COP29 outcomes: What they mean for climate finance and carbon markets
December 3, 2024
By Sofia Jonson Veloso, ClimatePartner Impact
What was the outcome at COP29?
After two weeks of tense negotiations, COP29 in Baku, Azerbaijan, officially concluded in the early hours of Sunday, 24 November 2024. Closing statements reflected mixed feelings about the outcomes. While progress was made on various topics, it did not meet the expectations of many parties.
Reflections on COP as a climate action forum
Our planet is a shared home for all nations, and actions in one country can profoundly impact the population in another. This interconnectedness makes climate change and environmental protection matters globally significant. International cooperation, such as the collaboration seen at COP (Conference of the Parties) negotiations, is essential for the survival and well-being of our planet.
COP is one of the few platforms where governments from across the world come together for a common goal. This summit also invites stakeholders from various sectors, including the private sector, civil society, academia, and the general public. This broad participation fosters dialogue and collaboration, creating a foundation for collective action.
For these reasons, the work and progress made at COP is vital for the successful achievement of our shared goals. However, it's important to remember that the results reflect the voices of all the parties involved and require compromise. As such, the agreements represent a new baseline rather than best-practice standards. They establish a foundation from which we can advance further. As independent actors, we have the opportunity to go beyond these agreements and achieve much more than what is set during the negotiations.
Official Outcomes
NCQG
A New Collective Quantified Goal on Climate Finance (NCQG) was officially drafted and agreed upon during COP29. The NCQG is a global climate finance goal, developed within the context of meaningful mitigation and transparency in implementation, while taking into account the needs and priorities of developing countries.
- The agreed text tripled the previous goal (USD 100 billion per year), committing USD 300 billion annually by 2035. Developed countries are to take the lead in reaching this new goal to aid climate action in developing countries.
- The goal is to be achieved using a wide variety of sources, including public and private, and bilateral and multilateral, among others.
- Additionally, the agreed text calls on all actors to work together to scale up financing for developing countries' climate action from all public and private sources to at least USD 1.3 trillion per year by 2035.
Many parties expressed deep dissatisfaction with the sum and wording of the final text, as it falls far short of the needs reported in the nationally determined contributions (NDCs) of developing countries. The figures were estimated at USD 5.1–6.8 trillion up until 2030, or USD 455–584 billion per year.
The agreed sum also does not meet the financial requirements identified by the High-Level Expert Group on Climate Finance (IHLEG), which reported an annual need of USD 2.4 trillion to invest in renewable energy, adaptation, and other climate-related issues in developing countries, excluding China.
Dissatisfied parties expressed their disappointment, stating that developed countries have not shouldered their responsibility. In contrast, the European Union expressed satisfaction that an agreement was reached upon despite tense geopolitical circumstances. They emphasised that the agreed sum is a realistic goal and will serve as a starting point.
Article 6
After nine years of negotiations, an agreement was finally reached on the essential components of Article 6 under the Paris Agreement. These developments pave the way for new Paris-aligned market mechanisms to achieve emission reductions worldwide.
Article 6 of the Paris Agreement aims to facilitate voluntary cooperation in implementing nationally determined contributions (NDCs). It regulates two market-based mechanisms that allow for the generation and trade of emission reductions. Article 6.2 enables countries to exchange mitigation outcomes bilaterally, while Article 6.4 establishes a new mechanism for validating, verifying, and issuing high-quality carbon credits.
At COP29, consensus was reached on the rules, modalities, and procedures necessary to provide the structure and regulatory framework to operationalise Articles 6.2 and 6.4. The new rules adopted include components related to monitoring, reporting, and verification (MRV), as well as the authorisation and transfer of mitigation outcomes. With these developments, Article 6.4 is now an operational carbon market standard known as the Paris Agreement Crediting Mechanism.
The next step involves developing or approving methodologies that will be used to register and develop Paris-aligned carbon projects. Some methodologies will be transferred from the former United Nations Framework Convention on Climate Change (UNFCCC) Clean Development Mechanism (CDM), allowing existing projects to transition to the Paris Agreement Crediting Mechanism. Adoption of methodologies and the registration of new projects are expected to begin next year.
General agreement on Article 6 was reached early during COP29, with subsequent negotiations focusing on technical details. While there was some tension in the room, the discussions showed broader consensus on this issue compared to other high-priority items at the summit.
COP29 in relation to the VCM
The outcomes of COP29 offer promising developments for the future of the Voluntary Carbon Market (VCM), particularly with the long-awaited agreement on Article 6 of the Paris Agreement. This milestone, achieved after nine years of negotiations, provides a solid foundation for the next generation of UN-backed carbon markets. Although the final texts have some imperfections, they represent significant steps forward in establishing high-integrity market mechanisms for the trade of mitigation outcomes.
Additionally, given the relatively modest commitment of USD 300 billion annually under the NCQG, the role of private finance is critical for the green transition and the implementation of NDCs. The NCQG text explicitly includes private finance as a key contributing source to achieve the broader target of USD 1.3 trillion per year by 2035.
The COP29 summit focused heavily on public and private finance in both the official negotiations and sideline events. Public-private partnerships played a prominent role in discussions, with several countries explicitly encouraging the use of high-integrity voluntary carbon markets to support their national activities and the achievement of their NDCs.
For this purpose, countries are currently in the process of implementing comprehensive regulations to integrate the VCM into their national policies. This approach allows VCM projects to generate mitigation outcomes that can either be exported for international use applying corresponding adjustments, or contribute directly to the host country’s NDCs.
The latter scenario showcases the potential for the emerging contribution claim model. Within such a system, companies can finance climate projects in a host country and claim their contribution toward the NDC of that country. This innovative use of the VCM highlights its potential to support national climate ambitions while fostering international cooperation.
In summary, COP29 has laid the groundwork for a more robust and trustworthy VCM. The agreement on Article 6, combined with ongoing improvements in market integrity and increased private sector engagement, offers a positive outlook for the market. As the global focus on climate finance intensifies, the private sector’s role in driving climate action has never been more crucial.
ClimatePartner Representation
ClimatePartner had a strong presence at COP29, with participants at official sessions, side events, and networking opportunities. Our team recorded outcomes from both official proceedings and relevant side events while also representing the company across various platforms. Additionally, ClimatePartner organised two events and participated in two panel discussions.
Event 1: Local Knowledge and Innovative Solutions: The Role of Climate Projects in Sustainable Development (Workshop, 16 November 2024)
Event 2: Contribution to Global Net Zero – Leveraging Carbon Markets for Public-Private Partnerships (panel discussion, 20 November 2024)
Resources:
From Vision to Reality, Getting the Job Done: Executive Secretary Speech | UNFCCC