COP29: forward or back?

The spectacle of COP is over again. A New Collective Quantified Goal (NCQG) on climate finance was agreed (albeit at a level decried by small island states and least-developed countries), several revised national climate plans were submitted in advance of an official February 2025 deadline (the most ambitious being from the UK), and the standards for a new global UN-supervised carbon market (as trailed in Article 6 of the Paris Agreement) were set out.

These are important developments, not least for lower-income countries, yet in themselves they will not turn the dial. Global carbon dioxide concentrations are at their highest level since the Pliocene epoch, with record-breaking temperatures and climate disruption. In this context, US$300bn annually by 2035 to countries most at risk of climate change is a fraction of what is thought to be required (US$1.3tn according to those countries).

Elsewhere, the negotiations made little progress on the so-called ‘UAE consensus’ established in Dubai last year, including the commitment to transition away from fossil fuels, triple renewable energy capacity and phase out unabated coal power. Common ground did not exist between fossil fuel dependent countries and those most impacted by climate change or advanced in their transition to clean energy. Hence the biggest issues in climate change were deferred until next year.

So, did COP29 move the debate forward or not? The answer is both: progress was clearly made on climate finance and carbon markets, yet the conference as a whole was characterised as ‘too little too late’. Huge interest from business, civil society and science at the conference underlines both a concern that the climate has reached a point of no return, and a keenness to bring forward – and benefit from – a green economy.

That said, too much emphasis can be placed on the COP meetings themselves, the success of which depends on a preceding year of negotiations, bilaterals, political influences (including elections), and national policy processes. In that respect, COP30 – yes, the thirtieth COP since they began in Berlin in 1995 – may have a more progressive tone given that it will be hosted by Brazil in Belem, gateway to the Amazon. Both the hosts and the organisers, the UNFCCC, will be conscious of continuing calls from the climate community to reform the COP process.

Climate finance

Whether the Executive Secretary of UN Climate Change, Simon Stiell, is correct in saying the US$300bn climate finance goal is an “insurance policy for humanity” depends, as he hinted himself, on it materialising quickly and being directed to where it is most needed. Of note for private capital, insurers and banks, is that it appears that the headline figure comprises both public and private sources, so there will be increased interest from governments and development finance institutions in attracting private capital into deals. 

The pace with which this happens will be conditional on the perceived risk of the underlying investments and projects, influenced by the quality and stability of the investing environment. Key here is the concept of an “investable NDC”, ie a national climate plan that is capable of convincing would-be investors that public policy on climate will not only support transition, but do so without the prospect of burdensome bureaucracy, financial disincentives, wastage, contradictory aims or, worse, flip flopping in the jurisdictions concerned. 

For an NDC to convince large pools of private capital to move consistently over the next decade, the small print will be as important as their headline ambitions. As more NDCs are updated by the February 2025 deadline, it will be interesting to see which are sufficiently compelling to attract private capital or, conversely, what risk mitigation measures better-off countries will be required to put in place to ensure that finance flows. 

Carbon markets

Prior to COP29, progress on Article 6 of the Paris Agreement on carbon trading was stalled. Article 6 offers a framework for voluntary international cooperation to reduce emissions such that carbon credits earned from reductions in one country can be transferred to another to meet its emission reduction targets. Day 1 of the negotiations saw progress on country-to-country trading of so-called ITMOs (Internationally Transferred Mitigation Outcomes), a wider UN-backed ‘crediting mechanism’ for carbon trading, and also on ‘non-market approaches’ like technical assistance for resilience, adaptation and protection of biodiversity which do not depend on traded instruments.

Progress on carbon trading is key to establishing a fully operational market among countries and embracing other actors like companies, with the potential to unlock – and make more efficient – financial flows into climate mitigation, including into nature-based solutions such as reforestation and agroforestry. On country-to-country trading (Article 6.2), authorisation processes were agreed, including how they are disclosed, as well as procedures for revocation and reporting. 

The relationship between bilateral carbon deals and the global carbon crediting mechanism (Article 6.4) was also clarified. Operated by the UN, it is vital that this crediting mechanism is regarded as ‘high-integrity’ in order to build trust among stakeholders that will be aware of media reports about junk carbon credit projects in recent years. The conference agreed to adopt standards both for the methodologies eligible for the crediting mechanism and requirements for the underlying projects removing carbon emissions. The latter encompass risk assessments, contributions to sustainable development and, forthcoming, clarification on baselines, additionality, leakage, non-permanence and reversals. 

In short, the carbon market heralded in Paris in 2015 has edged closer to reality – and could be up and running as soon as 2025. Credits traded on the new mechanism could set a benchmark for quality, with their higher status reflected in their price. If successful, voluntary market standards such as Verra and Gold Standard, and integrity initiatives like ICVCM, may seek to align with the mechanism leading to increased impact and scale.

Baku to Belem

Despite the obvious challenges facing a vast multilateral event at a difficult geopolitical moment, the power of COPs to bring together Europe, Russia, China and the US – not to mention the rest of the world – to think long-term about planetary crisis is remarkable. While the process is frustrating for companies looking for long-term, ambitious and certain policy frameworks to justify investment in transition, Baku demonstrated that, despite its flaws, the process is still alive.

Fortunately, transition is not all about public policy: commercial opportunities abound. According to the IEA, clean energy investment (renewables, storage, grids, efficiency, fuels) has outpaced fossil fuels since 2015, now at almost two to one based on a clear commercial logic. The presence of a supportive policy framework – as promised year after year at COPs – would no doubt accelerate transition, but it is happening anyway and companies will not wait.

Will a consensus on climate action be found at Belem, most likely without the USA and possibly Argentina? No one knows. Two things are more certain: that millions of people will experience heatwaves, storms, droughts and floods over the next 12 months; and that a further trillion dollars will be invested in clean energy, critical mineral value chains, and allied transition industries. The optics of climate change don’t rest.