Headlines from the Finance COP: UNFCCC Climate Change Conference COP29, Baku

1. The New Climate Finance Goal

Overview

Known as the ‘Finance COP,’ COP29's primary agenda was negotiating a new annual target above the existing USD 100 billion floor. The result: a new collective quantified goal (NCQG).

Key outcomes

• Developed countries committed to raising “at least” USD 300 billion annually by 2035 for developing nations from public, private, bilateral, multilateral, and alternative sources.
• A request for “all actors to work together to enable the scaling up” of finance for developing nations to at least USD 1.3 trillion per year by 2035.

Negotiation Challenges (IISD Earth Negotiations Bulletin, Vol 12 No. 865)

• Structure: Debate over a “core” of public finance surrounded by an “investment layer.”
• Quantum: Disparity between the USD 200-300 billion figure suggested by developed nations and the USD 1.3 trillion sought by developing nations.
• Contributor Base: Contentious obligations for contributions from developed nations vs. voluntary contributions from South-South actors.

Reactions (IISD Earth Negotiations Bulletin, Vol 12 No. 865)

• Positive: The EU called this a new era of climate finance with increased funding and broader contributions.
• Negative: Some countries, such as India and Bolivia, rejected the decision outright.

Historical Context and Next Steps

• Originating from COP15 in 2009, the USD 100 billion goal by 2020 was extended through to 2025 by the Paris Agreement (see Copenhagen Accord, para 8; Paris Agreement, Art 9; Decisions 1/CP.21, para 53; 14/CMA.1, 5/CMA.4, 8/CMA.5, 9/CMA.3).

• Countries must update their Nationally Determined Contributions (NDCs) by February 2025, with some, like the UK and Brazil, already announcing their targets.

2. Operationalising International Carbon Markets

Article 6 Overview

Article 6 of the Paris Agreement enables a cooperative approach to achieving NDCs by enabling emissions mitigation in one country to count towards another country’s NDCs. This is known as the internationally transferred mitigation outcome (ITMO).

Two key aspects of Article 6 are:

• Article 6.2: Sustainable and transparent frameworks for voluntary collaboration; and
• Article 6.4: Establishment of an international carbon trading mechanism (Paris Agreement Crediting Mechanism).

COP29 Agreements

The Paris Agreement rulebook was advanced at previous COPs. Final aspects of the rules recently agreed at COP29, include:

(a) Article 6.2 – Authorisation of ITMOs

Key features of the ITMO authorisation rules include:

• Content Requirements: An authorisation must include a unique identifier from the centralised accounting and reporting platform, the names of the parties involved, the specific uses covered by the authorisation etc.
• Transparency Measures: The centralised accounting and reporting platform will host a public repository to disclose each party’s authorisation statements, including updates and changes.
• Format Standardisation: The administrator of the platform is required to develop and publish a voluntary, standardised, and user-friendly template for authorisations.
• Avoidance of Double Counting: Any changes to an authorisation must occur before the first transfer of an ITMO, unless the changes comply with cooperative agreements between the parties.

It was clarified that mitigation outcomes could only be "first transferred" after receiving authorisation from the first transferring party. These steps aim to ensure the integrity and transparency of ITMO transactions.

(b) Article 6.4 – Mechanism Operations

The Paris Agreement Crediting Mechanism has a Supervisory Body tasked with developing and overseeing the processes needed to operationalise the mechanism. 

At COP29, the Supervisory Body was tasked with several critical actions to expedite the establishment of the mechanism, including:

• Standards Development and Implementation:
  • Implementation of existing standards.
  • Developing further standards, tools and guidelines for baselines, additionality, and leakage monitoring etc.
  • Revising baseline and monitoring methodologies for the Clean Development Mechanism (CDM) under Article 12 of the Kyoto Protocol.
• Mechanism Registry Creation: Establishment of the Mechanism registry and its associated procedures to support the functioning of the market.
• Transition of CDM Projects: Ensuring that eligible CDM projects under the Kyoto Protocol can transition to the Article 6.4 mechanism (n.b. several CDM projects have already been approved by the host party for transition, see UNFCCC Transition of CDM activities to Article 6.4 mechanism).