What happened at COP29?
Matti Kahra, Stefan Henningsson, Tiina Salonen
New climate finance goal
An agreement on channelling USD 300bn a year to developing countries by 2035 to support their efforts to fight climate change was one of the most important results of COP29. The final text also mentioned the need to scale up financing to a total of USD 1.3trn. This is also the amount needed according to the Independent High-Level Expert Group on Climate Finance launched by the COP26 and COP27 presidencies.
The new goal triples finance to developing countries from the previous goal of USD 100bn annually. It’s a step forward, but clearly insufficient. This is also reflected in the concluding text which is asking all actors – from public to private sources – to work together to scale up finance to developing countries to USD 1.3trn per year by 2035. In its current format there is no clarity about who pays what, and the text is without any distinction between public and private financing or between grants and loans.
COP29 also failed to include China and other fast developing states as formal contributors to the new climate finance goal. They can do it additionally on a voluntary basis. GFANZ – a coalition of leading financial institutions committed to accelerating the net-zero transition – said that the private sector can support with USD 1trn as long as countries live up to commitments and can make their NDCs, their national climate action plans, “financeable”. Nordea is part of the group developing recommendations and we are actively working with stakeholders for the next round of NDCs due in 2025.
It’s a step forward, but clearly insufficient.
Carbon trading rules agreed
After a decade of negotiations and four years of stalled negotiations, COP29 has delivered on the establishment of a carbon trading market. This includes country-to-country trading as well as a new international carbon market. It’s significant both in terms of cost-efficiency and ambition. A study from the International Emission Trading Association estimates that this trade could yield USD 250bn in savings in meeting climate targets and nearly double ambitions across countries. For the first time since 2013 and the Kyoto protocol, we may see the emergence of a viable, UN-backed mechanism to broaden and link carbon markets across the world.
No new wording on transition away from fossil fuels
The commitment to transition away from fossil fuels that was part of the COP28 climate deal was not further refined at this year’s summit The countries failed to reach an agreement on how the outcomes of last year’s “global stocktake” should be taken forward. After long discussions the decision was to postpone the issue to COP30 next year in Brazil.
High pressure on 2025 pledges and COP30 in Brazil
Under the Paris Agreement, countries need to submit new climate targets every five years (the NDCs mentioned above) and these are due in February 2025. The United Arab Emirates, Brazil and the UK have already released new targets and Mexico has announced a new net-zero target by 2050. There will be big pressure on COP30 in Brazil to deliver more than this year’s summit, and the NDCs will be monitored closely as they should help close both the ambition gap – countries need higher targets – and the implementation gap – countries need to do a lot more.