COP29 Leaves Finance on the Floor

Key Takeaways

• COP29 has stumbled in delivering meaningful progress on the New Collective Quantified Goal (NCQG) for climate finance. The current figure of $250 billion remains far short of the $1.3 trillion annual target required to address climate action needs effectively.
• The re-election of former U.S. President Donald Trump has raised concerns about U.S. climate diplomacy, including the potential rollback of federal climate policies and reduced contributions to global climate finance. These shifts could trigger a domino effect, impacting other nations’ climate strategies.
• The role of the private sector in driving climate action and finance has become increasingly critical, as businesses are expected to comply with emerging sustainability regulations, lead decarbonization efforts, and advocate for climate policies to influence government leadership.
• Looking ahead, Brazil’s leadership at COP30 is anticipated to address the shortcomings of COP29, leveraging its political capital and diplomatic expertise to set more concrete commitments and unify diverse global stakeholders, though challenges remain abundant.

Overview

As the foremost multilateral forum on climate change, the 29th annual Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) took place in Baku, Azerbaijan, from November 11–22. Dubbed the “Finance COP,” it brought together world leaders, business experts, and representatives from civil society to scale up climate financing while building upon the UAE Consensus established at COP28 and the Global Stocktake (GST). This year’s COP unfolded amidst growing global uncertainty: the re-election of former U.S. President Donald Trump, conflicts in Ukraine and the Middle East, and increased domestic challenges that led world leaders to de-prioritize the COP. Notable absences increased concerns about stalled negotiations and contributed to the uncertainty around a less predictable landscape for sustainable development.

Given the limited progress leading up to the event and the Conference being held once again in a state known for its fossil fuel production, the likelihood of achieving meaningful outcomes or declaring the Conference a “success” was low. The lack of clear signaling on the New Collective Quantified Goal (NCQG) on climate finance, the centerpiece of this COP, cast a cloud over several other areas of priority. Though negotiations were officially set to close today, negotiating blocs continue to clash. While agreements might persist, the overall takeaway is clear – that COP29 failed to deliver on critical climate needs, leaving the world to turn their focus to next year’s COP30 in Brazil.

Future U.S. Leadership 

U.S. President-elect Donald Trump’s election victory six days before COP29 cast a shadow over the Conference as stakeholders digested the potential impact on the future of UNFCCC negotiations. John Podesta, Senior Advisor to President Joe Biden on international climate policy, led the U.S. delegation’s attempt at positive messaging, promising continued U.S. engagement and touting the staying power and political durability of the Inflation Reduction Act (IRA). While there are speculations about whether the President-elect will repeal the IRA, the likelihood of a rebrand rather than a rollback is strong, given the prominent influx of jobs and investment into conservative districts.

Trump’s victory also impacted the negotiations themselves. The potential for increased disengagement from negotiations and a potential domino effect of nations following in the footsteps of the U.S.’s receding presence seemed to materialize. On the third day of negotiations, the Argentinian delegation was recalled from Baku by President Javier Milei, reportedly after a conversation with President-elect Trump. At the negotiating table, countries like China seized the opportunity to justify their lofty climate finance contributions as high-emitters brace for the incoming American administration’s decline in U.S. public finance contributions.

In a showing of the type of private sector leadership likely to become more common in lieu of federal government programs, ExxonMobil’s CEO Darren Woods publicly praised the merits of the Paris Agreement and encouraged the President-elect to “bring common sense back into government.” Woods’ comments are in response to Trump’s existing narrative of “drill, baby, drill,” coupled with a vow to withdraw from the Paris Agreement — again.

It is undeniable that American climate diplomacy will see drastic changes over the next four years, with spillover effects from other nations likely to proliferate. With rumors of the incoming administration seeking to withdraw from the UNFCCC entirely, advisors have publicly prompted the President-elect to take a more transactional approach, remaining a party to the UNFCCC while trading climate actions for non-climate-related concessions at future negotiations. While the policy, structural, and legal measures Trump will implement to reverse climate initiatives are inevitable, the administration’s rhetoric will play an equally significant and consequential role in climate diplomacy.

Core Negotiations  

While the media hailed the early consensus on standards for a global carbon market under Article 6.4, a few updated Nationally Determined Contributions (NDCs), and emission reduction targets announced by some countries, the technical work faltered.

