COP29: Why it matters and 4 key areas for action

The global climate conference COP29 is days away and the summit, held this year in Baku, is a key moment for leaders to make progress on climate commitments.

Recently, COP29 President-Designate Mukhtar Babayev sent his first official letter to the conference’s parties and constituencies. In it, he outlined the priorities for action -- as well as the remaining hurdles to achieving them.

As his letter makes clear, we will need "all hands on deck" to successfully advance the event's two “pillars”: the enhancement of ambition; and the enabling of action.

Here's what's on the agenda -- and what's needed to move these priorities forward.

The Conference of the Parties (COP) is the group of nations that have signed the UN Framework Convention on Climate Change (UNFCCC), which was put together in 1992. It commits them to act together to stabilize greenhouse gas concentrations “at a level that would prevent dangerous anthropogenic (human-induced) interference with the climate system”. Since then the Parties, or nations, have met almost annually.

The most recent COP, COP28, was held last year in Dubai and was the largest attended climate COP in history, convening 97,000 delegates, and more than 150 heads of state, along with negotiators, business leaders and non-state actors. The conclusion of the first ever Global Stock Take (GST) (a mid-term review of progress towards the 2015 Paris Agreement) was the event's key outcome and the conference emphasized the need for determined action to make progress on renewable energy, a just transition and more.

Many are calling COP29 the “finance COP”, seeing it as an opportunity to align climate finance contributions with estimated global needs. Yet despite this focus on unleashing funds, nearly every basic element of the New Collective Quantified Goal (NCQG) is still being contested, from the new target and the contributor base to the scope of the finance involved and the Paris Agreement articles in question. Over the next few months, attention will need to be focused on creative solutions to these issues.

In addition, the private sector’s involvement needs to be ramped up; at the moment, many climate finance schemes have been devised by making assumptions about the behaviour of private capital, some of which have not held. The private sector is best placed to lay out the prerequisites for private finance to flow, so its input should be solicited quickly and systematically.

In recent years, carbon markets have become a flashpoint in international climate policy, largely because of their mixed results. On the one hand, they have shown potential as a debt-free way to channel finance from heavy emitters to promising clean or green projects. On the other, a lack of rigour has meant that often, carbon markets do not drive real emissions reductions, instead pushing funds into unneeded or unverifiable places and enabling greenwashing.

Article 6 of the Paris Agreement created principles for carbon markets and ways countries could cooperate to reach climate targets. While rules were agreed to at COP26, negotiation has been needed to establish the necessary guidance to operationalise it.

A fully operationalized Article 6 would provide the basis for better quality carbon markets through reviewable bilateral agreements and a centralized multilateral marketplace. To get to that point, negotiators need to come to agreements on definition and content; project eligibility and review processes; and the ability to make certain information confidential, among other issues.

Two successive COPs have failed to get Article 6 up and running, with countries and other entities striking some agreements in the meantime but no real scale being achieved. As anti-greenwashing sentiment continues to rise and companies back away from banner climate pledges, a well-functioning carbon market ensconced within the UNFCCC machinery is more important than ever.

The amount currently pledged to the still-forming Loss and Damage Fund, whose board will be hosted by the Philippines, is tiny compared to estimated loss and damage needs worldwide. Before being able to grow that amount to anything meaningful, the fund needs to check off several boxes quickly.

Ideally, in the next 100 days, the board should appoint an executive director. This process is up and running, but its conclusion will allow for a point person, empowered by a settled – if interim – hosting agreement at the World Bank, to engage in high-level discussions that could draw new waves of funding. In addition, efforts need to be made for active observers to have consistent access during the decision-making process.

One of the key decisions, however, will be the involvement of the private sector. The Transitional Committee’s proposal recommended that the fund be able to receive financial inputs from “non-public and alternative sources, including new and innovative sources of finance.” Other non-climate funds, like Gavi and the Global Fund, are set up to receive private finance; to maximize its impact, the Loss and Damage Fund might consider following suit.

Adaptation has often been overshadowed by mitigation, yet it is crucial as climate impacts worsen. COP29 is a pivotal opportunity to prioritize adaptation and secure the necessary resources.

With some climate change effects now inevitable, robust adaptation strategies are essential. National Adaptation Plans (NAPs) are vital tools, and COP29 should enhance support for their development and implementation, focusing on financial and technical assistance. Closing the adaptation finance gap is critical; donor countries must meet their commitments, and innovative funding mechanisms, including private sector investments, should be explored so that the most vulnerable countries can better prepare against climate challenges.

A narrow focus on market- and investment-based solutions to the climate finance problem means certain other approaches risk falling by the wayside. A glaring one could be the advancement of an agreement to credibly phase out fossil fuel subsidies. At COP28, parties maintained the existing agreement on the phase-out of “inefficient” subsidies, but this language has arguably given too much cover to nations looking to prolong and defend their subsidy programmes. It also comes without a deadline, an action plan, or a way to measure progress.

With fossil fuel subsidies reaching record levels in 2022, they should not slide off the docket to make room for other agenda items. (One could argue that subsidy elimination falls under “climate finance”, specifically under the Paris Agreement’s Article 2.1(c), which stipulates that all nations should make “finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient development”.)

The finance lens also makes clear that not enough attention is being paid to finding comprehensive debt solutions. Debt relief and restructuring are some of the most powerful methods for freeing up fiscal space, stimulating activity, and reducing risk. As innovative tools like debt-for-climate and debt-for-adaptation swaps grow in popularity – and provide a pathway for funding projects that present a less-than-appealing return profile to private investors – parties should place them front and centre at COP29, to whatever extent possible. Without transformative action on sovereign debt, many developing countries will be locked into risk cycles, forced to choose between financial stability and climate action, and outcompeted in capital markets.

With a nationally determined contribution (NDC) update on the horizon, achieving a robust outcome at COP29 is critical to send a strong signal of progress. By closing the finance gap, pursuing robust adaptation strategies, and fostering innovative and inclusive solutions, COP29 can set a precedent for comprehensive climate action. The next few months will be decisive in shaping that future.