COP29: Key Outcomes Signal Need to Deliver Greater Climate Action

While we face geopolitical headwinds, the economics of climate action and adaptation are on our side. The costs of clean energy technologies needed in the developing world have been declining faster than expected. So, it's not a question of 'if' but 'how fast' the world moves in this direction.

The 29^th meeting of the Conference of the Parties (COP29) to the UN Climate Convention in Baku, Azerbaijan was a contentious meeting that left a bitter taste in the mouths of the most vulnerable countries and many others. It felt like a massive wave crashing over the bow of the rusty climate multilateral forum, as it faced relentless geopolitical headwinds. In the end, we avoided a shipwreck. Rebuilding trust will require all countries to rally more forcibly around the "spirit of the Paris Agreement," recapturing the common imperatives that brought the world together around a shared climate goal.

"While we would have liked to have seen wealthy, polluting countries commit to a higher amount, this is a floor not a ceiling. The pressure to increase funding will only grow over time, as the economic and security rationale for doing more is clear, and we will work to build the political support necessary to deliver greater investments. This is not only the right thing to do morally-it is critical for all of our survival and prosperity." - Manish Bapna, President & CEO, NRDC

Despite these dynamics, COP29 delivered three key things: (1) a new climate finance target; (2) beginning the sprint to new climate targets for 2035; (3) additional action to deliver on past promises. Coming out of this difficult meeting, it will be critical that countries continue to rally international support for climate action.

New Climate Finance Goal

The world's governments meeting at COP29 in Baku have at last set a new collective quantified climate finance goal (NCQG) for the post-2025 period. In one of the most bitter negotiations in the UN climate convention's three-decade history, countries agreed that all actors in the global community would work to scale up climate finance to developing countries from all public and private sources to at least $1.3 trillion per year by 2035. In addition to this overarching goal, developed countries agreed to take the lead in mobilizing at least $300 billion per year by 2035. This smaller goal has a similar scope as the previous $100 billion per year goal for 2020 to 2025: public funds, private finance mobilized by the public sector, and alternative sources. But the new goal also allows developing countries to voluntarily count finance they provide towards the goal, and there was a voluntary agreement that all multilateral development bank (MDB) climate finance to developing countries can be counted, rather than just the portion attributable to developed countries. And, while there was no overarching goal for public finance provision, governments agreed to pursue efforts to at least triple the annual outflows from UNFCCC climate funds from 2022 levels by 2030 - from $1.74 billion in 2022 to at least $5.2 billion per year by 2030.

Ahead of COP29, we developed an assessment, with a number of groups, of potential pathways to scale-up international climate finance. Now that the NCQG goal is adopted there are several areas that will be essential to focus on to meet and exceed the agreed goals, and help to ensure that the finance is delivered in the right manner:

• Scaling climate finance on at least a "straight-line" trajectory from the $115.9 billion in 2022 to a minimum of $300 billion by 2035 by growing the bilateral, multilateral development bank, and private finance. A straight-line would imply increasing to $229 billion in 2030. $300 billion by 2035 is eminently achievable, with little to no additional budgetary effort required from developed countries, let alone other contributors, to meet the goal.
• Going beyond the $300 billion to reach the $1.3 trillion that is needed. The new goal mandates the COP29 and COP30 Presidencies (Azerbaijan and Brazil) to produce a roadmap next year on how to raise financing to $1.3 trillion. Our analysis finds that there are multiple pathways to increase international climate finance in the coming years. This includes further reforming international financial institutions to be bigger and better, developing innovative sources of finance, efforts to change domestic perspectives towards international funding in contributor countries, and better approaches to mobilizing private finance.
• Improving access for the Least Developed Countries (LDCs) and the Small Island Developing States (SIDS). Countries failed to agree to the push from the LDCs and SIDS for strong provisions to ensure they could more easily access a fair share of climate finance. This was important for them since so only 2.8% of current international climate finance reaches SIDS and 18% goes to LDCs. The COP29 agreement included some more qualitative provisions on this issue, and it will be vital to build on these in future years.
• Targeting an increase in adaptation finance. The COP29 agreement on the NCQG lacked a specific goal on finance for adaptation. With the current goal to double adaptation financing only running to 2025 there will certainly be questions at COP30 about whether a new adaptation finance goal is needed.
• Improving the quality of climate finance. Including ensuring more grants and concessional funding is available for areas where the private sector can't or won't invest, such as adaptation, loss and damage, and just transition.

With the COP29 finance outcome as the floor, it is essential that rich countries don't declare job done and move on. The moral, economic, and security rationale for delivering more international climate funding is clear.

Gold Standard National Climate Targets for 2035

The Paris Agreement sets a deadline for all countries to set new national climate targets - also known as nationally determined contributions (NDCs) -every five years, and in early 2025 countries will set their 2035 NDCs. The ambition of these NDCs will be critical in determining if the world has a chance of keeping warming below 1.5°C and achieving the global net zero by 2050 goals set in the Paris Agreement.

Some countries have begun to announce the targets in their NDCs, setting 2035 targets of:

• United Kingdom: 81% below 1990 levels
• Brazil: 59% to 67% by 2035 below relative to 2005 levels
• United Arab Emirates: 47% below 2019 levels

And a group of countries - the European Union, Mexico, Chile, United Kingdom, Canada, Bhutan, Madagascar, Panama, Suriname, Switzerland, Norway, and Georgia - announced that they would commit to 2035 targets that are at least on a straight-line to their net zero targets. As a part of this, Mexico announced that it would set a 2050 net zero target becoming the last of the major economies to set such a target. As the world seeks to create a race to the top in the level of ambition reflected in the next round of NDCs, NRDC published a set of country-by-country benchmarks for each of the G20 countries that can be used to assess whether the NDCs from these key countries are "good enough" to keep 1.5°C alive.

