The Headline Deal: "Transitioning Away" from Fossil Fuels
The UAE Consensus text adopted at COP28 calls on parties to "transition away from fossil fuels in energy systems, in a just, orderly and equitable manner." It is the first explicit mention of fossil fuels in a COP final decision since the Paris Agreement in 2015. It also calls for:
- Tripling global renewable energy capacity to at least 11,000 GW by 2030
- Doubling the annual rate of energy efficiency improvements
- Phasing out "inefficient fossil fuel subsidies" as soon as possible
- Accelerating the phase-down of unabated coal power
- Rapidly scaling Carbon Capture, Utilisation and Storage (CCUS) for hard-to-abate sectors
The language is carefully qualified — "transitioning away" rather than "phasing out," and only "unabated" coal singled out by name. Petrol and diesel in transport are not mentioned as explicit phase-out candidates in the text, but the overall trajectory — declining fossil fuel investment, rising carbon prices, and subsidy removal — points toward higher long-run fuel costs in currently subsidised markets.
Fossil Fuel Subsidies: The Direct Pump Price Link
The COP28 text reiterates the G20 commitment to phase out "inefficient fossil fuel subsidies." The IMF estimates that explicit and implicit fossil fuel subsidies totalled USD 7 trillion globally in 2022 — roughly 7% of global GDP. Explicit subsidies (direct price controls and budget transfers) alone exceeded USD 1 trillion.
For drivers in subsidised markets — Venezuela, Iran, Libya, Saudi Arabia, and dozens of others — subsidy reform is the direct mechanism by which COP commitments eventually appear at the pump. The World Bank's subsidy reform toolkit documents that reforms usually come in waves triggered by fiscal crises rather than climate commitments, but COP pressure accelerates the political cover governments need to act. Nigeria's abrupt petrol subsidy removal in May 2023 — discussed in our Africa fuel smuggling article — is an example.
The UAE hosting COP28 raised eyebrows given its status as a major oil exporter. ADNOC CEO Sultan Al Jaber served as COP28 President, drawing criticism from climate groups. Proponents argued that having a major producer in the chair was essential for securing the fossil fuel language that had eluded previous COPs. The final text's explicit reference to transitioning away from fossil fuels — however qualified — was stronger than many observers expected.
Carbon Pricing and Fuel Taxes
COP28 did not set a global carbon price, but it reinforced momentum behind national and regional carbon pricing schemes. The World Bank Carbon Pricing Dashboard shows that carbon pricing instruments now cover about 23% of global greenhouse gas emissions, up from 15% in 2020. The EU's Emissions Trading System (EU ETS) directly feeds into diesel and petrol wholesale prices across Europe, with allowance prices (€40–70/tonne in 2023) translating to roughly €0.10–0.17 per litre of petrol in cost terms.
The EU ETS2 — extending carbon pricing to road transport and buildings from 2027 — was finalised in 2023 and will add a new layer of carbon cost to European pump prices. The European Commission's ETS2 documentation provides the detail, and our guide on excise duty explains how existing fuel tax structures will interact with the new carbon cost layer.
Transport Decarbonisation Commitments
A separate COP28 Declaration on Zero-Emission Vehicles attracted commitments from more than 40 countries to accelerate the transition to zero-emission vehicles. Signatories included the EU, US, Canada, and a number of emerging economies, though not China, India, or Germany's biggest manufacturers.
The IEA Global EV Outlook 2024 projects that EVs could displace 6 million barrels per day of oil demand by 2030 — equivalent to roughly 6% of current consumption. The demand destruction effect would put downward pressure on crude prices, but the per-litre cost for remaining petrol and diesel drivers could still rise if carbon taxes and subsidy phase-outs accelerate. Our comparison article on EV charging costs vs petrol covers the consumer-level economics.
Loss and Damage Fund
COP28 operationalised the Loss and Damage Fund agreed in principle at COP27 in Sharm el-Sheikh. The fund channels financial support from developed to climate-vulnerable nations. Initial pledges totalled roughly USD 700 million — far below the USD 400 billion per year some developing nations requested, but a concrete institutional step. The fund is hosted at the World Bank on an interim basis.
For fuel price research, Loss and Damage funding matters because recipient countries often use external finance to simultaneously fund clean energy access — potentially reducing kerosene and diesel use in off-grid households — and to build the fiscal resilience that makes subsidy reform politically feasible.
What COP28 Means for Fuel Prices Over the Next Decade
COP agreements are non-binding, and the gap between pledged and implemented policies remains wide. The Climate Action Tracker shows that current policies put the world on track for roughly 2.7°C of warming — well above the 1.5°C Paris target. Yet the direction of travel is clear:
- Subsidy reform accelerates: Fiscal pressure plus COP political cover = more subsidy removals in emerging markets, lifting pump prices toward cost-reflective levels.
- Carbon pricing expands: More countries will introduce or expand carbon taxes and ETSs, adding a carbon cost layer on top of existing excise duties.
- Demand peaks earlier: The IEA's Net Zero pathway sees oil demand in transport peaking before 2030, putting medium-term downward pressure on crude prices.
- Supply investment falls: If producers believe demand will decline, upstream investment drops — creating potential supply crunches and price spikes in transition years.
The net effect is uncertain, but structural forces point toward higher carbon costs on top of pump prices in rich countries, and higher base prices in currently subsidised economies. You can track current prices across 168 countries in our global fuel price explorer.
Frequently Asked Questions
What was agreed at COP28 regarding fossil fuels?
For the first time in COP history, the UAE Consensus final text explicitly called for "transitioning away from fossil fuels in energy systems." It also called for tripling renewable energy capacity, doubling energy efficiency improvements by 2030, and phasing out "inefficient fossil fuel subsidies."
Does COP28 mean petrol prices will rise?
Not directly or immediately. COP agreements are non-binding. The medium-term effect comes through subsidy reform (removing below-cost pricing), carbon pricing (adding cost to emissions), and declining oil demand. The IMF subsidy tracker and World Bank carbon pricing dashboard are the best places to track policy implementation.
What is the Loss and Damage Fund agreed at COP28?
The Loss and Damage Fund channels financial support from developed countries to climate-vulnerable nations. Initial pledges at COP28 totalled roughly USD 700 million, hosted at the World Bank on an interim basis. It can indirectly affect fuel prices in recipient countries by financing energy access alternatives to kerosene and diesel.
How does the EU ETS2 relate to COP28?
The EU ETS2 — extending EU carbon pricing to road transport from 2027 — was finalised before COP28 but aligns with the subsidy phase-out and carbon pricing calls in the COP28 text. It will add a carbon cost layer to European petrol and diesel prices. The European Commission provides full documentation.