COP kicks the climate can down the road, again

The quantum of money—and more so, its nature—was at the crux of the negotiations to mobilize capital to address climate change. The exercise mandated by the Paris Agreement is to produce the New Collective Quantified Goal (NCQG). The new ask ballparked at $1.3 trillion a year. The current commitment is at $100 billion a year. The wide-open negotiating field called for exalted ambition and commitment. Eventually, COP29 demurred and stuttered to cough up $300 billion a year by 2035.

Simon Stiell, executive secretary, United Nations Framework Convention on Climate Change (UNFCCC), said the result is an ‘insurance policy’ subject to timely payment of premium. India called the outcome stagemanaged and vociferously registered its objection. Nigeria labelled it an insult. Many developing countries and the Least Developed Countries (LDCs) shared India’s stance. The unyielding position of developed countries had left the Global South clutching at straws, said experts.

“A disappointing and unambitious goal,” said RR Rashmi, India’s former principal negotiator and distinguished fellow at The Energy and Resources Institute. “Developing countries were pushed to accept the deal. The ambition was set by developed countries and others had to fall in line willy-nilly. In the end the [COP29] Presidency was trying to save its skin by coming to an agreement in one form or the other,” he added.

The Trump factor

Hard bargains, dissatisfied parties, walkouts and hastily conjured agreements are part of COPs. More often than not, this is the template. The Baku COP, however, began on the back foot. The US had re-elected Donald Trump as President a week prior to the conference. A climate change sceptic, Trump had taken the largest historical emitter of greenhouse gases out of the Paris Agreement in his first stint and might do so again even as he focuses on fossil fuel expansion. The likelihood of the US exiting a historic achievement of the COP framework—the Paris Agreement—yet again not only cast a cloud on the negotiations but impacted its tightfisted outcome as well.

“Of course, there was the Trump factor. The possibility of the US not paying its fair share means other developed countries have to bear the burden, a reason why they didn’t want to commit to a higher finance goal,” said Harjeet Singh, global engagement director at The Fossil Fuel Non-Proliferation Treaty Initiative. The US, however, has not been the biggest contributor to climate finance.

Geopolitics aside, Singh said the decision smacked of a lack of intent from developed countries. “There is always money for wars and subsidizing the fossil fuel industry. But when it comes to giving to developing countries, economic challenges and accountability to their people are cited. The point is you [developed countries] are obligated to pay.”

Delayed delivery

At global climate negotiations such as the COPs, negotiating lines are drawn between developed and developing countries on the principle of Common But Differentiated Responsibilities and Respective Capabilities (CBDR-RC), which distinguishes the roles of the two entities after factoring in their historical part in environmental degradation. The principle was a negotiating win for the developing countries at the 1992 Rio Earth Summit, where the UNFCCC was formed.

Climate finance flows from the developed to developing countries as assistance to bolster the latter’s capabilities to reduce emissions, adopt cleaner energy and enhance resilience. Lofty though the intent, the brass tacks of money matters have been less pleasant over the years. Preceding the NCQG was an old goal of $100 billion a year from developed countries, which was committed at Copenhagen in 2009 and was to be met by 2020. According to the Organization for Economic Co-operation and Development (OECD), the target, which has since been extended till 2025, was reached in 2022 though loans accounted for the ‘lion’s share’ of public climate finance from multilateral development banks. That the target was met was contested by entities such as Oxfam International.

Climate finance is therefore a slippery ground defined by delayed delivery of promises and distrust among developing countries. Poor countries cannot afford to have climate change measures adding to their debt burden. Ahead of Baku, they sought a new financial goal of $1.3 trillion a year and wanted a large part of it as grants and concessional loans.

Climate finance is therefore a slippery ground defined by delayed delivery of promises and distrust among developing countries.

COP29 set the NCQG from developed countries at $300 billion a year, drawn from public and private sources, among others. “There would be additional financial instruments through which resources are raised from the private sector—additional taxation and levies—but it does not mean it includes private sector lending,” noted Rashmi.

The sought goal of $1.3 trillion annually figures in the final decision of COP29 as the Baku to Belem (Brazil) Roadmap. But it is to be curated by all entities, not developed countries alone, and will come through multiple channels, including private loans, by 2035. “The decision fosters two levels of finance: core finance ($300 billion) and a multi-layered mechanism ($1.3 trillion),” said Rashmi.

An undefined goal

At the heart of the NCQG is its composition. The new goal, highlighted Dhruba Purkayastha, director for growth and institutional advancement, Council on Energy, Environment and Water, has to be public capital, but the decision text offers little clarity on it. “If the $300 billion is additional public capital put on the table by the OECD countries, then it can help meet the estimates of $1.3 trillion, where the balance is mobilized by commercial capital. But the text does not say so,” he said.