The next round of NDCs will need to evolve so it will be critical to have the major economies reach the greatest level of ambition, while also providing more details on the sectoral, fossil fuel production, finance, and adaptation actions that countries will deliver over the coming decade.

We can't afford weak signals in these NDCs as a slower pace of transition by 2035 would raise questions about the promise of countries to deliver on their commitments under the Paris Agreement.

Accountability for Commitments: Additional Action to Close the Ambition Gap this Decisive Decade

Within and outside the formal COP29 meetings, we've seen some important signs of progress as key stakeholders deliver additional actions to close the gap in needed ambition this decisive decade. These include:

• Better integrating the climate and nature agendas. At COP29, countries continued to advance discussions on coordinating between the U.N. climate, biodiversity, and desertification conventions. The special representative for climate change for Panama announced that, instead of submitting three separate plans around climate, biodiversity protection, and desertification, the country would submit one "Nature Pledge" to reflect the integrated nature of the actions to address these three crises. In addition, Parties finalized guidance for Article 6.8 of the Paris Agreement, which allows countries to support mitigation and adaptation action through non-market approaches. This guidance stressed that these non-market actions can link climate change to biodiversity conservation and provide benefits including the protection of ecosystem integrity, setting the stage for investments that integrate both climate and nature priorities.
• Mexico announcing it will set a 2050 net zero target and bring forward a 2035 target on a clear trajectory to that target. This 2050 net zero target implies a 2035 NDC of more than a 30% cut below 2019 levels on a straight-line trajectory.
• Indonesia moving up its coal phase-out by 15 years and indicating it will move up its net zero target to 2050. The new Indonesia President Subianto announced that the country will "phase out coal-fired and all fossil-fueled power plants within the next 15 years". He also signaled Indonesia's vision to reach net zero emissions by 2050 - as opposed to its current target of 2060. Moving up their fossil fuel phase-out and net zero targets should be reflected in an even stronger 2035 NDC than was previously floated. A straight-line to net zero in 2050 implies a target of more than 40% cut below 2019 levels, as opposed to the 30% cut implied by a 2060 net zero target.
• The "surprising" solar and wind growth. The global renewable energy economy continues to grow at a rapid pace. According to analysis from Ember (with a great chart), wind and solar installations are increasing at rates that no other source of electricity has ever witnessed. Pakistan solar growth surprised experts as around 17 gigawatts of solar generation capacity were imported into the country in just the first 9 months of 2024 - equivalent to a third of the country's total installed electricity fleet. A similar record year is occurring in Latin America, with Bloomberg New Energy Finance estimating that the annual wind and solar installation in the region will reach the highest level ever.
• China beginning to report its international climate finance. In his speech at COP29, China's Vice Premier Ding Xuexiang announced that since 2016 the country has "provided and mobilized more than RMB177 billion yuan [$24 billion] of project funds in support of other developing countries' climate response"-around $3 billion per year. Independent assessments has put the value at around $1.6-4.5 billion per year.
• The U.S. meeting Biden's pledge of over $11 billion in bilateral international climate finance. "These investments are strongly in America's own economic self-interest." The U.S. also (finally) began supporting restrictions on overseas oil and gas financing at export-credit agencies. If finalized such an agreement would stop the more than $41 billion in fossil fuel financing these institutions have provided since 2016, with the US Export-Import Bank providing more than $2.3 billion since May 2023.
• Growing commitment to energy storage and grids. The COP29 host launched a "Global Energy Storage and Grids Pledge" seeking to globally deploying 1,500 GW of energy storage in the power sector by 2030 - a more than six-fold increase from 2022 levels. The pledge also seeks to support renewable electricity by "adding or refurbishing 25 million kilometers of grids by 2030". The pledge was signed by 58 countries and over 40 organizations.

Rallying of Continued International Climate Action

This meeting came at a time of massive head winds, with the geopolitics between key countries at very complicated levels, a consequential election in the U.S. that will challenge continued climate action, and with shifting political moods in key European countries. How the meeting was facilitated by the COP29 hosts, the dissatisfaction with the outcome from most developing countries, especially the most vulnerable ones (like the small islands and least developed countries) and India, and the reality that the world continues to contribute more emissions than we can afford, leaves a bitter taste in the mouth of those trying to tackle the climate crisis. Despite these forces, countries were able to rally around continuing to deliver on the promise of the Paris Agreement.

This coming year, countries will need to deliver on several items including:

• delivering more finance through continued increases in bilateral finance, reforms of the MDBs, and outlining and implementing clear actions to ramp-up finance to the $1.3 Trillion through the "Baku to Belém Roadmap to 1.3T";
• increasing support for adaptation including through setting specific adaptation finance goals and finalizing the Global Goal on Adaptation;
• additional actions to close the current emissions gap, while putting stronger 2035 targets into their NDCs;
• the Brazilian focus on forests for the COP30 meeting in the city of Belém;
• the G20 agenda under the South African Presidency;
• safeguards for the carbon market under Article 6 of the Paris Agreement;
• designing the right kind of trade systems and responses for a climate-focused agenda; and
• ensuring that the UNFCCC meetings are organized and implemented to deliver the kind of international climate action the world needs.

Next year will be a continued test of the resilience of the international response to climate change. The COP29 outcomes and the continued strengthened actions across the various segments of the global economy provides some glimmer of hope that the Paris Agreement - who will be a 10-year old next year - can continue to mature before reaching those awkward teen-years. No child grows up without having to overcome difficulties, but it is how they get through them that determines the kind of adult they will become.

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