The New Collective Quantified Goal (NCQG) on climate finance has been the feature of the negotiations, as developed countries aimed to mobilize financial support for developing countries’ climate action – a number that must reflect needs-based figures to be effectively impactful, which currently stands at $1.3 trillion per year. Though the quantum is the focal point (i.e., how much money should flow), additional factors of contributors versus recipients, coverage and scope, and accountability remain largely undecided, as there are disagreements on virtually every element. The only soft confirmation was the timeframe of achievement by 2035, and the most recent figure is a fraction of the need, at $250 billion.

The lack of clear signaling on the NCQG outcomes brought on skepticism of several other areas of priority, such as the Mitigation Work Programme, the Just Transition Work Programme, and the Global Goal on Adaptation. Though pillars of the Presidency’s Action Agenda saw good dialogues and some progress, like the FAO and COP29 Presidency’s Baku Harmoniya Climate Initiative for Farmers, these non-negotiated initiatives are supplementary to the core of the COP process.

Article 6, a core and necessary element of the architecture of the Paris Agreement, which has withstood almost a decade of deadlocked deliberations, is yet to be fully operationalized in the way that observers and nations seek. Ongoing uncertainty on authorizations, sequencing, the registry, and more of the carbon market system is a setback for those looking to engage in market-based approaches with a high bar of environmental integrity, safeguards, and human rights as part of their emissions reduction goals. Moreover, it significantly delays progress on NDCs.

For Loss and Damage, initial pledges to the fund at COP28 were welcome, though insignificant, to enable adequate responses to expected or past climate-related disasters. The COP29 Presidency called on parties to increase their coordination and contributions; however, Sweden was the only nation that responded with a pledge outside of Australia, coupled with its bid to host COP31. Sights are instead focused on operationalizing the Santiago Network so that technical assistance can be accessed as quickly as possible by Small Island Developing States (SIDS) and Least Developed Countries (LDCs).

Looking Ahead

As with COPs past, the hope is that the momentum of progress on climate doesn’t waver during the interim year until the next convening. Brazil, the incoming host country and Presidency for COP30, also hosted this week’s G20 Summit and has spent the past year as president of the G20, focused on driving discussions on sustainable development and climate. However, even G20 leaders’ declaration of the need for rapidly scaling up climate finance “from billions to trillions” did not address the immediate need for COP29 to make headway in the climate finance negotiations.

As we look to COP30, countries are expected to submit updated NDCs by February 2025 to establish the groundwork for global climate action until 2030. Discussions on notable climate finance priorities are expected to continue at COP30, with the Brazilian delegation at COP29 requesting solidified definitions of climate finance activity, demonstrating the incoming Presidency’s priority to reach attainable and distinct climate finance commitments.

However, COP30 faces even more pressure and heightened expectations following the stagnation at COP29 – a position the incoming Presidency had hoped not to inherit. Still, Brazil is equipped with more political capital to deliver successful outcomes and a diplomatic corps that is highly respected and experienced at international negotiations and uniquely capable of bringing the G7, BRICS, and Global South to the table. President Lula and his team will be focused on delivering a successful COP30 outcome, but the challenges are great, and collective efforts from the Troika in the lead-up are vital.

Opportunities for Business 

As climate finance negotiations continually prove unfruitful and the climate crisis only worsens, the onus on the private sector to mobilize capital and lead ambition is perpetually reinforced. COPs are a microcosm of the efficiency of the UN system, and businesses’ influence and resources have the capacity to re-track the climate transition, side-step the posturing, and push towards common ground.

In addition to individual efforts to decarbonize businesses, the private sector recognizes the invaluable role they play in climate policy advocacy in their markets of operation and throughout their value chains. Notably, small and medium enterprises (SMEs), which make up 90% of the world’s businesses, can benefit from more intentional engagement.

Transition planning will also become a major focus for the private sector, as companies face increasing pressure to disclose sustainability risks and opportunities with mandated regulation from the EU’s Corporate Sustainability Reporting Directive (CSRD) and notable global uptake of the International Sustainability Standards Board (ISSB) Standards on sustainability and climate. Ultimately, it is essential that companies embrace collaboration and share missteps, challenges, and best practices with peers to build rapport and capacity as well as establish the necessary tools and skills without duplicating efforts.

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For additional information or to arrange a follow-up, please contact Carleen.Wenner@dgagroup.com.