Purkayastha, a climate economist, said it is critical the new goal is met either by grant-capital or grant-equivalent capital. “$1.3 trillion as grants cannot be expected. But the $300 billion needs to comprise official development assessment [government aid from OECD countries] or its grant equivalent or government public finance facilitated lending. Otherwise it is not a way forward,” he said, and added that it is imperative to properly define what constitutes climate finance.

The COP29 decision text states the goal of “$300 billion per year by 2035″, but does not explicitly mention when it will come into effect. The old goal of $100 billion is set to lapse next year. “The target has been pushed to 2035, so what are the year by year contributions? Are they to progressively go up? Is it a trajectory from $100 million to $300 billion? There are many unclear elements,” observed Purkayastha.

Grant-based climate finance is critical for poor countries to fight climate change and the meagre outcome will pinch them the most. Observers fear it will impact Nationally Determined Contributions (NDCs), which are climate action plans countries have to submit as per the Paris Agreement. “The biggest and direct impact of the low ambition on finance at COP29 is going to be on NDCs, which have conditional and unconditional targets,” said Singh. Conditional targets are based on international cooperation, including finance. “It means we cannot expect a lot of ambition from developing countries,” he added.

Consensus on Article 6

Underdeliver as it did on the main agenda, COP29 would want to be considered for the progress it made on Article 6, in both 6.2 and 6.4, the unresolved elements of the decade-old Paris Agreement on country-to-country emission reduction trade and the international carbon market mechanism.

COPs have a propensity to begin big in a bid to set the momentum for the two-week conference. COP28 at Dubai did it by putting the Loss and Damage fund into operation, Baku aimed to do the same with a consensus on international standards for carbon markets. The lapse of the Kyoto Protocol and its Carbon Development Mechanism in 2020 paused UNFCCC-monitored carbon trading among countries, which allowed industrialized entities to carry out emission reduction projects in developing countries and earn credits.

The corresponding element related to carbon markets in the Paris Agreement of 2015—Article 6.4—had remained highly contentious, technical and unresolved, though measures to settle it had begun as far back as the Glasgow COP in 2021. “The parties broadly agreed in Glasgow on the rules, modalities and procedures. But that was just the beginning, for the devil was in the details,” said Subrata Chakrabarty, associate programme director at World Resources Institute. The technical complexity of Article 6 meant it took three subsequent COPs to arrive at an agreement. “After the failure to get a consensus at COP28, there was considerable pressure to get the element right at COP29,” he added.

Chakrabarty, an expert on carbon markets, said that prior to the Baku COP, key points that needed agreement were identified. “They were related to authorization, interoperability of registries, and accountability with respect to reporting on Article 6. A consensus was needed on all these, [and that is] the reason it took so long to move the goalpost from Glasgow to Baku,” he said.

Article 6.4, which is the carbon market mechanism, will be overseen by the UNFCCC entity called the supervisory body, which has representation from both developed and developing countries. “The standards adopted at COP29 can be further revised and CMA [which oversees the implementation of the Paris Agreement] can provide additional guidance. The text does not give a date for the implementation of the carbon market mechanism, but now that we have a decision text on 6.4 mechanism methodologies, things should proceed faster,” Chakrabarty observed.

Carbon markets internationally have been criticized for instances of greenwashing and adverse impacts on local communities. The Article 6.4 consensus factors in the knowledge and practices of indigenous people and local communities—a welcome addition. Article 6.4, Chakrabarty said, has sustainability tools that have safeguard provisions. “There will be generalized checks and balances, but there would also be specific ones for different types of projects. Article 6 enables different kinds of reporting to enhance accountability,” he said.

Underdeliver as it did on the main agenda, COP29 would want to be considered for the progress it made on Article 6

India’s opposition

Consensus on a long unresolved mechanism is a takeaway from the latest edition of the Conference. But its enduring image was of Indian delegate Chandni Raina making the country’s stance on the outcome unequivocally clear. Denied an opportunity to make a statement before the decision was gavelled, she said the Azerbaijan Presidency had sidestepped the principles of trust and inclusivity critical to the UNFCCC framework. India refused to accept the decision in its present form.

Sidelining voices at the climate conference is a development longtime observers view with trepidation. Consensus, they added, is at the core of multilateral climate negotiations. “It was unnerving and distressing to see a decision being pushed through despite objections and reservations from many countries. Decisions are deferred when there are strong objections. The negative publicity received by the multilateral process is concerning,” said Rashmi.

Singh concurred. “We are not letting the process function effectively. The Presidency did not ensure an open and transparent process. We missed a golden opportunity to raise ambition and give confidence to developing countries.”

Multilateral meetings the scale of COP are spurred by a dogged resolve to look ahead. COP30 is scheduled to open in Brazil in 2025 and President Lula da Silva has called it the “last chance to avoid an irreversible rupture in the climate system.” Between the rhetoric and action, COP remains about small, and at times inadequate, steps. But work, it appears, goes on. “We have to make sure the Baku to Belem Roadmap is real,” said Singh.