Climate finance, carbon markets and more: 4 key takeaways from COP29

The global climate agenda took centre stage in Baku, Azerbaijan, as over 65,000 world leaders, decision-makers, private sector organizations and civil society members gathered for COP29.

Against new data predicting 2024 to be the hottest year on record, increased extreme weather set to cost billions in damages, and a complex geopolitical context, this year’s summit highlighted the urgent need for climate action.

At COP29, finance emerged as the key focus, particularly mobilizing and allocating funds for the necessary work. Key negotiations aimed to set a new global climate finance target, strengthen nationally determined contributions, make significant strides in adaptation and loss and damage efforts, and advance progress on the COP28 energy pledges.

The goal was to solidify global cooperation and secure tangible advancements in addressing climate change’s most pressing challenges.

So, what did COP29 achieve and what remains to ensure meaningful progress? Here are four key highlights from this year’s summit.

Negotiators faced the critical task of setting a new global climate finance target for 2025 and beyond, building on the previous $100 billion per year commitment.

Delegates worked to address the quantity, quality and sources of climate finance. Vulnerable countries pushed for concrete assurances regarding loss and damage mechanisms to ensure the necessary financial support is delivered.

Key priorities included establishing fair expectations for contributors, ensuring financial support translated into tangible impact and mobilizing substantial private-sector investment.

Parties agreed on a “New Collective Quantified Goal for climate finance” to support developing countries in two parts:

Both targets can be met through public and private sources but while they represent significantly more than past goals, they still fall short of the financial needs of vulnerable nations.

Moreover, the goal does not build on commitments to reduce fossil fuels. Let’s be clear: this agreement is just a foundation, not a solution and many obstacles have been encountered along the way.

For international trade of mitigation outcomes (Article 6.2), COP29 clarified how countries will authorize carbon credit transactions and manage tracking registries. Additionally, it established mechanisms to ensure environmental integrity through upfront technical reviews in a transparent process.

Under the centralized carbon crediting mechanism (Article 6.4), the Paris Agreement Crediting Mechanism now includes mandatory safeguards to protect the environment and human rights. These safeguards ensure projects cannot proceed without the informed consent of Indigenous Peoples.

The supervisory body, responsible for overseeing the mechanism, has a comprehensive action plan for 2025.

This progress in Article 6 negotiations, achieved at COP29, will be crucial for creating functional carbon markets, which are essential for meeting the Paris Agreement´s reduction targets and mobilizing much-needed finance.

State delegates faced mounting pressure to raise their ambition and establish expectations for the next cycle of national climate plans. With the deadline for submitting updated nationally determined contributions (NDCs) in 2025, nations were encouraged to update their climate commitments to be more ambitious, investable and equitable as part of the five-year update cycle.

This phase requires higher emissions reduction targets and key outcomes from past COPs, such as commitments to phase out fossil fuels and triple renewable energy capacity by 2030.

The UK and Brazil announced new nationally determined contributions and emission reduction targets during the summit. Businesses, including the Alliance of CEO Climate Leaders, pushed for more ambitious, credible, and investable contributions, translating these plans into stable and long-term domestic policies to attract private sector investments.

Delivering on these fronts is critical to maintaining the momentum needed to meet global climate goals.

Despite Brazil's Group of 20 statement referencing the United Arab Emirates consensus and boosting mid-conference negotiations, Baku was polarized about the global commitment to transition away from fossil fuels and move forward on the COP28 energy targets.

Regrettably, the final outcome did not make explicit reference to the “transitioning away from fossil fuels.”

On energy targets, neither the private nor public sectors can achieve these alone, and collaboration is critical. Businesses have called for more demand-side action, translating efficiency targets into implementable sector-level plans and enabling policy and regulation to drive efficiency in key sectors such as building, industry and transport.

In addition, targeted measures to remove transition obstacles to deliver on the tripling renewables targets, such as dramatically shortening permitting times, boosting grid readiness and driving more project finance into developing countries, will be crucial for future COPs to advance.

While COP29 marked progress, critical gaps remain:

Nations failed to agree on binding commitments to phase out fossil fuel subsidies. This issue remains one of the most significant barriers to decarbonization, as subsidies distort energy markets and slow the adoption of cleaner alternatives.

Establishing clear timelines and mechanisms for subsidy elimination will be critical in 2025 to align energy markets with global decarbonization goals.

Besides the agreement on the new collective quantified goal on climate finance, the mechanisms for scaling and disbursing funds remain unclear, particularly for attracting private sector capital.

The challenge of ensuring financial commitments translate into a project pipeline and real action on the ground persists, particularly for developing nations. Without addressing these gaps, the momentum from COP29 risks losing steam before COP30.

At COP28 in Dubai, nature was a clear winner as negotiations and outcomes referenced the importance of biodiversity and nature-based solutions for mitigation and adaptation. During this year’s proceedings, nature was less prominent, leaving it to COP30 to ramp up momentum and link biodiversity pathways with climate action.

With a strong mandate to translate these into detailed plans at national and sector levels, forthcoming COPs need to work more closely with businesses, particularly from higher-emitting sectors and explain how governments interpret the triple renewable and double energy efficiency targets from a national and sectoral perspective.

That would allow businesses to develop their own detailed energy transition plans and seek market-based solutions to turbocharge the transition.

The year 2024 was pivotal, hosting COP29, COP16 for biodiversity and COP16 for desertification. This rare alignment offered world leaders a unique chance to integrate efforts and pursue sustainable solutions.

Nations will update their nationally determined contributions ahead of COP30. However, the COP process itself needs reform. Collaborative public-private approaches are vital to addressing the climate crisis with the urgency and scale required.

The upcoming World Economic Forum Annual Meeting in Davos, Switzerland, will be the first major public-private forum post-COP29. It will provide a platform to transform its outcomes into actionable initiatives and strengthen collaboration among governments, businesses and civil society.

COP30 in Belém, Brazil, will build on the progress and unresolved issues from COP29 in Baku.

Brazil, representing emerging markets and developing economies, will set the tone for climate ambition, with the next round of nationally determined contributions due by mid-February. The COP31 host for 2026 may also be decided, with Australia and Turkey as leading contenders.