COP29: The Future Of Carbon Markets And Climate Finance
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COP29 in Baku brought nations together to tackle the climate crisis but exposed deep divisions between wealthier and vulnerable countries. The summit's $300 billion finance pledge and carbon trading rules were criticised as insufficient. Resistance from fossil fuel-dependent states raised doubts about meaningful progress. Can future COPs deliver real solutions in time?
The 29th United Nations Climate Change Conference or Conference of the Parties (COP29) took place in Baku, Azerbaijan, from 11 to 22 November 2024. This annual conference serves as the primary global platform for nations to negotiate and implement strategies to combat climate change. COP29 brought together representatives from nearly 200 countries, including scientists, policymakers, business leaders, and environmental advocates, all united under the theme "In Solidarity for a Greener World."
The COP29 Presidency's strategy is built on two interconnected pillars. The first pillar, "enhancing ambition," focuses on ensuring that all countries commit to ambitious national plans and uphold transparency. The second pillar, "enabling action," highlights the essential role of finance in transforming these ambitions into tangible actions, helping to reduce emissions, adapt to climate impacts, and address loss and damage.
Climate change poses significant threats to cultural and natural heritage sites worldwide. UNESCO reports that one in three natural sites and one in six cultural heritage sites are currently endangered by climate-related impacts, including wildfires, floods, storms, and mass-bleaching events. In response, UNESCO has launched the World Heritage Canopy platform, which compiles innovative strategies and practices that integrate heritage conservation with sustainable development. This platform aims to inspire and guide local actions that contribute to and align with major global commitments, such as the Sustainable Development Goals (SDGs), including SDG 13 on climate action.
The COP 29 main goals are to secure commitments on climate finance, advance strategies for energy transition, and strengthen efforts to limit global warming to 1.5°C, aligning with Sustainable Development Goal (SDG) 13. The conference also finalised rules for international carbon credit trading under Article 6 of the Paris Agreement, aiming to channel funds towards climate projects in developing nations.
The summit highlighted the difficulties in achieving global cooperation on climate issues, showing divisions between wealthier and vulnerable countries and raising questions about how effective the Conference of the Parties COP29 is in making real progress.
COP29 Presidential Action Agenda: Key global initiatives for climate action
The COP29 Presidency, under the leadership of Azerbaijan, introduced a comprehensive Action Agenda comprising several global initiatives aimed at accelerating climate action and fostering collaboration among diverse stakeholders. These initiatives are designed to complement the formal negotiation processes and address critical climate challenges.
Key Initiatives:
- Joint Solemn Appeal for a COP Truce: A call for a temporary cessation of hostilities to facilitate uninterrupted climate negotiations.
- Global Energy Storage and Grids Pledge: Commitments to enhance energy storage solutions and modernise grid infrastructure to support renewable energy integration.
- Green Energy Pledge: Green Energy Zones and Corridors: Development of designated areas and corridors to promote green energy projects and facilitate their implementation.
- Hydrogen Declaration: Advocacy for the adoption and scaling of hydrogen as a clean energy source.
- Declaration on Green Digital Action: Promotion of digital technologies to advance green initiatives and sustainable development.
- Declaration on Reducing Methane from Organic Waste: Strategies to minimise methane emissions through improved waste management practices.
- Declaration on Multisectoral Actions Pathways (MAP) to Resilient and Healthy Cities: Integrated approaches to enhance urban resilience and health through collaborative actions.
- Declaration on Enhanced Climate Action in Tourism: Encouragement of sustainable practices within the tourism sector to reduce its environmental impact.
- Declaration on Water for Climate Action: Initiatives to manage water resources effectively in the context of climate change.
- Climate Finance Action Fund: Establishment of a fund to support climate finance initiatives, particularly in developing countries.
- Baku Initiative for Climate Finance, Investment, and Trade (BICFIT): Promotion of investments and trade that support climate action.
- Baku Initiative on Human Development for Climate Resilience: Focus on human development strategies to build resilience against climate impacts.
- Baku Harmoniya Climate Initiative for Farmers: Support for farmers in adopting climate-resilient agricultural practices.
- Baku Global Climate Transparency Platform (BTP): Creation of a platform to enhance transparency in climate actions and commitments.
