COP29 debrief – Tensions and temperatures rise
Following a tense two weeks in Azerbaijan, negotiations at COP29 have reached their conclusion. In this blog post, we’ll be discussing what was achieved, what we think is missing, and what this actually means for businesses.
Over the last two weeks, world leaders gathered in Azerbaijan’s capital Baku to work on global solutions to address the climate crisis. This year’s conference of the parties (COP) was focused on climate finance, with negotiations centred around a deal to deliver up to trillions of dollars in financing for climate projects around the world.
COP29 was overshadowed by several global factors. Despite the focus on finance, significant world leaders from some of the wealthiest and highest emitting countries were notably absent; US President Joe Biden, European Commission president Ursula von der Leyen, Indian Prime Minister Narendra Modi and China’s President Xi Jinping. Additionally, the recent US presidential election clouded conversations as the States’ participation in the Paris Agreement has once more been called into question.
Amidst global tensions between the host nation and France, and Argentina withdrawing their negotiators just a few days into the conference, the Albanian prime minister questioned the point of the summit if the biggest polluters were allowed to “continue as usual”. Put all of this against the backdrop of Climate Action Tracker’s latest report which warns that current policies would lead to a disastrous 2.7C of warming, and it can be hard to see what was actually achieved this year. But despite the “theatrics”, progress was made on key negotiation points.
Key Outcomes from the Negotiations
Global Carbon Market
After years of stalling, an agreement has finally been reached to create a global carbon market. Wealthy countries will be able to buy carbon credits to help reach their emission reduction targets, potentially funneling billions into mitigation projects in developing countries. While more funding for climate initiatives is sorely needed, there are still concerns about the validity of some of these projects and debate about whether they distract from actual emissions reduction efforts.
New Collective Quantified Goal (NCQG)
The most important goal at COP29 was to achieve a new climate finance target to support countries on the front lines of the climate crisis. Negotiations stretched out to the very last minute and after a bitter fight almost 200 countries agreed to a target of $300bn a year, tripling the existing finance commitment.
While reaching an agreement is an achievement, considering the deal almost fell through entirely on Saturday (23rd November), even its supporters are aware that the final sum is still far away from the $1.3 trillion a year that vulnerable nations say they need to adapt to the worst impacts of the climate crisis.
Debate around whether countries like China, India and Saudi Arabia still qualify as developing nations, and therefore exempt from contributing to the fund, also caused anger and frustration from both sides. Further disagreement stemmed from the proposed source of the funding and how much will come from public money, loans and private finance. Countries hoping to receive funding are anxious to take support in the form of loans given the high level of debt they already face.
Key Outcomes from the Sidelines
While the central negotiations stumbled over the key issues, encouraging progress was made throughout the conference between industry leaders and national representatives.
$120bn pledged by global lenders for climate finance
The world’s top multilateral banks have pledged $120 billion towards climate finance for low- and middle-income countries by 2030. The target represents a more than 60% increase on what the group delivered last year; however, they warn that more ambition is needed from shareholders in both developed and developing countries if they are to be successful.
Renewable Energy Deals
At COP28, a commitment was made to triple global renewable energy capacity and double energy efficiency by 2030. This year, new renewable energy deals were announced to start making progress towards the first half of this goal.
Firstly, the European Bank for Reconstructions and Development collaborated with the Asian Development Bank and the Asian Infrastructure Investment Bank on an agreement to finance the construction of two Azerbaijani solar power plants. The project is expected to cost $670 million in total and marks a major step in expanding green infrastructure across the Caucasus region.
Secondly, host nation Azerbaijan announced it will build its first offshore wind farm. Together with Saudi Arabia’s ACWA and the UAE’s Masdar, Azerbaijan’s state-owned energy company Socar signed a memorandum of understanding for the development of a 3.5-gigawatt project in the Caspian Sea. The deal is part of a wider strategy to enhance energy security, create jobs and drive sustainable economic growth in Azerbaijan.
What was missing from COP29?
While the small progress that was made shouldn’t be overlooked, the outcome of the key negotiations was unsatisfactory for many nations. Alongside the lack of financial support for developing nations, the conference missed the mark on fossil fuels.
A significant marker of progress was achieved at COP28 and a commitment to ‘transition away from fossil fuels’ was enshrined in the final document for the first time in the conference’s history. This year, however, countries were in disagreement over whether to renew the historic pledge and incorporate it into this year’s final deal or to simply focus on finance. It’s not a good look, backsliding on commitments made just one year ago let alone such a momentous one as this. It is imperative that all countries are committed to fossil fuel phase out if we are to mitigate the worst impacts of the climate crisis.
While the final text did renew the commitment to transition away from fossil fuels, exactly how countries plan to do so has been delayed until next year. A separate text calls on nations to “contribute to the global efforts” toward the milestone yet avoided naming fossil fuels explicitly.
Does COP need to be reformed?
Although key climate action milestones have been achieved over the history of COP, including the 1997 Kyoto Protocol, the 2015 Paris Agreement and 2021’s Glasgow Climate Pact, an increasing number of people are calling the effectiveness of the conference into question.
Now in its 29th year and with global climate action stalling, several world leaders and experts argue that “the framework alone is not enough to solve the problems”. With global emissions increasing and biodiversity loss accelerating, they argue that “the current structure simply cannot deliver the change at exponential speed and scale” needed to save our planet. Building on an open letter first shared in 2023, a coalition of government officials, including the former UN secretary general and UNFCCC executive secretary, NGOs, university professors and CEOs are among the signatories urging for “ a fundamental overhaul of the COP.”
In their letter they call for stricter eligibility criteria to prevent countries who do not support fossil fuel phase out from hosting the conference, alongside recommendations to increase the speed of implementing climate solutions. They want to see countries take more accountability for their climate targets and give a platform to climate scientists through a permanent scientific advisory body. Given that this year’s document almost didn’t include last year’s pledge to transition away from fossil fuels, they have good reason to be concerned.
What does this mean for businesses?
Leveraging Influence
When governments step back, it’s important for businesses to leverage their influence and lobbying power to put pressure on world leaders to act. Although many green energy solutions are developing quickly, the business case is rarely competitive and requires strong government policies to lower the risk and level the playing field.
117 CEOs of some of the world’s largest companies, including Santander, Nestle and SONY, have signed an open letter calling on policy makers to improve the business case for climate action and spur investment. Their demands include developing ambitious NDCs, scaling up climate finance, removing transition barriers and supporting innovative technologies. We need to see more corporate leaders stepping up and asking governments to support green energy. In return, the government needs businesses who are willing to invest in the transition to a net zero economy.
Mitigation VS Adaptation
With Climate Action Tracker warning we are set to breach the 1.5 degree limit of warming, businesses are starting to look towards climate adaptation alongside mitigation. If we reach the predicted 2.7 degree temperature increase, corporate leaders will have to adapt their businesses to rising temperatures and more frequent destructive weather events including floods, forest fires, hurricanes, droughts and hailstorms. We expect to see a big focus on both strategy and risk management and supply chain operation.
In summary
While the outcomes of COP29 have been far from satisfactory, we cannot lose momentum in the fight against climate change. Now, more than ever, we need businesses to step up and use their influence to shape a better future. All businesses, no matter how big or small, have a part to play in driving the transition to a net zero economy.
