COP29: What were the key outcomes?

As we noted in our initial COP29 article, the central issue on the table at the 'Finance COP' was agreeing the NCQG. The NCQG was first introduced under the Paris Agreement and will replace the $100 billion annual target for climate finance that was agreed back in 2009 at the Copenhagen Climate Summit. The NCQG was unveiled last Sunday, after previous versions of the text had been rejected.

While the $300 billion pledge represents a more acceptable number than the $250 billion that was initially rejected, a guaranteed floor of $500 billion (which was floated by some) remained well out of reach. It is safe to say that the announcement did not go down well with many, with Chandni Raina, a negotiator for India, describing the deal as a "travesty of justice".

With that said, the Independent High-Level Expert Group on Climate Finance said on Friday, ahead of the final text being agreed on the Sunday with a revised commitment, that while the earlier figure of $250 billion per year by 2035 was "too low and not consistent with delivery of the Paris Agreement" a target of "at least $300 billion per year by 2030, and $390 billion per year by 2035" would be feasible – suggesting that the final NCQG figure that was agreed was in line with at least some expectations.

From a private capital perspective – there is clearly a financing gap which will needs to be filled by investors, and it should be noted that the NCQG clearly states that finance for climate action should ultimately come from "a wide variety of sources, public and private, bilateral and multilateral, including alternative sources". This suggests that there will be new investment opportunities to further the green transition – which will be welcome if, as expected, direct loans and grants from developed countries to developing countries fall short of the $1.3 trillion aim by 2035.

Simon Stiell, the Executive Secretary of the United Nations Framework Convention on Climate Change ("UNFCCC"), recognised that, while "it has been a difficult journey" at least a deal was delivered. This should not be forgotten; particularly within the context of early wobbles at COP29, following the results of the US election, and a general backdrop of global economic uncertainty, in addition to reports coming out of COP29 that discussions had been particularly fractious. However, it was also emphasised by Simon Stiell that the world is still "a long way off course" and that "governments still need to pick up the pace".

Much of the international response to climate change in the coming few years will end up being determined by new Nationally Determined Contributions ("NDCs") that all participants to the Paris Agreement must provide ahead of COP30. To date, only a few countries have announced their new targets. There was, however, one notable area at COP29 where clear progress was made: carbon markets.

One positive announcement coming out of the first week of COP29 was the progress that was made in relation to carbon trading. Specifically, the adoption of international standards in relation to the global carbon market, and for generally improving the integrity of carbon credit programmes – in accordance with Article 6.4 of the Paris Agreement.  

As outlined in our last COP29 briefing, there were concerns that the initial deal that had been reached had been rushed – however further discussions were held over the course of the second week. These allayed some initial concerns and resulted in a text that was welcomed by more stakeholders. This included wider agreements in relation to other key components of Article 6 of the Paris Agreement including Article 6.2 (cooperative approaches) and Article 6.8 (work programme activities). It is hoped that the progress that was made in Azerbaijan may mean that trading using the UN backed system could begin as early as 2025.

There have been a series of criticisms of carbon markets in recent years (including some high-profile scandals). However, these failures have often been attributed to the lack of scientific certainty as to the merits of the relevant carbon offsetting project (e.g. how much does the relevant land actually play a part in reducing emissions, have the relevant forests already been counted for another scheme etc.).

By providing certainty through internationally agreed mechanisms and standards, Article 6 of the Paris Agreement really does represent a potential material change in the approach that has previously been taken – and may well provide the level of confidence necessary for both countries and private capital to invest.

It is also welcome news, given that at previous COPs, negotiations in relation to Article 6 have failed to result in meaningful engagement or agreement. As outlined by Axel Michaelowa in the Guardian, a carbon markets expert at the University of Zurich, "the Paris carbon market is now ready to roll out in 2025. It can accelerate mitigation and thus help close the gaping emissions gap that separates us from achieving the 1.5C target".

Another key area of focus at COP29 was the growing role of the courts in climate litigation.  Judges and legal experts from across the globe exchanged perspectives on solutions to climate change related disputes and shared knowledge on innovative legal mechanisms and judicial perspectives on climate litigation. These discussions were held over the course of three separate panels, followed by a roundtable.

Several other significant cases were considered, including the recent Hague Court of Appeal decision in Shell v Milieudefensie, which overturned the ruling that required Shell to cut emissions to 45% by 2030 relative to 2019 levels. It was pointed out that the Court of Appeal's judgment still recognised that companies like Shell owe a duty of care to curb emissions, even if this obligation is not expressly laid out in the law of the country where the company operates. Crucially, the duty to prevent dangerous climate change applies not only to states, but to corporate actors as well, and COP29 discussions suggest that the courts will play an increasing role in defining this duty. 

A further notable outcome from COP29 has been the apparent renewed desire of the UK to take up a leadership role in relation to the green transition. In an article following the completion of COP29 Mukhtar Babayev, the president of the COP29, stressed that it was evident the UK was taking a greater role in relation to climate finance than many of its contemporaries – specifically saying that "the new British government has reassumed the country’s role in global climate leadership, and that was clearly in evidence at the summit itself, with new UK targets on decarbonisation and net zero".

We have discussed on a number of occasions recently the UK's desire to attract further investment – with renewable energy and green jobs identified as a key strength for the UK. This was reflected by the UK's announcement of its new NDC at COP29, pledging to reduce carbon emissions by 81% by 2035 compared to 1990 levels (up from 68% by 2030). The UK's Energy Secretary, Ed Miliband, said after COP29 had completed that an "alliance of high ambition is the world’s centre ground of climate politics and is the best hope for the future".

The UK also showed a willingness to engage in additional negotiations. This included an agreement with the US to "speed up the deployment of cutting-edge nuclear technology to help decarbonise industry and boost energy security". The agreement, which was entered into on the 18 November (and will come into force on 1 March 2025), is aimed at pooling additional funding together for nuclear development and research – supporting further information sharing to enable advance nuclear technologies to be available by 2030 (including for industrial uses).

On the day that COP29 kicked-off, Great British Nuclear, which was set up by the government to support the UK’s nuclear industry by providing better opportunities to build and invest, announced that negotiations had begun for the UK’s small modular nuclear reactor ("SMR") programme with the final four shortlisted bidders – and the agreement with the US at COP29 was therefore well timed. The hope is that technologies such as SMRs can assist in decarbonising "heavy industry such as aviation fuel, hydrogen or advanced steel production, by providing low-carbon heat and power" – and particular interest in SMR technology has been shown by technology companies who are looking at novel solutions for powering data centres.

COP30 will convene next year in Belém, Brazil in November. COP30 will arrive at a time when all parties to the Paris Agreement will be required to submit updated NDCs which will reveal how committed major international powers remain to achieving the goals of the Paris Agreement (and whether, in the case of the US, an updated NDC will be provided at all).

The hope for many is that COP30, which will be held in a city known as the gateway to the Amazon River (representing an ecosystem which is particularly vulnerable to the impacts of human activity), will result in greater international consensus around the significant efforts that still need to be made to tackle climate change. However, as highlighted in Baku, climate negotiations are difficult to manage, and it will be interesting to see how Brazil approaches this difficult balancing act.