how citizens perceive this energy transition.”

Gonzalo Valencia recalled that, indeed, the price of gas has had an impact on citizens: “Energy prices are key when performing analyses and this issue is also of interest to industry to be able to develop a stable framework (not only from the regulatory standpoint but also in terms of potential energy prices)”. On this point, Lobillo explained that “Spain has never received gas from Russia, but the situation has been quite dramatic in other countries.” Despite everything, she noted the shift that occurred last year: “40% of the EU’s gas came from Russia, a figure which it managed to reduce to 8% last year.” This energy crisis, it was recalled, led to an unprecedented spike in energy prices. “Last year we reached €300 MW/h. I had never seen a level of tension such as this. Now energy and gas prices have stabilized. The best way to lower prices in the EU is to step up the production of renewables. More renewables and more energy efficiency,” explained Cristina Lobillo, who recalled that in just one year seven legislative packages have been approved with a view to finding a solution to the crisis. “In the EU, we can be proud of having found ways to tackle the crisis. Now we have to place the emphasis on companies, on European industry, guaranteeing their competitiveness too,” she insisted.

The importance of human resources

Another subject discussed was the need to have material and human resources to address the energy transition at scale. Lobillo underlined the importance of having university studies to adapt to the energy and digital transformation, for training in new skills with a view to achieving energy neutrality by 2050. And she recalled that the EU has precisely just reached an agreement for the first artificial intelligence law. “Technology will also be key to this whole process; we need to start thinking about all of it.”

Cabrera placed the question of managing suitable human resources for the sustainable transformation and the need for people in this process among the top 3 issues that might jeopardize fulfillment of the 2030 goals. He lamented the fact that “the academic system is not currently offering the right training to meet needs in relation to decarbonization, sustainable finance and other sustainability challenges.”

In response to Gonzalo Valencia’s question about how to equip teams with this knowledge, Luis Cabrera explained that companies speak of “a lack of knowledge and lack of people. And those people need to be trained internally. It is also true that regulation is moving very fast and every day we have to study something. It’s a very large and also highly regulated universe, and this is something we have to live with. There are some companies that are starting to intuit that they are not aware of the scale of what is coming. The agenda has become very sophisticated, reporting standards are complex and now companies are faced with the challenge of meeting the targets that have been set.”

Lastly, Cristina Lobillo wrapped up the discussion by explaining that in the proposals adopted by the EU this past year, the emphasis has been on incentivizing companies: “This energy transition and decarbonization process is unstoppable. It’s a sensation that is felt in every country; it’s happening throughout the world, albeit at different paces, but the EU legislation focuses on the need to incentivize companies’ competitiveness through sustainability goals.” She recalled that there will be a new European parliament in place as from June and it will start to work on new goals. Meanwhile, there will be no new legislation, the focus at this point being on the application of the legislation already enacted.

“The objective is so broad and so cross-cutting that it feels like there isn’t enough time, but it’s clear that this is something unstoppable and industry has to gradually adapt,” concluded Gonzalo Valencia.