Baku’s test: Can CoP 29 deliver on climate promises?

As the year-end approaches, governments and representatives of industry, businesses and civil society are gearing up for the annual United Nations climate conference, commonly known as the Conference of Parties (CoP) of the United Nations Framework Convention on Climate Change (UNFCCC). 

This year, Azerbaijan, an oil-producing country, situated on the borders of Europe and Asia, will host the 29th iteration of the climate conference. The proceedings and outcomes of previous conferences have been under global observation as they have implications for how governments and businesses manage energy and environment-related policies. However, questions were raised early this time about the ability of the CoP 29 to deliver significant results.

Doubts about the Baku CoP emanate primarily from the uncertainties caused by the two wars raging in the neighbourhood. Rising energy prices, issues of energy security and unpredictable trade scenarios have upset the energy transition plans of several countries. The decision of some important corporate leaders and heads of government to pass on the  Baku meet is either because of political affiliations or other geopolitical factors, causing further uncertainty.

It is not as though the agenda of CoP 29 is any less important than that of the previous summits. The description by the Azerbaijani Presidency of its priorities — of ‘enhancing ambition’ and ‘enabling actions’ — is cryptic and anodyne. It conceals some key objectives. The first is the new collective and quantified goal (NCQG) for climate finance, which is a deliverable at Baku. It flows from the mandate that was arrived at the Glasgow CoP in 2021, the year when the implementation of the Paris Agreement began. 

Another important item on the agenda is a decision on how the countries may raise or revise their targets for mitigation in the next cycle of the nationally determined contributions (NDCs), beginning 2025, in light of the Global Stock Take (GST) held last year at Dubai. 

Reaching an agreement on the collective and quantified goals for climate finance is indeed a major task of the Baku conference. The existing goal of mobilising at least $ 100 billion in climate finance annually is going to expire in 2025 and a new commitment of developed countries, under the Paris Agreement, has to take effect from 2026 onwards. 

Mode of funding

However, there are serious concerns about how climate finance is defined—whether it includes all types of financial flows or only public grants and concessional finance. The discussion is mostly focused on the scale of finance, which includes the private sector, public finance, loans from multilateral development banks, grants, and debt.  

Involving the private sector in reaching a higher scale of finance appears to be the main objective of the discussions. There are also varying estimates of the required scale.

CoP 28 had projected the requirements ranging from $ 4 trillion for renewable energy transition and $4 to 6 trillion for low carbon economic transformation to $5.9 trillion for all climate actions, including adaptation. The G20 group of independent experts has pegged the amount at $500 billion per year for official development assistance, including concessional finance for climate. 

While private sector participation may be crucial to raising the scale of climate finance, there is, at present, little indication of how climate risks will be addressed for the international private capital to flow without raising the cost for recipient countries. Even if Baku is able to establish a long-term finance goal, the capacity of multilateral development banks to leverage private capital, without causing additional risk, will remain a key issue. 

An important aspect from a developing country perspective is adaptation finance. Currently, the NCQG discussion seems to have ignored this aspect. Some countries are trying to link the NCQG with Article 2.1 of the UNFCCC, which is mainly about low-carbon transition. 

Adaptation finance

An important aspect from a developing country perspective is adaptation finance. Currently, the NCQG discussion seems to have ignored this aspect. Some countries are trying to link the NCQG with Article 2.1 of the UNFCCC, which is mainly about low-carbon transition. 

There is insufficient focus on the impact of climate change on developing countries. The NCQG needs to allocate significant outlays for enhancing adaptation finance if it has to have practical relevance for countries affected by climate change. The other contentious issue is that of voluntary contributions from rising and emerging economies in the developing world. 

The governments of Canada and Switzerland have called upon the top ten emitting economies with PPP-adjusted per capita income above $20,000 or $22,000 to contribute to international climate finance. Developing countries, like India, will be obviously uncomfortable with this approach and may dismiss them as attempts to distract from the main goal.

To make matters worse, the election of Donald Trump to the post of US President has altered several scenarios about international commitments to climate finance. The US is the major donor of climate finance, either bilaterally or through multilateral development banks. 

The Trump administration may not have any inclination to contribute to global funds with public resources mobilised from American taxpayers. The Republican Party had threatened, during the election campaigns, to withdraw from the Paris Agreement once again if it came to power. 

Political changes

Trump has also vowed to stop public funding of clean energy projects, currently being supported under the Inflation Reduction Act, even though Tesla CEO Elon Musk, his ardent supporter, is a votary of electric mobility. Trump has also threatened to impose unilateral tariffs on imports from countries having surplus, which may cause severe disruptions in trade and capital flows.

Some analysts believe that the decisions taken by previous climate conferences under the Paris Agreement will prevent backsliding and that the net zero goals provide enough momentum to further investments in renewable energy and industrial decarbonisation. However, evolving geopolitics under the Trump administration may seriously weaken the prospects for low carbon transition in the near term. 

This may also dampen the goal of raising national targets for mitigation in the upcoming cycle of the NDCs. The global stocktake of last year made it clear that the world is not on track to check emissions and that there is an urgent need to raise global mitigation efforts to meet the 1.5-degree temperature goal. However, achieving this appears highly unlikely as the commitment of larger and more resourceful economies is substantially weaker. Even though a country like India may like to keep its ambition high because of the progress made in adding substantial renewable energy to its capacity, global dynamics may force a rethink. India contributes only 4% of global emissions. Other major players must step up and commit to increasing their ambition at Baku. 

Baku CoP has the unenviable goal of redeeming the pledge made by developed countries to come up with new financial goals. But it has to grapple also with the realities of the evolving geopolitics and the divergent interests of private and public sources of finance to make things happen at Baku.

(R R Rashmi is a Distinguished Fellow at The Energy and Resources Institute (TERI) and a former climate negotiator)