COP29 Recap – What was achieved in Baku?

The key goals of the COP29 conference in Baku this year were to: (a) set a New Collective Quantified Goal (NCQG); (b) develop an agreement over carbon market regulation under Article 6 of the Paris Agreement; and (c) build on the outcomes of COP28's "Global Stocktake" in the UAE last year.

While agreement was reached on carbon market regulation, the NCQG agreement has been widely criticised, with many commentators arguing that the goal has not gone far enough to supply the funding that developing countries require to achieve their nationally determined contributions (NDCs) and adaptation plans. Other negotiations have also been slow, and some commentators argue that a step backwards has been taken since last year in transitioning away from fossil fuels.

New Collective Quantified Goal

After very slow deliberation in the first week, the final few days of the conference saw intense negotiations. Many negotiators extended their stays in Baku to agree a final text of the NCQG in the early hours of Sunday morning. Developing nations called for the current annual goal of $100 billion per year to be raised to $1.3 trillion per year collected by developed countries to help developing nations reach their NDCs. Negotiations centred around the quantum (with figures of $200 to $300 billion being previously rejected by developing nations) as well as the sources through which financing would be raised. Developing countries objected to:

• the inclusion of market rate loans from developed countries, which often place a further burden on developing nations; and
• carbon market backed projects, which are seen as controversial, as emissions reductions or removals achieved by internationally financed carbon projects are unlikely to contribute to host country NDC goals.

The agreement

The final text of the NCQG consists of a headline figure of at least $300 billion of climate financing per year by 2035 to be raised by developed countries. The text allows for this financing to consist of funding from a wide variety of sources including public, private, bilateral, and multilateral funding arrangements. There is a further overall target of $1.3 trillion per year of funding to be channelled towards developing nations, which includes the contribution of private sector investment. While there is little consensus over how this overall target will be achieved or what the sources of funding will be, explicit references to funding through scaling voluntary carbon markets, which had been proposed in a previous version of the text and heavily opposed by green groups and developing countries, were not included in the final version of the text.

Following a push from developed nations to have stronger emerging economies such as China and the Gulf states contribute to the financing, the final text reaches a compromise position where it "encourages" developing nations to contribute to the finance goal on a voluntary basis. It remains to be seen which developing nations may contribute. So far Korea is one of the key actors that has voluntarily contributed to climate financing, for instance through its $300 million contribution into the Green Climate Fund. However most emerging nations falling within this bracket were highly opposed to funding from developing nations to be included.

Given that negotiations were particularly rushed in the last few days of the conference and spilled over into extra time, many countries criticised the presidency for not allowing time to obtain proper consent from parties, particularly India which has stated that the agreed public funding will not come close to what is needed. There are of course lots of questions in relation to how the NCQG will look in practice, but we do know that moves towards any goals will require joint deployment from both the public and private sectors and will likely open opportunities for investors in energy transition and emissions reduction projects in developing nations.

Voluntary Carbon Markets

An agreement was reached over the regulation of carbon markets under Article 6 of the Paris Agreement, which is a momentous point after several years of failed negotiations regarding the complexities of Article 6 at prior conferences.

Article 6.4

Early in the first week, new methodological standards set by the UN supervisory body were adopted for the Paris Agreement Crediting Mechanism under Article 6.4 which allows for the international trade of carbon credits. The standards include a requirement for project developers to conduct risk assessments and set out how their projects contribute to sustainable development, i.e., ending poverty, improving health, and providing sustainable jobs. There were, however, some questions remaining which were further negotiated and resulted in an agreed text which set out the process for authorisation of emission reductions; the use of the Article 6.4 registry in conjunction with national registries for carbon credits; and the mechanism by which legacy Clean Development Mechanism (CDM) projects (created under the Kyoto Protocol) would be transferred to the new Article 6.4 mechanism. The agreed text allows for reforestation and afforestation projects under the CDM to be transferred to the Paris Agreement Crediting Mechanism as long as they meet the required rules, methodologies and procedures for projects established by the supervisory body under Article 6.4.

Article 6.2

Article 6.2 provides for voluntary bilateral agreements between countries to trade carbon credits known as international transferred mitigation outcomes (ITMOs). At COP29 the debate in relation to Article 6.2 focussed on the technicalities around how bilateral agreements between countries can be authorised and conditions around the reversal or revocation of authorisation. The agreed text sets out the procedural requirements for authorisation of bilateral agreements for the trade of ITMOs. It also states that revocation of authorisation can only occur where prescribed conditions in the text for authorisation are met.

International registry

A further area of contention related to the functionality of an international registry for the Paris Agreement Crediting Mechanism and the bilateral trade of ITMOs under Articles 6.2 and 6.4. Key conversations concerned the level of centralisation the registry should hold. The position agreed is that the registry will follow a dual-layer approach under which the international registry would mostly compile and display data with an additional functionality of holding ITMOs on request of the parties which would be tradable as sovereign carbon credits.

Article 6.8

The text for Article 6.8 of the Paris Agreement was agreed. Article 6.8 provides for non-market-based cooperation for countries to implement mitigation and adaptation actions, and sustainable development. The agreed text includes guidance on implementing and operationalising a non-market approaches platform (NMA Platform) which aims to record and exchange information on non-market approaches, including recording support needed or provided to participating states, and build further capacity for non-market approaches.

Smaller developments worth noting

Some developments worth noting include: (a) thirty states including Brazil and the US, signed a pledge to include methane emissions reduction from organic waste in their NDCs; and (b) a group of twenty-five countries and the EU announced that they would include a pledge for “no new unabated coal power” in their next NDCs.

Verdict

While some progress was made, by progressing Article 6 and reaching some form of agreement on the NCQG – which is arguably better than no agreement – it is difficult to speak of true success.

Last year's Global Stocktake agreed a target of cutting emissions by 43% by 2030 relative to 2019 levels and consisted of commitments to transition away from fossil fuels, phase-down unabated coal power and triple renewable energy capacity by 2030. At the outset of COP29 there had been hopes to build on these commitments and reach further agreements in this direction. However, there was generally little progress on related negotiation items. For instance, negotiations on the Mitigation Work Programme, which was launched in 2022 to enable countries to navigate their emission reductions, consisted of no mention of Global Stocktake commitments to phase out fossil fuels. This was partly because of opposition from a small group of emerging economies led by Saudi Arabia who opposed further talks on fossil fuels and the Mitigation Work Programme. Likewise, the Just Transition Work Programme, which aims for a just transition for communities affected by climate change and the energy transition, saw very little progress, with negotiations coming to a halt in the second week with no agreed text.

Looking forward to COP30

After the COP is before the next COP, which is particularly true right now in light of the number of outstanding negotiation items. COP30 is scheduled to take place next year in Belem, Brazil, a small rainforest city within the Amazon which is currently undergoing significant development by the Brazilian government to provide the facilities and accommodation the conference will require. Given the rainforest location as the backdrop for COP30, the themes of nature, biodiversity and climate loss are expected to form a key aspect of the agenda. In addition, considerably higher expectations regarding international engagement are expected for this symbolic anniversary COP.