Divisions between wealthier and vulnerable nations
At COP29, a major climate finance deal was struck, where wealthier nations pledged to provide $300 billion annually to help developing countries tackle climate change, to reach this sum by 2035. The intention is to support vulnerable nations in adapting to the impacts of climate change, transitioning to renewable energy, and reducing emissions. However, this commitment was met with significant criticism from developing nations. They argued that $300 billion was not enough to meet their urgent needs, with many calling for a minimum of $500 billion per year to effectively address their growing challenges.
Additionally, there was frustration over the structure of the funding. Much of the $300 billion was expected to come in the form of loans, rather than grants. This raised concerns that the loans would increase the already heavy debt burden on poorer nations, making it even harder for them to invest in climate action. Wealthier nations, on the other hand, defended the pledge by pointing to economic constraints and suggesting that private sector contributions could help bridge the funding gap. However, developing countries stressed the importance of more direct, public funding, which they argued would be more accessible and provide the immediate support needed to cope with climate impacts.
The summit also highlighted ongoing debates about the donor base for climate finance. Wealthier nations pushed for emerging economies like China and Gulf countries to contribute, but there was no consensus on this issue.
Energy transition: progress and resistance
One of COP29’s main goals was to advance the global energy transition by reducing reliance on fossil fuels and scaling up renewable energy deployment. However, these efforts faced significant resistance. Saudi Arabia, a major oil producer, actively blocked proposals to phase out fossil fuels, reversing earlier commitments made at COP28 to discontinue the use of fossil fuels. Attempts to include a resolution on transitioning away from fossil fuels were postponed, raising concerns about the ability of COP29 to drive meaningful progress on energy issues.
There were discussions on promoting green hydrogen markets and regional renewable energy grids. These initiatives aimed to create sustainable energy systems while addressing energy security concerns in countries dependent on fossil fuels.
Climate Finance and Article 6
At COP29 in Baku, Azerbaijan, negotiators made an important breakthrough by finalising the rules under Article 6 of the Paris Agreement. This creates a clear framework for international carbon credit trading, which will help countries and companies reduce greenhouse gas emissions around the world. Each carbon credit represents the removal or avoidance of one tonne of carbon dioxide from the atmosphere, providing a clear, measurable way to track progress in tackling climate change.
The implementation of Article 6 is expected to create transparent and effective carbon markets, supporting nations and businesses in reaching their climate goals. It could also save up to $250 billion each year by making national climate plans more cost-effective. By allowing countries to trade carbon credits, Article 6 offers a flexible and efficient approach to emissions reductions, helping to channel financial resources where they are needed most.
The rules finalised at COP29 are a key step in putting Article 6 into action, unlocking international carbon markets and enabling countries to work together on solutions to the climate crisis. The agreement involves two main mechanisms:
- Article 6.2 allows countries to trade carbon credits directly with each other. This means that one country can reduce its emissions and sell credits to another country that needs to meet its emissions targets. This system enables countries to find the most cost-effective ways to cut emissions, benefiting both the buyer and the seller, and ensuring that emission reductions happen most affordably.
- Article 6.4 creates a new international carbon market where carbon credits are generated through large-scale projects, such as renewable energy development, reforestation, or other climate-friendly initiatives. These projects will be monitored and regulated to make sure that the carbon credits are real and lead to actual reductions in emissions. This new market aims to support both developed and developing nations in their transition to low-carbon economies by offering financial incentives for taking action on climate change.
Together, these mechanisms aim to bring in much-needed finance for developing countries, helping them reduce emissions and adapt to the impacts of climate change. By allowing carbon credit trading between countries, Article 6 provides a way to achieve global climate goals more efficiently, making it easier for nations to work together to solve one of the world’s most pressing challenges.
Multilateral development banks also pledged to increase climate-related lending, with commitments from institutions like the World Bank and the Asian Development Bank. Non-profit organisations and private investors announced additional funding for adaptation and mitigation projects, but these contributions were seen as insufficient compared to the scale of the crisis.
