COP28 leaders establish circular economy investment fund for developing nations

05 Dec 2023 --- The new fund to help nations reeling from damages caused by the climate crisis established at the COP28 climate summit in Dubai, UAE, is good news for developing countries and companies in the international packaging industry, according to Neil Farmer, founder and owner of business development consultancy Neil Farmer Associates.

The declaration is endorsed by India, France, Barbados, Kenya, Ghana, Germany, the UK, the US, Senegal and Colombia.

Launching the Allied Climate Partners (ACP) platform on Friday, the group aims to use an initial US$825 million to attract more private cash than any previous blending of public and private money of this kind has managed.

These innovative financial instruments announced at COP28 can help provide countries with fiscal space to invest in climate resilience and recovery. The instruments are critical in rising debts and need to address loss and damage, writes the official press release.

Getting more money to poorer countries to help them shift to a low-carbon economy — with total climate-related investment needs estimated at US$2.4 trillion annually — is a central theme of the COP28 climate talks in Dubai.

Farmer asserts that the “massive” need is for infrastructure investment to overcome the accumulation of packaging waste, and other types of waste, in rivers and oceans in Asia and Africa.

Farmer says that there is a “massive” need for waste infrastructure investments in developing countries.The business consultancy owner says he visited some Asian countries where packaging waste is left to rot in an unregulated and controlled way. “Simply put, the lack of investment in recycling and waste disposal systems is causing an environmental catastrophe.”

“Poorer countries have got to move toward a low-carbon economy, and this fund will help in a big way,” stresses Farmer. “The regulated disposal of packaging waste, much of it plastic, will help the process the ACP scheme attempts to address.”

“Investment in recycling infrastructure is key in all of this.”

“Bridging the gap”
Mark Gallogly’s Three Cairns Group and the Bezos Earth Fund are among the charitable donors that aim to seed the ACP with US$235 million. A further US$590 million funding is expected to come from investors including the World Bank’s International Finance Corporation (IFC), Reuters reported last week. 

Jamie Fergusson, IFC’s global head of Climate Business, said ACP was one of the biggest entries of philanthropic capital into a world that has been overly reliant on sovereign sources.

“In the absence of sufficient flows from north to south, getting leverage out of the pockets of blended finance is vital,” Fergusson said.

The venture’s participants aim for an eventual total of US$11 billion raised in debt and equity finance for climate-related projects. They also hope it can address the problems of past public-private partnerships that have been hampered by concern about high levels of risk.

Ventures such as ACP can help to “bridge the gap” as the public or charitable money absorbs more risk, for example, by taking on a project’s first losses, according to Fergusson.

But Sian Sutherland, co-founder and chief changemaker at A Plastic Planet tells Packaging Insights that the fund does not recognize that recycling is not a silver bullet to solve the plastics crisis. “There is nothing circular about plastic,” she says.

“Recycling does not fix the problem. Rather, it exacerbates the multitude of environmental and health risks including premature births, and endocrine and nervous system disruption, cancer and infertility. The implications of a business-as-usual approach are dire.”

The fossil debateAl Jaber, claimed there is “no science” indicating a phase-out of fossil fuels is needed to reduce global warming but Kerry says every decision must lead to reaching climate targets (Image credit: COP28).
On the weekend, the president of COP28, Sultan Al Jaber, claimed there is “no science” indicating that a phase-out of fossil fuels is needed to restrict global heating to 1.5 degrees Celsius.

The statement was made after António Guterres, secretary-general of the UN, told COP28 delegates on Friday that “the science is clear: The 1.5 degrees Celsius limit is only possible if we ultimately stop burning all fossil fuels. Not reduce, not abate. Phase out, with a clear timeframe.”

Al Jaber also works as the head of the state-run Abu Dhabi National Oil Company, so he was seen as a controversial choice to lead COP28 discussions in Dubai.

The COP28 president said a phase-out of fossil fuels would not allow sustainable development “unless you want to take the world back into caves.”

US climate envoy John Kerry responded to Al Jaber, saying that countries must prioritize the fight to keep global warming to 1.5 degrees Celsius, CNBC reported on Sunday. “We are in a race against time, and I know that everybody here does accept that concept.” 

Asked to respond to Al Jaber’s comments, Kerry replied, “that’s not the argument.”

“The G7 countries voted that there should be a phasing out of unmitigated fossil fuel emissions, and what there is science for is keeping 1.5 degrees as your North Star,” Kerry told CNBC’s Tania Bryer at the COP28 climate summit.

“Every decision we make should be geared to say, ‘does this advance the 1.5 degrees Celsius, or is it going to be more destructive and take us in the wrong direction?’”

Calls for commitment 
For many at the UN talks, which are being held in the UAE, COP28 can only be recognized as a success if it results in a deal to phase out all fossil fuels, the burning of which is the chief driver of the climate crisis.

The language of the final agreement, expected by the end of the conference on December 12, will be closely monitored. A “phase out” commitment would likely require a shift away from fossil fuels until their use is eliminated, while a “phase down” could indicate a reduction in their use — but not an absolute end.

Looking at what COP28 has achieved so far, Greenpeace says calls for accessible, long-term funding and a balanced approach between climate action and development have been heard, particularly from developing nations. 

“But we still need clear commitments, including a fossil fuel phase-out to prevent further climate change impacts,” stresses the environmental NGO.

By Natalie Schwertheim