press release, 29. November 2024

Summit in Baku did not lead to any real breakthrough in climate finance

Two UFZ scientists assess the situation

At COP 29, climate finance presented a negotiation challenge comparable to that of the Paris Agreement. The resolution was largely deferred to the next summit in Brazil. The CO? markets, ruled by the Paris Agreement, are set to commence. "Little progress" is the conclusion of climate economist Prof Reimund Schwarze and forest expert Dr Friedrich Bohn from the UFZ, who both attended the summit in Baku.

COP 29 was the summit of climate finance. At the 29th UN Climate Change Conference in Baku, discussions focused on financial aid from industrialised countries to support developing countries in climate protection, climate adaptation, and loss and damages. 

To this end, there was already a commitment of USD 100 billion per year in the "Copenhagen Accord" in 2009 to be paid starting in 2020. However, the promised sum was not reached until 2022. 

At Baku, a pledge was made for USD 300 billion annually starting in 2035. Experts in climate finance agree that this is "too little, too late". This can thus be considered only a first step.

Many conference attendees had hoped for a signal from the G20 meeting in Rio de Janeiro, which at times met in parallel. Unfortunately, that did not come. Emerging countries such as China, India, and Brazil remained as reserved at the G20 meeting as they were at the climate summit in Baku.

Brazil’s proposals for a wealth tax on the super-rich and comprehensive reforms of the World Bank and the global financial system were vague and lacked specificity. The climate conference faced considerable challenges because of the lack of a clear plan to secure the necessary funds. The fear that the US under Trump could withdraw from the Paris climate agreement and draw other countries (e.g. the OECD partner country Argentina) with it created a crippling uncertainty for the remaining donor countries.

Disregard for the task

And so the inevitable happened. Disorder, threats, heated arguments, long nights, and contentious negotiations marked the discussions around the billion-dollar "Quantum", the new climate finance goal under the Paris Agreement. Azerbaijan’s negotiating team was evidently overwhelmed; however, it cannot be held solely responsible. 

Insiders had long anticipated that COP 29 in Baku would need to address the leap "from billions to trillions", a negotiation task on par with the Paris Agreement. 

The contempt for this challenge on all sides, especially among the donor countries concerned, was reflected in a broad absence of high-profile politics at the climate summit. 

US President Biden, French President Macron, German Chancellor Scholz, and EU Commission President von der Leyen - all of them stayed away from the COP 29 as did the top leaders of the emerging economies China, India, and Brazil, which were targeted as new donors. Even major global financial institutions such as the World Bank and the IMF were not represented by senior officials. How could a breakthrough have come about?

A commitment has been made to take a significant step forward at COP 30 in Brazil next year as part of the Baku-Belém process. While USD 300 billion has been pledged, an additional USD 1.3 trillion is required to enable developing countries to undertake meaningful climate change mitigation efforts. This means that an additional USD 1 trillion is to be found within one year, mainly from private donors. It is doubtful whether this promise can offset the loss of confidence on the part of developing countries in Baku.

Carbon markets decided

This climate summit did achieve at least one notable result: after almost 10 years, the CO? markets under the umbrella of the Paris Agreement (Article 6) - and thus an important pillar of future private climate finance - have finally been decided.

Article 6.2 establishes a basis for existing trade agreements between states. New rules promote transparency and prevent arbitrary changes to credits but remain weak when it comes to sanctioning violations. A dual registry system has been introduced to assist countries that do not have their own registry.

Article 6.4 introduced the Paris Agreement Crediting Mechanism (PACM), which is the first global standard for Paris-compliant emissions credits. The rules of the PACM include environmental and human rights protection as well as stricter baselines. The first methodology for project approval is expected in 2025 and will pave the way for trading new credits.

However, it remains uncertain whether these mechanisms will lead to substantial emission reductions and financial flows to the Global South or act only as symbolic gestures. Transparency and public scrutiny will be key in Belém next year, as will delivering on pledges such as ending deforestation by 2030 and setting clear nationally determined contributions (NDCs).

The way to Belém 

COP30, scheduled for 10 to 21 November 2025, will be held in Belém, Brazil - a city located in the rainforest near the mouth of the Amazon River. President Luiz Inácio Lula da Silva is focusing on its proximity to the Amazon and is investing more than USD 800 million dollars to prepare the city. But Belém faces numerous challenges, including pollution, violence, and a lack of accommodation. 

The COP30 is seen as crucial for the submission of new nationally determined contributions to reduce emissions and adapt to the impacts of climate change (NDCs) by February 2025. Further COP30 is advertised as a "natural COP" because of its location. Brazil is working closely with Colombia, the host of biodiversity COP16, to better integrate nature and climate protection - without introducing new negotiation topics. In addition, both countries are developing a proposal for a binding global agreement on the traceability of critical minerals supply chains. 

Further information

Prof Dr Reimund Schwarze
UFZ Department Economy
reimund.schwarze@ufz.de

Dr Friedrich Bohn
UFZ Department Computational Hydrosystems
friedrich.bohn@ufz.de

UFZ press office

Susanne Hufe
Phone: +49 341 235-1630
presse@ufz.de