Baku, Azerbaijan hosts today the opening of the 29th Conference of Parties to the United Nations Framework Convention on Climate Change (COP29). The conference, that will end on November 22, is bound to make much noise in negotiations over what has been termed a new financial commitment towards helping developing nations mitigate climate change effects caused by greenhouse gas emissions like carbon dioxide.
Typically, each COP meeting has a leading theme; COP29’s leading theme is ‘new collective quantified goal’, or NCQG – a term that will be heard a lot over the next couple of weeks. For this reason, COP29 is described as a ‘Finance COP’.
The NCQG is a new target for funding that should be made available to developing countries. It will replace the ‘$ 100 b per year’ target that was set in 2009—the target was to be met by 2020, but never was.
The hope against hope is that an NCQG target will be agreed upon and there will be pledges for seed funding it. The points on the negotiators’ table include the structure of the goal and the quantum, who contributes to it, who should be given priority to receive funding out of it and sectoral targets such as for ‘adaptation’ and ‘loss and damage’.
A point to note is, while developing countries wish to have more grant funds that they don’t have to repay, developed countries think of ‘funding’ as mobilising finance, even if at a concessional rate of interest. Even with the developed countries’ liberal definition of funding, the achievement is short of the target, which in turn is woefully short of the requirement, which runs into trillions of dollars.
Another issue at COP29 again finance-related to put money into the ‘loss and damage fund’. ‘Loss and damage’ refers to a country getting back on its feet after being hit by a climate event and is particularly relevant to lower income countries. Developed countries generally aim their efforts towards ‘mitigation’, or preventing further global warming (by measures such as renewable energy), and ‘adaptation’, which is taking steps to cope up with climate events that are no longer avoidable (such as by building storm water drains). A ‘Loss and damage’ fund was agreed upon in the Paris conference (COP21) in 2015, but was put on the backburner, and not taken up until COP27 in Egypt that a decision was taken to create a fund.
It took a year more to actually set up the fund, which was formally named Fund for Responding to Loss and Damage (FRLD) and hosted by the World Bank. In COP28 at Dubai last year, about $700 m was pledged by a bunch of countries, against an estimated requirement of $ 580 billion. One might expect negotiations to veer around getting more money into the FRLD.
COP29 will also discuss carbon markets, which constitute the ‘market mechanism’ of providing finance for climate action. Today carbon credit trading happens voluntarily. For example, Google or Apple may buy carbon credits from an agro-forestry project in India, to meet its own emission reduction targets. But how governments could use the carbon markets to meet their countries’ international commitments depends upon an agreed framework of rules and procedures. At the heart of this is ‘Paris Agreement Crediting Mechanism’. The UNFCCC describes the mechanism like this: “Through this mechanism a company in one country can reduce emissions in that country and have those reductions credited, so that it can sell them to another company in another country. That second company may use them for complying with its own emission reduction obligations or to help it meet net-zero targets”.
The Paris Agreement Credit Mechanism is something that will be negotiated upon at COP29. It involves issues like creating registries, authorization, credit transfers.
One of the key issues at COP 29 is going to be Biennial Transparency Reports (BTRs), a provision established at the Paris Agreement. The first BTR falls due by December 31, 2024. The Enhanced Transparency Framework (ETF) stipulates submission every two years; countries are to make all the transparency reports as part of a current commitment to the Nationally Determined Contributions (NDCs). These consist of commitments to a country to act on climate change. They will also report on policies and measures, the effects of climate change and adaptation, as well as the level of support received and required for finance, technology, and capacity-building purposes.
Another important theme is the NDCs themselves. Countries are now invited to enhance and submit more ambitious climate pledges every five years under the Paris Agreement. February 2025 is the due date for submissions. This is critical since the totality of current NDCs will not be enough to contain global warming at 1.5°C, and, worst, they might open up the worst-case scenario of 2.6 to 2.8°C by century's end. This gap highlights the need for more decisive climate action.
