Financial Smoke Signals and the Rise of Nuclear Energy

Climate pledges and commitments took center stage at the 28th annual Conference of Parties (COP28) held in Dubai, United Arab Emirates. Countries promised money for various funds that are supposed to address climate change. However, these financial commitments fall far short of the scale required to make a significant impact. On the ground at COP28, I closely observed negotiations, engaged with delegates from around the world, and interacted with companies, universities, and various organizations. After two weeks of immersion in the conference, I came away with these insights:

Show Me the Money

A significant development at COP28 was the first-ever global stocktake (GST), an every-five-years assessment mandated by the Paris Agreement. The GST evaluates global progress in reducing greenhouse gas emissions, implementing adaptation measures, and providing financial support. Although starting a GST signified administrative progress, it revealed shortfalls. Over and over again, COP28 made obvious the meager capital commitments compared to what would be needed for real change. The number of pledges was encouraging; their size wasn’t.

For example, one year after the announcement of the loss and damage fund to compensate small developing island nations, only $700 million has been pledged. This amount is less than 0.2% of what is estimated to be needed annually. Climate justice experts emphasize the need for new grants, but details remain unclear. Additionally, while the Green Climate Fund (GCF) received new pledges, reaching a total of $12.8 billion from 31 countries, the GST revealed that it needs trillions.

On Energy, COP Goes Nuclear

In a historic turn of events, the 198 nations that are party to the U.N. Framework Convention on Climate Change (UNFCCC) formally advocated for the accelerated adoption of low-emission technologies, including nuclear energy. More than 20 countries made a global commitment to triple nuclear energy capacity by 2050. This unprecedented call was discreetly embedded in the 28th paragraph of the GST, marking a paradigm shift since the inception of the annual climate summits in 1995. While headlines primarily echoed the transition from fossil fuels and the ambitious goal of tripling renewable energy capacity, the explicit inclusion of nuclear energy signified a remarkable consensus on its crucial role in achieving climate and sustainable development objectives. Rafael Mariano Grossi, the director general of the International Atomic Energy Agency (IAEA), hailed this as a historic milestone, emphasizing the global acknowledgment of the imperative to multiply nuclear generation, for clean and reliable power.

There were other encouraging developments. Korea Hydro and Nuclear Power (KHNP) showcased its "iSMR'' reactor, designed for integration into existing power grids to support desalination or urban heating. The CEO, Jooho Whang, stated that KHNP could construct a plant within two years once permits were secured. While nuclear power plants require government approval, Whang believes successful Small Modular Reactor (SMR) demonstration projects could lead to a surge in global demand. The International Atomic Energy Agency (IAEA) is working to streamline global approval rules to facilitate technology-sharing among countries in a rapidly evolving SMR market.

Achieving global net-zero greenhouse gas emissions by midcentury means unlocking the full potential of nuclear energy, but this raises several challenges. These include the complexities of rising interest rates and commodity prices, the pressing need for financial and policy fairness, and the call for improved regulatory harmonization and industrial standardization – areas championed by the IAEA’s Nuclear Harmonization and Standardization Initiative (NHSI). The tripling nuclear declaration urging international financial institutions to incorporate nuclear energy in their lending policies, underscored the importance of establishing secure supply chains to facilitate the widespread adoption of this technology. Despite nuclear power finding its place in various sustainable investment taxonomies, the translation of this recognition into tangible shifts in the lending principles of banks, including multilateral entities, remains a challenge. Grossi the ongoing challenge of achieving a fair and supportive investment environment for new nuclear projects, indicating that nuclear lacks a level playing field in financing projects.

Along with the announcement of the goal to triple global nuclear energy capacity by 2050, nuclear energy gained prominence with the presence of four pavilions, including IAEA’s Atoms4Climate, Net Zero Nuclear, Nuclear4Climate, and Korea Hydro and Nuclear Power. Nuclear advocacy groups were actively myth-busting and sharing information on why nuclear energy is a necessary part of the solution to climate change.

Pledges were also made to triple renewable energy capacity by 2030. According to the International Energy Agency, renewables lead current power investments. The significant investments in renewables, grids, and storage raised questions about how these percentages might change following the recent announcements, sparking discussions about prioritizing nuclear energy as a leading and reliable clean energy solution.

Now What?

COP28 showcased significant strides in global climate action, acknowledging the urgency of the climate crisis. While commendable progress has been made, the current challenges call for more substantial financial commitments and concrete actions. The spotlight on nuclear energy as a pivotal element in a low-carbon energy mix and the initiation of the GST are commendable steps toward a sustainable future. These measures not only have the potential to increase investments in nuclear energy but also to modernize regulatory infrastructures and expedite related policies.

The GST will ensure accountability in meeting climate commitments. However, it is evident that sustained and intensified efforts are essential to address the climate crisis. Beyond mere rhetoric, there is a critical need to implement and fortify climate policies, encompassing both emissions reduction and adaptation measures. Furthermore, the call for increased financial support underscores the importance of investing in renewable energy, climate resilience, and adaptation, particularly in vulnerable regions. While COP28 represents progress, the global community must unwaveringly commit to transformative actions for a resilient and sustainable future.