The Climate Finance Action Fund (CFAF) at COP29
The key initiative highlighted by Azerbaijan during COP29 was the Climate Finance Action Fund (CFAF). The CFAF was established to collect financial contributions from fossil fuel-producing countries and companies, which would then be reinvested into renewable energy projects and climate disaster support. This fund is designed to support the transition to low-carbon economies, particularly in developing countries, by providing financial resources to support clean energy initiatives and climate adaptation efforts.
Azerbaijan presented the CFAF as a critical step in bridging the gap between fossil fuel-producing nations and the global climate finance goals set under the Paris Agreement. The fund aims to channel much-needed capital into regions most vulnerable to the impacts of climate change, such as Small Island Developing States (SIDS) and Least Developed Countries (LDCs). By directing financial contributions from the fossil fuel sector towards the renewable energy transition, the CFAF aims to balance the economic needs of fossil fuel-dependent nations with the urgent need for sustainable, climate-resilient infrastructure.
While the CFAF was welcomed by some as a positive step towards addressing climate finance, its success will depend on the level of commitment from fossil fuel-producing countries and the transparent allocation of funds to projects that genuinely contribute to sustainable development and emissions reduction.
Looking Ahead: Challenges for COP30
COP29 concluded with a series of unresolved issues that now loom over COP30, scheduled to take place in Belém, Brazil, in 2025. As the clock ticks toward the 2030 deadline to limit global warming to 1.5°C, COP30 represents the final opportunity for countries to submit updated national plans, known as Nationally Determined Contributions (NDCs).
Nationally Determined Contributions (NDCs) are the commitments made by each country under the Paris Agreement, which came into force in 2016. The Paris Agreement set a global target of limiting global warming to well below 2°C above pre-industrial levels, aiming for a more ambitious target of 1.5°C.NDCs are updated every five years, with countries required to present increasingly ambitious plans to reduce greenhouse gas emissions and adapt to climate impacts. The updating of NDCs at COP30 will be a critical moment to assess whether countries are on track to meet the 1.5°C goal and to increase their level of ambition in light of the latest scientific findings on climate change.
These plans will be critical in shaping global efforts to meet climate targets.
Securing Meaningful Commitments
Many nations, including major emitters like India and China, have emphasised the need for developed countries to shoulder more financial and technical responsibilities. The success of COP30 will depend on whether these demands are met with concrete actions rather than vague promises.
The postponed discussions on fossil fuel phase-outs from COP29 must be revisited. With countries like Saudi Arabia actively obstructing progress, Brazil will face significant pressure to broker a consensus that aligns with the Paris Agreement’s goals while accounting for the diverse interests of participating nations.
The absence of strong U.S. leadership under Trump could open the door for other nations, such as China, to take on a more prominent role. China’s recent moves to disclose climate finance contributions and support developing countries could position it as a leader, but questions about its commitment to reducing emissions remain.
Meanwhile, the European Union, traditionally a climate leader, will need to step up its diplomatic efforts to unite fragmented coalitions. Countries like India, balancing rapid economic growth with environmental sustainability, will also be pivotal in shaping the outcomes of COP30.
Brazil’s president, Luiz Inácio Lula da Silva, has emphasised the need for inclusive and transparent negotiations.
In his speech at the opening of the 79th United Nations General Assembly in September 2024, he stated, "Brazil will host COP30 in 2025, convinced that multilateralism is the only way to overcome the climate emergency."
His administration’s focus on environmental justice and support for Indigenous communities could provide a framework for addressing the equity concerns raised at COP29.
The stakes for COP30 could not be higher. The conference will not only shape the trajectory of global climate efforts but also determine whether the 1.5°C target remains achievable.
Brazil faces the daunting task of navigating these complexities while ensuring that COP30 delivers where previous conferences have faltered. The world will watch closely, hoping for decisive action that translates promises into tangible progress.
Shikha Negi is a Content Writer at ztudium with expertise in writing and proofreading content. Having created more than 500 articles encompassing a diverse range of educational topics, from breaking news to in-depth analysis and long-form content, Shikha has a deep understanding of emerging trends in business, technology (including AI, blockchain, and the metaverse), and societal shifts, As the author at Sarvgyan News, Shikha has demonstrated expertise in crafting engaging and informative content tailored for various audiences, including students, educators, and professionals.
