COP29: first results

COP29, the United Nations climate summit, started in Baku in Azerbaijan on 11 November 2024 and will run until 22 November. 

This COP has been over-shadowed by the re-election of former US President Donald Trump in the recent US elections and the strong chance the US will, once again, pull out of the Paris Agreement. There has also been a notable absence of world leaders at this year’s conference and attendee levels were down from COP28. 

Despite this, the physical impacts of climate change this year have been the worst so far, with 2024 set to be the hottest year on record and the geo-political and economic backdrop also continuing to be highly complex. 

In this blog post, we look at some of the key announcements made during the first week of COP29. 

Updated NDCs

Countries need to submit their updated Nationally Determined Contributions (NDCs) under the Paris Agreement by February next year ahead of COP30 in Brazil. Countries are being strongly encouraged to ramp up their climate ambition in the next round of NDCs - dubbed “NDCs 3.0” by the UNFCCC. NDCs represent each country’s plan for how to achieve the goals of the Paris Agreement.

A number of counties have announced updated NDCs, including:

• Brazil (the host of next year’s COP) announcing its new target to reduce emissions by between 59 and 67 percent by 2035, compared with 2005 levels (Brazil had previously set a target of a 53 percent reduction by 2030).
• the UK unveiling a new climate target to cut emissions by 81 percent by 2035, compared with 1990 levels (the UK had previously set a target of a 78 percent reduction by 2035 but the target to reduce emissions by at least 68 percent by 2030 remains).
• the UAE (the host of last year’s COP28) announcing its third NDC with a commitment to reduce greenhouse gas emissions by 47 percent by 2035, compared with 2019 levels.

Article 6 carbon markets

An important milestone was reached on carbon markets with an agreement being announced on Articles 6.4 of the Paris Agreement. We are waiting to see what agreement can be reached on Article 6.2 of the Paris Agreement. 

Articles 6.2 of the Paris Agreement enables countries to voluntarily cooperate to meet their climate targets by trading carbon credits from emissions reductions and removals via bilateral agreements - although the mechanism under Article 6.2 is already operational, technical details need to negotiated at the conference. 

Article 6.4 sets out principles for establishing a centralised crediting mechanism – creating a new UN-supervised voluntary carbon market. Disagreements had persisted over the previous COPs on credit methodologies and eligibility of removal activities, amongst other things. 

On day one of COP29, two standards were agreed on Article 6.4 covering: (i) methodology requirements for developing and assessing eligible carbon credits for a UN carbon market (otherwise known as the Paris Agreement Crediting Mechanism); and (ii) requirements for projects that remove greenhouse gases from the atmosphere, such as how removed emissions should be calculated and monitored. Although the carbon credit methodology set out by the Supervisory Body sets out important high-level principles, there is still work to be done on how such principles will be applied in practice — as was reflected by the agreement reached at COP29 which instructs the Supervisory Body to “expeditiously elaborate” on the standards it has developed. 

There were criticisms of the unusual procedural approach of the Supervisory Body’s decision to adopt the standards in advance of the conference, as opposed to referring them for final decision at COP. Nevertheless, given that the carbon market envisaged under article 6.4 has never been properly established, this development of a framework for a centralised international carbon market may offer a path for countries to participate in the global carbon market. 

In other developments, Saudi Arabia launched its first voluntary carbon credit exchange and the UK published its principles for voluntary carbon and nature market integrity.

Climate finance

NCQG

This COP has been billed as the “finance COP”, because it is time for countries to set a new global climate finance goal. To recap - under the Paris Agreement, a pledge was made by developed countries to mobilise US$100 billion per year to assist developing countries mitigate and adapt to climate change – a commitment that was met, after repeated delays, in 2023.

The new global finance goal – referred to as the collective quantified climate finance goal (NCQG) - is for developed countries to provide climate finance to developing countries to help them cut their greenhouse gas emissions and cope with the impacts of climate change.

In the coming days, all eyes will be on whether an agreement can be reached on what the actual amount of climate finance under the NCQG will be (with the G77/China negotiating group pushing for an annual climate finance target of US$1.3 trillion), which countries will be contributors and recipients of the funding; how much will come from public and private sources, and whether it will be in the form of grants or loans. 

According to a report published by the UN’s Independent High-Level Expert Group on Climate Finance at the conference, global projected investment needed for climate action is around US$6.3–6.7 trillion per year by 2030, of which US$2.7–2.8 trillion is in advanced economies, US$1.3-$1.4 trillion in China, and US $2.3–2.5 trillion in emerging markets and developing countries (other than China). 

