This article first appeared in The Edge Malaysia Weekly on December 25, 2023 - January 7, 2024

The recently concluded 28th United Nations (UN) Conference of Parties (COP28) ended with a landmark deal that encourages countries to move away from fossil fuels. It was lauded for making such an explicit claim on fossil fuels for the first time, but also criticised for not going far enough.

This obviously has implications for Malaysia, a developing nation that is reliant on oil and gas revenue. Malaysian companies are already facing pressure, including from carbon taxes and regulations in other countries, to transition.

The point that this transition must be just, with developed countries leading the way and taking responsibility, was emphasised by several industry observers interviewed by ESG.

“COP28 continued to show the divide between developed and developing countries in their approaches to solving our collective climate problem. We should maintain a healthy suspicion of Western media narratives celebrating COP28 as the fossil fuel transition breakthrough,” says Yin Shao Loong, deputy director of research at Khazanah Research Institute.

“To speak of a transition away from fossil fuels with ‘deep, rapid and sustained reductions in global greenhouse gas emissions’ without equally substantial, rapid and sustained finance and technology to do so for the majority of the world’s countries is profoundly unjust and self-defeating.”

COP28 was also where the Global Stocktake (GST) was done for the first time. Countries’ progress in meeting their climate targets was assessed and the conclusion was that parties to the Paris Agreement are not collectively on track to achieve the target.

“It was acknowledged in the GST decision that the carbon budget is small and that four fifths of it has already been used up. It’s no longer about this critical decade, it’s more about how we have less than eight years or so to limit temperature rise,” says Meena Raman, head of programmes at the Third World Network and president of Sahabat Alam Malaysia.

“If developed countries refuse to acknowledge this responsibility for the overuse of the carbon budget and continue to expand fossil fuel production, which is already in their plans, it’s really hypocritical.”

Developed countries must keep their promises by providing funding for developing countries to transition and adapt to climate change impacts, and do more to mitigate climate change because of their historical contributions to carbon emissions.

These funds must be provided to developing countries without conditionalities, Meena adds. This was echoed by Yin, who calls on Malaysia to focus on the climate finance agenda for COP29 which will be held in Azerbaijan, where a “new collective quantified goal” must be agreed upon.

“Transfers to developing countries must be in the order of US$2 trillion (RM9.34 trillion) to US$3 trillion per year to achieve the ‘just, orderly and equitable’ transition COP28 called for. Current flows have failed to reach US$100 billion per year,” says Yin.

Another major criticism of the commitment made at COP28 is the lack of clear targets and timelines.

Ahmad Afandi, senior analyst at the Institute of Strategic & International Studies Malaysia, says COP28 does not reflect the urgency based on the latest science nor does it come with a clear obligation or timeline.

“This is like you’ve been diagnosed with lung cancer but you told your doctor you would transition away from smoking,” he says. There are concerns that carbon capture, utilisation and storage (CCUS) and carbon credits might become a focus when they are not necessarily the most effective solution for deep decarbonisation.

“The ultimate goal is about reducing emissions and what is released into the atmosphere. This requires all technological solutions to be studied and put on the table. Even renewable energy (RE), which was agreed to triple in capacity, such as solar, still grapples with technical limitations as well as trade-offs if not produced and managed sustainably throughout its supply chain and lifecycle,” he says, referring to the pledge made at COP28 to triple RE capacity, double the rate of energy efficiency improvements by 2030 and reduce global emissions by 43% by 2030.

However, according to the United Nations Environment Programme Emissions Gap Report 2023, greenhouse gas emissions hit a new high in 2022.

There is work to be done by Malaysia in demanding more support from developed countries. This is especially true for transition and adaptation finance to help countries adapt to the impact of climate change.

“All these resolutions at COP28 need to translate into actions that would lead to a 43% cut in emissions by 2030 and 60% by 2035, and that would require over US$5 trillion of investment per annum,” says Jigar Shah, head of sustainability research at Maybank Investment Banking Group.

Malaysia should play a stronger role in pushing for access to climate finance, together with other developing nations. It has to make its voice stronger in the grouping of countries that present their views at the COP negotiation table, say the other interviewees.

This also applies to trade policies such as the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) and the EU Deforestation Regulation.

“The UN has reported that CBAM will result in a net transfer of wealth from developing countries to Europe while only reducing emissions by 0.1%. This is a profound climate injustice as Europe is the world’s second-largest greenhouse gas polluter after the US,” says Yin. “Wealth transfers should actually be flowing from Europe to the developing world.”

Currently, Malaysia is in the Group of 77 (G77) that represents 135 developing countries. “But the G77 was split on the mitigation aspect because the small island states wanted far more ambition,” says Rahman. Malaysia used to actively voice its opinions in the Like Minded-Group of Developing Countries.

Meanwhile, Malaysia is a developing country, and Petroliam Nasional Bhd (Petronas) contributes close to 30% of the federal budget. That makes Petronas different from other private oil and gas companies, as it contributes to national development.

“We [must] recognise that the challenge of developing countries is different and that Malaysia must take part in calling for the finance required for a genuine transition so we can rely less on gas and phase out coal. But we have to continue reducing as much as we can as well, not just for the global benefit but for our own needs,” says Meena.

Even if Malaysia is on the right path with the energy transition, the bill will come up to RM1.2 trillion, according to estimates by the National Energy Transition Roadmap. How this is to be funded is unclear, Yin says, adding that there has to be more for adaptation.

“We have a figure of RM392 billion for flood responses, but nothing as yet for heat stress or addressing the impact of sea level rise on our highly coastal nation. We may face a total climate bill in the order of trillions of ringgit,” he adds.

“The government and businesses need to shift from climate policy as investment branding to actually deploying finance and solutions to solve our climate challenges before the impacts get too costly.”

Another two major achievements of COP28 were the operationalisation of a loss and damage fund, which is compensation for damages in developing countries due to climate change, and the global goal on adaptation (GGA).

As usual, means of implementation, commitment of funding from developed countries and the quantum of how a country can access the funds have to be ironed out. The GGA’s targets on risk and vulnerability assessment were pushed to 2030 from 2025, “and we need to wait one year for a new financial target for adaptation and another two years for indicators that can assess progress in adaptation,” says Ahmad Afandi.

“For this COP, the biggest winners are the oil and gas industry, energy companies, livestock industry, CCUS and carbon credit lobbyists. The losers continue to be the planet, vulnerable communities, particularly those in developing countries, ecosystems and species, and future generations.”

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.