COP29: what was decided and what does it mean in practice for business?

Nearly 200 countries and thousands of attendees gathered in Baku, Azerbaijan this year for COP29, the annual UN climate summit. The two-week conference closed on Sunday 24 November, two days late, after some very heated negotiations. 

So what are the key takeaways and how does this affect the private sector? 

See the UN press release and COP29 decision documents. 

New global finance target 

COP29 was badged as a “Finance COP” as countries needed to set a new global climate finance goal. Under the Paris Agreement, a pledge was made in 2009 by developed countries to mobilise US$100 billion per year by 2020 to assist developing countries mitigate and adapt to climate change – a commitment that was eventually met after repeated delays. The new global finance goal – referred to as the New Collective Quantified 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.

According to a report published by the UN’s Independent High-Level Expert Group on Climate Finance at the start of 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). 

The parties agreed to triple finance to developing countries, from the previous goal of US$100 billion annually, to at leastUS$300 billion annually by 2035 “from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources” - although the G77 group of developing countries had been pushing for at least US$500 billion. The parties also agreed to work together to enable the scaling up of financing to developing countries, “from all public and private sources”, to at least US$1.3 trillion per year by 2035. 

Private finance (and blended finance mechanisms in particular) are expected to play a much larger role in meeting the new global climate finance target but what remains uncertain is what that will look like in practice, with a “Baku to Belem Roadmap to $1.3 trillion” expected to submit a report next year at COP30. We are expecting “transition finance” and “transition plans” to be a very hot topic next year. 

However, a number of climate-vulnerable developing countries feel strongly that the new target is nowhere near what is needed. And a number of developed countries had hoped to change the way in which donors and beneficiaries are classified. In particular, the EU and US (which this year was still represented by President Biden’s team) had hoped that some countries which are technically classified as developing countries (e.g. China) under UN rules dating back to the 1990s could now be reclassified as donors. Although agreement was not reached on that front, China did nonetheless say it is willing to voluntarily contribute more climate finance. 

Simon Stiell, the UN Climate Change Executive Secretary, acknowledged that the agreement reached in Baku did not meet all parties' expectations: “No country got everything they wanted, and we leave Baku with a mountain of work to do …So this is no time for victory laps, we need to set our sights and redouble our efforts on the road to Belem.”

No mention of “transitioning away from fossil fuels”

At last year’s COP28 in Dubai, the parties had agreed wording, for the first time, which referred specifically to “transitioning away from fossil fuels”. 

Some parties at this year’s COP had hoped to reaffirm that wording but instead had to settle for reaffirming in general the deal reached last year without explicit reference to fossil fuels. 

This leaves some questioning the mixed energy messages. However, as we explained in our previous blog post about COP28, the wording in the COP28 agreement about transitioning away from fossil fuels is not intended to be mandatory - it actually gives countries across the globe a great deal of discretion.  

Agreement reached on Article 6 carbon markets

After almost a decade of negotiations, agreement was reached on rules for Article 6 of the Paris Agreement – with rules on Article 6.4 being agreed at the start of COP29 and the rules on Article 6.2 agreed at the end of the summit. 

The new Article 6 carbon trading mechanism will allow countries to trade carbon credits with each other, as well as companies, and allow countries to meet some of their national carbon targets via this new mechanism.  The rules cover how credits should be traded, counted and checked, as well as a UN registry. 

Articles 6.2 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 needed to be agreed at the summit. 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. 

New global taxes on the horizon to help fund climate finance?  

The Global Solidarity Levies Task Force (GSLT) was launched at last year’s COP28 (led by France, Barbados and Kenya) to explore different options for international taxation to fund climate-resilient investments in developing countries. The taskforce has been looking at the potential to raise climate finance from taxes on a range of industries and economic activities. 

At COP29, the GSLT published a progress report in which it outlined a range of policy options for “solidarity levies” on shipping, aviation, fossil fuels, financial transactions and carbon pricing. It has also announced it will explore additional options such as levies on cryptocurrency,  plastics production, and ultra-wealthy individuals. 

