From November 11-22, 2024, COP29 took place in Baku, concluding at 5:31 AM on Sunday, November 24, after running 35 hours past its scheduled end time. The summit saw last-minute agreement on the New Climate Finance Goal (NCQG) and a consensus reached on Article 6 concerning carbon markets. However, the issue of fossil fuel phaseout was deferred to COP30 in Brazil next year. In addition, discussions at COP29 highlighted critical topics such as NDC 3.0, multi-jurisdictional climate finance, and the role of water in climate action, among others.
1. New Climate Finance Goal (NCQG)
Since countries have differing levels of historical emissions and capacities, some, particularly the least developed countries, are more vulnerable and face significant climate-related challenges. Developed nations have agreed to help channel “at least” $300bn a year into developing countries by 2035 to support their efforts to deal with climate change, replacing an earlier goal of $100bn per year. Down from $1.3tn a year as developing countries intended, with Indian and Nigerian representatives opposing the deal. Ultimately, negotiators agreed on a looser call (“all actors” to scale up funds from “all public and private sources”) to raise $1.3tn yearly from various sources by 2035.
However, a projection of US$6.5 trillion is needed on average per year by 2030 to meet climate targets in advanced economies, including China based on LSE’s latest findings.
During COP29, the Multi-Jurisdiction Common Ground Taxonomy (M-CGT) also sees its latest development following Singapore’s announcement to join the previously established EU-China CGT. A comparison of the sustainable finance taxonomies of China, the EU and Singapore has been released to enhance the interoperability of taxonomies across China, the EU and Singapore. While the M-CGT is not legally binding, green bonds and funds that align with the M-CGT criteria can be considered by cross-border investors whose markets reference the taxonomies which are mapped to M-CGT, subject to applicable laws and regulations of each jurisdiction.
2. Article 6 on Carbon Markets
The rules governing country-to-country trading under Article 6.2, as well as a new international carbon market under Article 6.4, are now more or less complete. Countries still need to finalise implementation details, especially on tracking and verifying trades. For businesses, this means preparing for stricter accountability and exploring both market and non-market pathways to meet climate commitments with carbon markets.
Article 6.2: Finalised rules for cross-border carbon trading between countries, including how approvals and revocations of carbon credit trades will work.
Article 6.4: Set global standards for carbon removal projects like reforestation or carbon capture, ensuring high credibility, and launch a registry to track and authorise these projects.
Article 6.8: Advanced non-trading solutions like climate finance, technology transfer, and initiatives linking climate goals with biodiversity and adaptation efforts.
Implications for businesses and investors: Clearer rules reduce risks in international carbon trading, making it easier to invest in or buy credible carbon credits for offsetting emissions. The focus on non-market solutions provides new opportunities for partnerships in sustainable technologies or biodiversity-linked projects.
3. Updated Nationally Determined Contributions (NDC 3.0)
Nations are required to submit their updated NDCs (climate action plans) ahead of the February 2025 deadline. Stronger targets with greater details in near- and medium-term decarbonisation strategies and more ambitious in aligning or advancing the previous high-level longer-term NDCs (e.g., China’s “30·60” dual goals) are expected from these updates. Enhanced NDCs will likely integrate stronger adaptation strategies, pushing sectors like construction, agriculture, and finance to address climate risks in value chains.
Currently, Switzerland, Brazil, the UK and the United Arab Emirates (UAE) have announced their updated NDCs to include economy-wide 2035 GHG targets and certain strengthened mitigation and adaptation targets for 2030, with additional information for enhancing transparency. (UNFCCC)
Businesses and investors will need to navigate evolving compliance landscapes and seize incentives like subsidies or tax breaks for green initiatives, with a stronger focus on ensuring transparency and reporting.
4. Water for Climate Action
At COP29, nearly 50 countries and prominent non-state actors endorsed the Baku Declaration on Water for Climate Action, a commitment to integrate water-focused mitigation and adaptation measures into national climate policies such as NDCs and NAPs (National Adaptation Plans). This initiative emphasises collaboration across nations and COPs, promoting data sharing and scientific advancements to address climate impacts on water resources.
The launch of the Baku Dialogue on Water for Climate Action establishes a platform to ensure continuity in addressing water-related challenges in the global climate agenda. For businesses and investors, these developments signal opportunities in water resilience projects, sustainable water technologies, and cross-border water management initiatives, alongside increasing obligations to address water risks in climate strategies and ESG reporting.
Prepare with our previous research in water management: “Water Footprint” as Key Performance Indicator - A Business Guide, and “Blue Economy” & “Water Footprint” as KPI for Asset Managers, for actionable insights to leverage water as a critical KPI in business and investment strategies.
References:
· UNFCCC. 2024. NDC Registry: https://unfccc.int/NDCREG.
· UNFCCC. 2024. Paris Agreement Implementation and Compliance Committee Gears up to help Countries meet Key Deadlines: https://unfccc.int/news/paris-agreement-implementation-and-compliance-committee-gears-up-to-help-countries-meet-key
· LSE. 2024. Raising ambition and accelerating delivery of climate finance: https://www.lse.ac.uk/granthaminstitute/publication/raising-ambition-and-accelerating-delivery-of-climate-finance/
· IPSF. 2024. International Platform on Sustainable Finance: https://finance.ec.europa.eu/sustainable-finance/international-platform-sustainable-finance_en
· GC Insights. 2024. “Water Footprint” as Key Performance Indicator - A Business Guide, and “Blue Economy” & “Water Footprint” as KPI for Asset Managers: https://www.gc-insights.com/report/“water-footprint”-as-key-performance-indicator---a-business-guide &
· https://www.gc-insights.com/report/“blue-economy”-%26-“water-footprint”-as-kpi-for-asset-managers
· UNFCCC. 2024. Nearly 50 Countries Sign Baku Declaration on Water for Climate Action as COP29 Concludes Thematic Day Calendar: https://cop29.az/en/media-hub/news/nearly-50-countries-sign-baku-declaration-on-water-for-climate-action-as-cop29-concludes-thematic-day-calendar
· UNFCCC. 2024. COP29 achieves full operationalisation of Article 6 of Paris Agreement - Unlocks International Carbon Markets: https://cop29.az/en/media-hub/news/cop29-achieves-full-operationalisation-of-article-6-of-paris-agreement-unlocks-international-carbon-markets