What's at stake at COP29?
A close look at some of the key issues set to dominate the agenda in Baku.
The next edition of the United Nations’ annual climate change summit, COP29, is set to begin in Baku, Azerbaijan, on Monday. The COP process has often been described as a deeply flawed process which has failed, time and again, to deliver on the kind of climate action the world needs.
But, as the only truly global multilateral system seeking to address the challenges of climate change, it is our best shot of actually doing anything about the monumental problem.
Yours truly has reported from two COPs – from Madrid in 2019 and Glasgow in 2021. I often found myself confused and lost when it came to figuring out what was actually going on because the process can be opaque, technical, remarkably complicated, long-drawn-out and with little to show by way of achievement at the end of it.
“It takes you at least 10 COPs to actually begin to figure things out,” a friend and a veteran COP watcher likes to say.
But, despite all this, at every COP, year after year, there is a great deal of hope and expectation that finally something good will come of out of it this time.
So, what good can happen in Baku?
The star agenda item is a new climate finance goal, which is being called the new collective quantified goal, or NCQG.
The current global climate finance goal, set over a decade ago, aims for developed countries to mobilize $100 billion annually for climate action in developing nations. That figure was supposed to be achieved in 2020, but only fully materialised in 2022.
Now, it is time to arrive at a new figure as per a pre-agreed schedule. The Paris Agreement, signed in 2015, and which is the heart and soul of global climate action, mandates the setting of a new finance goal before 2025.
Since 2025 is less than two months away, COP29 in Baku is the last opportunity to agree to a deal. It will not be easy, though.
Two fundamental issues are expected to dominate the NCQG deliberations. First, what the new climate finance goal should be. Second, who should pay for it.
Arriving at a new finance goal
Studies have said that climate finance needs to scale up to $2.4 trillion a year.
Developing countries have put forth their own suggestions and estimates. India, Saudi Arabia and the African group of countries have proposed between $1.1 and $1.3 trillion a year, while Pakistan has proposed $2 trillion a year.
The needs determination report of the UN standing committee on finance, which provides inputs to the NCQG process, has estimated that $5-6.9 trillion of climate finance will be needed by 2030. The estimate is based on self assessments by developing countries. However, the committee has said that the estimate may not be sufficient.
There are other higher estimates too. The UN’s climate champions network has estimated $5 trillion a year. McKinsey, the great expert on all matters, estimated $9 trillion a year, in a very pessimistic report. Its estimate has been since debunked for using too high-cost estimates, ignoring existing investments and not accounting for subsidies for the fossil fuel sector, where, ironically, it has considerable expertise.
As with any negotiation, it’s perhaps prudent to be realistic. Today, we live in a world where developed countries are funding at least two major wars, are grappling with high inflation, high-interest rates and flagging economies. Many developed countries have slashed their aid budgets in recent years (While pushing up their defence budgets).
So, an unrealistic target, such as the one proposed by McKinsey, is unlikely to lead us very far. Maybe that was the idea of the report, as some have suggested.
What is the developed world’s bargaining position, then?
The US, which from next year will have one of the world’s most famous climate change deniers as President, has mentioned a “floor of $100 billion a year”, which is the same as what already exists. Effectively, that is the developed world’s starting bargaining position, which will be likely be pitted against the figure of between $1 and $1.5 trillion a year proposed by developing countries.
Other than the US, developed countries have chosen to stay away from suggesting a specific numerical target for the NCQG.
It is expected that their negotiation tactics on the money amount will tie in closely with the second key question that has to be addressed.
Who should pay?
This is where things get more complicated – and where the issue of global inequality comes sharply into focus. The principle of "common but differentiated responsibilities and respective capabilities" (CBDR-RC) has long guided climate negotiations.
It recognizes that while all countries share responsibility for addressing climate change, their level of responsibility and capability varies based on historical emissions and current economic capacities.
In practice, this has meant developed countries, responsible for a large proportion of historical emissions, should finance climate action in developing countries.
The point of tussle here is that the list of developed countries was drawn up in 1992 and has pretty much remained unchanged since then.
Developed countries argue that the world has changed since then. Many countries classified as developing economies have grown their economies and their emissions substantially since then.
In fact, 40% of all green house gas emissions have been produced in the last thirty years, and developing countries have produced about two thirds of them, according to an estimate.
Qatar, which for the purposes of the COP process is a developing country, has among the highest per-capita incomes in the world. Saudi Arabia’s per-capita emissions are higher than those of the US.
South Korea, which has grown dramatically in the last few decades, now has a higher per-capita income than Spain and Portugal.
China’s share of cumulative CO2 emissions since 1750 was 6% in 1992. It is now 15%, second only behind the US.
So, developed countries want the contributor base of climate finance to be expanded to reflect how things have changed.
The European Union, for example, in a recent submission said, “The collective goal can only be reached if parties with high greenhouse gas emissions and economic capabilities join the effort.”
The US has said that the very basis for renegotiation of a new finance goal in 2025, was that the list of contributors will be expanded.
Developing countries are firmly opposed to any changes. They argue that modifying the contributor base goes beyond the legal mandate of the NCQG.
They have also argued that developing countries are already contributing to climate finance through south-south cooperation pathways (collaboration among developing countries) by way of voluntary contributions.
But, they often go unreported because developing countries fear that if they do report them, the contributions might turn into obligations, rather than remaining voluntary.
The Loss and Damage Dilemma
Another key focus in Baku will be integrating loss and damage finance into the broader climate finance network. Loss and damage refers to climate impacts beyond what countries can adapt.
For example, the floods in Pakistan two years ago which caused damage to about half the country with economic losses estimated to be around 10% of GDP.
The loss and damage fund was formalised at COP28 in Dubai. But, the allocation remains inadequate - approximately $700 million against an estimated need of $290-580 billion by 2030. COP29 will also see attempts to seek further pledges to the fund.
Developing countries are also pushing for loss and damage financing to be included within the NCQG framework as a third pillar, in addition to mitigation and adaptation. But, developed countries are opposed to that idea.
Carbon Markets
Another thorny issue at COP29 will be the role of carbon markets, through which carbon credits can be traded, in climate finance, or Article 6 of the Paris Agreement. It was supposed to have been resolved by 2019 during COP25 Madrid, when the rest of the Paris rulebook was finalised, but remained unresolved.
It was taken up again at COP26, then COP27, COP28 and is set to be part of the agenda once again at COP29.
The problem is that while some see carbon trading as a potential source of climate finance, critics argue that it allows polluters to continue business as usual without making real emissions reductions
Widespread evidence of fraud, overstating and greenwashing has emerged over the last two decades, while no significant headway has been made in the way of ensuring a transparent and credible mechanism by which carbon credits can be created and traded.
Very well written and analysed.