MDBs

Major multilateral development banks (MDBs) (including the African Development Bank Group, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Islamic Development Bank, the New Development Bank, and the World Bank Group) released an updated version of the Common Approach to Measuring Climate Results following its initial publication in April this year (see press release). The publication provides “the first common framework” for measuring and linking progress on climate mitigation and adaptation with the climate results of MDB activity. 

The MDBs estimate they will raise US$120 billion annually in climate finance for developing countries by 2030, including US$42 billion for countries to adapt to the impacts of extreme weather. Additionally, MDBs aim to mobilise an extra US$65 billion from private sector investments for developing countries by 2030. Although the US$120 billion annual target is a significant increase from the US$75 billion raised in 2023 and US$60.9 billion in 2022, the amount is reported to be substantially lower than what developing countries say they need annually. 

Blended finance initiatives 

The Singapore Government announced up to US$500 million in concessional funding to support the Financing Asia’s Transition Partnership (FAST-P). FAST-P is the blended finance initiative launched by the Monetary Authority of Singapore (MAS) at COP28 that aims to mobilise up to US$5 billion from public, private, and philanthropic partners to finance transition opportunities in Southeast Asia. 

BlackRock, MAS, IFC, MUFG, NEXI, and AIA signed a statement of intent to collaborate on a project to develop an industrial transformation infrastructure debt programme, under the FAST-P initiative, which will explore financing solutions for investors to access decarbonisation projects mainly focusing on Southeast Asia. 

Energy

From a scientific point of view, the current outlook is not good. A UN report published ahead of COP, found that the ability to remain within the target of 1.5 degrees Celsius of global warming “will be gone within a few years” without rapid action. If current NDCs are implemented and no further ambition is shown in the new pledges by countries, the best we could expect to achieve is global warming of up to 2.6 degrees Celsius over the course of the century, which scientists warn would have catastrophic consequences across the globe.  Despite the scale of the task, the report states that it remains “technically possible” to cut emissions in line with a 1.5 degrees Celsius pathway but delivering on the mitigation potential would require immediate global mobilisation “on a scale and pace only ever seen following a global conflict”. 

Renewables

The first days of COP29 brought some positive news with Azerbaijan, Egypt, Italy and Spain lending support to installing 1 TW of renewable energy capacity in the Mediterranean region by 2030, under the TeraMed initiative.

Coal

How to deliver finance to organisations in emerging markets and developing economies to enable them to transition to a lower carbon future continues to be an important issue, including in the context of the early retirement of coal-fired power plants – a critical topic given coal power remains the single largest source of emissions globally.

The Coal Transition Commission, jointly chaired by France and Indonesia, released a report setting out recommendations to accelerate the transition from coal to clean energy. According to the report, private finance needs to take a more active role in accelerating the early closure of coal plants and in implementing measures to reduce emissions from existing operations. The report recommended that regulators should ease their sustainability criteria to facilitate this transition and Governments and regulators could help investors by “clarifying” that funding aimed at phasing out coal plants qualifies as transition finance. Other recommendations include developing metrics to track emission reductions from investments, as well as supporting innovative financial instruments such as “coal-to-clean” carbon credits.  

Separately, Singapore’s MAS released an interim report on the use of transition credits to accelerate the early retirement of coal-fired power plants under the Transition Credits Coalition (TRACTION) initiative launched last year at COP28. 

Nuclear

El Salvador, Kazakhstan, Kenya, Kosovo, Nigeria and Turkey joined the declaration to triple nuclear energy by 2050. The declaration, which had been announced at COP28, “recognises the key role of nuclear energy in achieving global net-zero GHG emissions by 2050 and keeping the 1.5-degree goal within reach”. These additional countries brings the total number of signatory nations to 31, including key nuclear energy producers such as France, the US and Japan.

Methane emissions

The EU launched the new Methane Abatement Partnership Roadmap (the Roadmap). Methane is a greenhouse gas several times more potent than CO2 so reducing these emissions are among the most critical actions that can taken in the short term to slow the rate of climate change. Following the launch of the Global Methane Pledge at COP26 - an agreement to cut methane emissions by 30% by 2030 - this new Roadmap sets out a series of concrete actions to be undertaken, including a robust monitoring, reporting and verification system.

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The Linklaters team is keeping a very close eye on developments and will let clients know what the final outcome of this year’s COP means in practice once the summit has concluded.