The key highlights from COP29 in Azerbaijan
While we stepped back from covering the yearly United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) meetings this year, we cannot wrap up without some discussion of exactly what came out of the imperfect but best possible diplomatic tool we have to align the world’s actions on climate action.
This was the second year in a row where the COP presidency was given to a significant fossil fuel developing nation—it took place in Baku, the capital of Azerbaijan. While Azerbaijan is not really near the top in terms of total production of fossil fuels, with an annual crude oil production of 32.7 Million tonnes (Mt) (close to 0.1% of world annual production), and 35.0 billion cubic metres (bcm) of natural gas (3.4% of world annual production); the country has a very strategic geographic position that has become more important in recent times. It sits on the western front of the Caspian Sea, effectively connecting Central Asia to Europe. A lot of crude oil and natural gas shifted to be transported through Azerbaijan’s infrastructure following Russia’s invasion of Ukraine and Europe’s subsequent decision to to reduce their dependence on Russian fossil fuels.
So there was added anticipation for this year’s COP in another key fossil fuel producing nation following last year’s announcement of a commitment to “transition away” from unabated fossil fuels by all of the signatories. However, this was vague language that had absolutely no details on implementation attached to it, so we were curious to see what the acknowledgement would be this year regarding the subject. Spoiler alert: there were no follow-ups on this “transitioning away” promise, and instead the discussion was punted forward to COP30 held next year in Belém, Brazil.
COP29 was also ticketed as the “Finance COP,” due to the fact that the Collective Quantified Goal on Climate Finance was to be re-negotiated now that we’ve actually reached US$100 billion annually from developed countries to developing countries. It’s well-known that the developing countries of the world will need over $1 trillion in yearly climate finance to achieve net-zero by 2050. The figure that was being floated around as the officially recognized total need at this year’s meetings was $1.3 trillion—as stated in the third report from the independent UN High-Level Expert Group on Climate Finance.
COP29 was also the “Finance COP,” because of anticipated discussions regarding Article 6, and specifically Article 6.4. Referring to Article 6 of the 2015 Paris Agreement, which sets out the intention to establish international frameworks for bilateral voluntary carbon credit trading (Article 6.2), and a global UN-sponsored and operated Voluntary Carbon Credits Market (VCM) (Article 6.4). Nearly 10 years since the Paris Agreement was signed and we had yet to put steps into actually operationalizing a global VCM. This was expected to change at Baku (and in fact, we do have cause for celebration).
Let’s jump into dissecting some of the key aspects of the agreement this year.
A New Collective Quantified Goal (NCQG) for Climate Finance
You may have already heard of the headline item from this year’s negotiations—the NCQG for Climate Finance flows from developed countries to developing nations. The previous target set at the COP15 in Copenhagen in 2009 was due by 2025, and we knew we had hit the mark. This meant we needed to now increase the pot, but word on the street is that the climate diplomats were feeling unmotivated after the election of Donald Trump in the US, and the prospect of the world’s largest economy and its largest polluter, pulling out of the Paris Agreement.
Nonetheless, they persevered and were able to agree on a new target of $300 billion to be achieved by 2035. This is progress, but as we are now used to, not enough, (~23% of what is actually needed as indicated by the independent High-Level Expert Group) and not quickly enough. Importantly, this is $300 billion from public sources alone, which includes grants and financing from Multilateral Development Banks (MDBs) and allegedly will also include private financing that may be mobilized by public funds. The final text also included calls for scaling up efforts from all sources, including the private sector so that the grand total of $1.3 trillion per year can be achieved by 2035.
There was controversy at the last minute about the change of the makeup of the funds in terms of how much MDB financing may count towards the total goal. Previously 70-80% of MDB financing would be counted towards the goal, but this was changed to 100%. This was controversial because some countries that can still be considered in development, such as India, are also shareholders in institutions such as the IMF and the World Bank. This means that the total contribution from rich countries alone is somewhat diluted and supported by MDB shareholding developing nations. This prompted India’s representatives to attempt to object to the new finance deal, but the presidency quickly overruled objections and gaveled the agreement through, which led to India’s Finance Minister, Chandni Raina, to comment that the process was “stage managed.”
Additionally, when you factor in the effect of inflation—typically an average 2% over the long-term as is customary by most global banking institutions—this $300 billion in 10 years time is actually around $246 billion of today’s dollars. At 3% inflation, which is looking more and more likely to be the new long-term average, the total amount today is actually $223 billion. Overall, still far short of what is needed as 2050 is quickly approaching. But progress is progress, and this was also in the face of the US potentially pulling out of this new financing commitment.
Article 6.4: A Global UN-led and operated VCM
The second headline from COP29 was on the final signing of a methodology for Article 6.4, otherwise known as the Paris Agreement Crediting Mechanism (PACM). This crediting mechanism is intended to be used for countries to generate and trade carbon credits towards achieving the emissions reductions within their Nationally Determined Contributions (NDC). The PACM is also to be overseen by the UN Article 6.4 Supervisory Body, who would be in charge of registering projects, accreditations, and overall management.
What went down in Baku was the endorsement of a set of technical documents outlining procedures and rules for the accreditation and trade of carbon credits via the PACM. Importantly though, the rules for the quality of credits (typically dictated by how emissions reductions are measured and verified) were left out this time around. Meaning that the PACM is currently only half-baked. The credible standardization of measurement and verification is arguably the single most important item for a well functioning VCM, as we have witnessed through examples such as the uncovering that 90% of Verra’s Rainforest Carbon Offsets are inaccurately represented.
The Global Stocktake
Last year at COP28 in Dubai, the political phase of the Global Stocktake took place. This was the process through which the nations’ representatives assessed the performance of NDCs set in 2021 and whether they are on track to meet 2030 and 2050 goals, and limit global warming to 1.5 °C and well below 2 °C. This was the process that gave fruit to the commitment to “transition away from unabated fossil fuels.” Since countries are expected to submit new NDCs for 2025, it was expected that there would be discussion on how transitioning away from fossil fuels would be integrated into the updated NDCs. As mentioned earlier, this did not occur as negotiations over the NCQG took precedence.
We are expecting that both the NCQG and the commitment to transition away from fossil fuels will make their way into all updated NDCs next year. The extended financing should mean that developing countries can now do more to eventually transition away from unabated fossil fuels.
Looking Ahead
This past year will be the first year that the average global temperature has been consistently higher than 1.5 °C, relative to pre-industrial times. The Paris Agreement target, however, looks at the long-term average temperatures of the world so there is still hope. But as Global Warming data continues to show that there has not been any slowdown in rising temperatures, there is increasing pressure on the outcomes of these COPs.
Over the last decade or so that I have been closely following climate change and climate diplomacy, the story has started to shift slightly. Earlier on in this process, shortly before the Paris Agreement, and shortly after; it was standard practice that only baby steps could be expected. I’m feeling slightly more optimistic this year with last year’s commitment to transition away from unabated fossil fuels, and the establishment of the UN VCM this year, as well as the nominal tripling of the collective quantified goal on climate finance.
I can only hope that the world and its governments have really begun to take climate action more seriously, that the momentum does not slow down, and that we finally begin to reduce our collective global emissions, the associated effects of climate change get on an irreversible path.
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