At COP28, nearly 200 nations agreed to triple renewable energy capacity and double energy efficiency by 203013 in order to meet international Net Zero goals as outlined in the Paris Agreement.14 As noted in KPMG’s Turning the tide in scaling renewables, that will require a massive amount of capital investment — more than governments can supply alone.

There is also increasing recognition that — in a world of growing uncertainty and disruption — the energy priorities for many governments also include security, access and affordability. And that means that hydrocarbons will continue to be a key source of energy for the foreseeable future (according to the 2023 Statistical Review of World Energy report, in association with KPMG and Kearney, hydrocarbons still accounted for 82 percent of energy supply).15

More prudent attitudes are prevailing. Rather than calling for an end to hydrocarbon-based energy generation, many observers are now suggesting a rapid shift towards transition fuels and that any new generating capacity be primarily renewable. They are advocating for the oil and gas industry to more rapidly develop and implement carbon capture, utilization and storage technologies. They are encouraging the formation and standardization of carbon credit markets. They note the need for greater allocations to the emerging markets in order to encourage clean development. The launch of the Cement and Concrete Breakthrough by Canada and the UAE addresses a critical area of urban emissions. Cement, accounting for about 7 percent of global emissions, is a sector in urgent need of decarbonization. This initiative aims to speed up progress towards net-zero cement by fostering investment and collaboration across the value chain, including novel solutions like carbon capture and innovative materials.16

Unfortunately, the path to Net Zero is becoming increasingly complicated. Government incentives are distorting market dynamics. Protectionism in the form of incentives, industrial policy and trade wars are driving competition between nations. Budget deficits and concerns about possible recessions are reducing fiscal space for investment. Market risks are growing, particularly in those regions most exposed to the climate crisis. And all of this against a backdrop of increasingly violent and destructive weather events that create a need for further investments in resiliency or adaptation strategies.

In markets where governments have made firm commitments to meet their Paris Agreement goals, the need for aggressive policymaking is clear but, in some cases, needs to be balanced against other short to mid-term policy priorities. The Green Public Procurement Pledge, signed by countries like the United Kingdom, United States, Canada, and Germany, commits to using low and near-zero-emissions steel, cement, and concrete in public procurement. This pledge is a significant step towards reducing emissions in the construction sector and developing harmonized emissions accounting standards for construction materials. Energy transition is going to be a journey that requires wide ranging collaboration between governments and the private sector. KPMG professionals hope that though the participation of oil producing countries at COP28, brings divergent perspectives, but is also a recognition that might bring practicable approaches to help deliver on the goal.

In the lead up to COP29 in Azerbaijan this year — there is likely to be a tightening of the language around the phase out of fossil fuels in energy systems. COP28 ended with a promise to ‘transition away from’ them17; expect delegates to COP29 to want to revisit what that means. And expect infrastructure planners and investors to be listening closely to the dialogue.

At the same time, investors should be expected to ramp up their pressure through capital allocation. Regulators will get better at forcing the issue. Consumers will become more open to shouldering the financial costs. And global institutions will create innovative mechanisms and programs to help drive capital towards energy transition initiatives in the emerging markets. One such innovative project that a KPMG member firm is are advising on is the Cirebon IPP ETM pilot project in Indonesia. The 660-megawatt coal-fired power plant (CFPP) Cirebon-1 in Indonesia will likely be retired almost 7 years earlier than scheduled as a result of discussions with the plant’s owners and the Government of Indonesia under the Energy Transition Mechanism (ETM) program of the Asian Development Bank.

As the focus shifts to operationalizing the renewables and efficiency goals agreed at COP28 and realities of the energy transition start to hit home, expect to see everyone become more prudent about what must be achieved and the tradeoffs that must be made.18

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13 KPMG in Singapore, Navigating the post-COP28 landscape for global decarbonisation, 2023

14 IEA, Tripling renewable power capacity by 2030 is vital to keep the 1.5°C goal within reach, 2023

15 Energy Institute, in association with KPMG International and Kearney. “2023 Statistical Review of World Energy.” 2023.

16, Canada launches the Cement & Concrete Breakthrough initiative at COP28, New release, 2023

17 WWF, COP28: Key takeaways from the UN climate summit, 2023

18 WWF, COP28: Key takeaways from the UN climate summit, 2023