COP29 agreements on finance and carbon markets could potentially lead to billions more dollars circulating in the business world if countries can present climate plans with clear policies for markets and investment before next year’s U.N. climate summit in Brazil. These plans, which are due to the United Nations climate body, need to outline steps to make projects more realistic and less risky. However, questions remain about the pace of the transition since some countries have attempted to slow down the global shift from fossil fuels.
This development poses even tougher questions for businesses already navigating the implications of Donald Trump possibly returning to the U.S. presidency. Two weeks of contentious negotiations in Baku, Azerbaijan, resulted in a deal for $300 billion in annual climate finance by 2035. Many developing nations have expressed concerns that this pledge will not be sufficient to enable them to create robust national climate plans.
While private sector investment was highlighted throughout the summit—including a multilateral development bank commitment to mobilize $65 billion annually—the specifics of these investments remain crucial. Discussions among countries in the lead-up to next year’s COP30 summit may provide some clarity, as they prepare to outline their next set of emissions-reduction plans. Although countries are expected to submit their national climate plans by February, many have indicated they will miss the deadline. Businesses are urging that these plans include projects that are “investment-ready” and as detailed as possible to help investors assess their long-term commitments and risks.
Tensions were evident at COP29 on Thursday as the closing deadline approached, with divisions and frustrations surfacing among participants. According to Thomas Tayler, head of climate finance at asset manager Aviva Investors, financial commitments will materialize only after the shared goals established at events like COP29 are translated into regulations, legislation, and other policy measures. Equally important is demonstrating commitment to implementing these policies and reporting on progress. Mixed messaging about energy persists amid the difficult climate negotiations.
The latest round of talks began in Baku just a week after Trump, known for his climate denial, won the Nov. 5 U.S. presidential election. Few expect Trump to contribute to climate finance from the world’s largest economy or to uphold U.S. policies that favor climate investment. Although countries at COP29 set a new target of $300 billion for climate finance, this sum is guaranteed only by 2035, with a pledge to prioritize support for the most vulnerable nations.
They have also begun discussing potential new revenue streams, such as global taxes on polluting industries (like aviation and cargo shipping), oil and gas transactions, financial transactions, and ultra-wealthy individuals. While these initiatives could make infrastructure projects more attractive in riskier regions, the challenge of attracting profit-driven investors continues. The global transition to green energy has already been hampered by the war in Ukraine and the resulting energy crisis, which have led governments to slow green reforms, causing companies like BP and Unilever to retract some of their efforts.
Unfortunately, COP29 did not advance any plans to further last year’s COP28 commitments to move away from fossil fuels or to triple renewable capacity by 2030, particularly under pressure from countries like Saudi Arabia. David King, chair of the Climate Crisis Advisory Group, noted, “The influence of fossil fuel lobbies remains a significant obstacle that must be addressed ahead of COP30 if it is to deliver meaningful progress.”
On a more positive note for companies involved in carbon removal projects, COP29 reached a significant agreement to clarify the rules for trading national carbon offsets. This includes establishing a central registry to issue and track these credits. The hope is that clearer market structures will encourage both countries and companies to invest while alleviating concerns about reputational risk. However, it is important to note that the involvement of the U.N. registry does not automatically guarantee the quality of the credits.
Eliot Whittington, chief systems change officer at the Cambridge Institute for Sustainability Leadership, remarked, “There’s a lot more financing to be done on the basis of this agreement.”
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