The progress report outlines a range of policy options identified in the taskforce’s research:

• Aviation Levy: Policy options being considered include a kerosene fuel levy, including a coordinated levy on private jet fuel, and ticket levies on luxury tickets and frequent flyers. These could generate between US$19 billion and US$164 billion annually, depending on design and scope.
• Fossil Fuel Levy: A mix of levies on fossil fuel extraction, windfall profits, an increased minimum multinational corporate tax rate or a mixed levies instrument varying by country, to meet a minimum international standard.  
• Financial Transactions Levy: Options include revitalising EU efforts to design a global levy by mobilising a coalition of willing countries adopting measures on stock, bonds and derivatives, working towards a global harmonisation of financial transaction levies. This could include a 0.1% rate on stocks and bonds instruments and a 0.01% rate on transactions of derivatives. 
• Maritime Shipping Levy: The task force supports the work of the International Maritime Organisation to introduce a maritime levy. A levy on greenhouse gas emissions from international shipping could yield up to U$127 billion per year, based on a “well-to-wake” levy of US$150-$300 per tonne of CO2e.

In addition to the core levy areas, the taskforce also set out additional sectors that could be levied:

• Plastics production levy: A levy on primary polymer production, set at US$60-90 per tonne, could raise US$25-35 billion annually, supporting actions against plastic pollution.
• Cryptocurrency levy: Recognizing the high energy demand of crypto mining, a US$0.045 per kWh levy could reduce emissions while generating US$5.2 billion in revenue.
• Ultra-high-net-worth individual tax: A coordinated minimum 2% tax on billionaires, recently discussed at the G20, could yield $200-250 billion, fostering a fairer global tax landscape.

Impact assessments and consultations will be conducted before concrete policy proposals are presented by the IMF-World Bank Spring Meetings in April 2025. The goal is to produce specific proposals in time for COP30 in 2025.  

All eyes on COP30 in Brazil next year  

All eyes are on next year’s COP30 which will be held on 10-21 November 2025 in Belem, Brazil – the gateway to the Amazon rainforest. 

Countries need to submit their updated Nationally Determined Contributions (NDCs) under the Paris Agreement by February 2025, ahead of COP30 in Brazil. Countries are 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 they plan to achieve the goals of the Paris Agreement.

A number of counties have announced updated NDCs at COP29, including:

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

However, most countries are yet to submit their revised NDCs. 

As things currently stand, the science is rather bleak, with scientists across the globe predicting a significant overshoot of the 1.5-2C warming limit in the Paris Agreement unless governments (and the private sector) ramp up their climate action very soon. 

In the meantime, Australia and Turkey are still jockeying for who will host COP31 in 2026.  

What does this all mean in practice for businesses across the globe? 

This year’s COP has been over-shadowed by the outcome of the recent US election and the strong chance the US will, once again, pull out of the Paris Agreement. The hesitance on the part of developed countries to agree a more ambitious climate finance target at this year’s COP is due in part to a fear that if the US pulls out of the Paris Agreement, the other developed countries will have to shoulder the short-fall – as well as because of the ongoing economic and geo-political backdrop including inflation, stretched national budgets and rising populism. Also, there was a notable absence of world leaders at this year’s conference and attendee levels were down from last year’s COP28 in Dubai. Many have been keeping their powder dry for next year’s COP in Brazil.  

The private sector is waiting to see if countries will increase their climate ambition in the next round of NDCs in the lead up to COP30 next year and, if so, how that then translates into transition pathways for different sectors and investible opportunities. 

However, let’s take a step back and put things in perspective. UN climate conferences require nearly 200 countries to reach consensus – a nigh-on impossible task – so it is hardly surprising that the final results of these COPs are usually underwhelming. 

Also, when businesses and investors are deciding on their transition plans, often they are looking for signals a bit closer to home. 

Those operating in the UK, EU, US or Asia need to know what the regulatory and financial incentive landscape is in specific countries. For example:

• The UK’s new Labour government has made it clear that is sees a strong connection between economic growth and net zero (see our briefing) and we’re expecting a new Clean Power Action Plan and Industrial Strategy in the coming months. 
• In Europe, a new European Parliament and Commission are about to embark on a new five-year mandate where the needs of the EU Green Deal and competitiveness will need to be balanced in a new Clean Industrial Deal. 
• The US is about to embark on a brave new journey – with many asking themselves what that means for the energy transition (see our webinar recording). 
• And in Asia, interest in transition finance and blended finance mechanisms is gathering momentum. 

The energy/net zero transition is not a “one-size fits all” and sometimes the national landscape is more powerful than the global macro.