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| Photo Credit: Reuters

The world’s top multilateral banks pledged to ramp up climate finance to low and middle income countries to $120 billion a year by 2030 as part of efforts at global talks in Azerbaijan on Tuesday (November 12, 2024) to agree an ambitious annual target.

Reaffirming a goal of capping global warming at 1.5 degrees Celsius above the pre-industrial average by 2050, the new figure is a more than 60% increase on what the group of 10 multilateral development banks (MDBs) had funnelled to poorer nations last year, according to a statement released during the U.N. climate summit in Azerbaijan’s capital Baku.

Also read | COP29 day 2 updates

The new figure includes $42 billion to help adapt to the impacts of extreme weather, a 70% increase over the 2023 number.

With the U.S. government under Donald Trump expected to pull back from global efforts to fight climate change and many other countries cutting development aid, more emphasis is being placed on helping the private sector increase its funding for climate.

“MDB finance is most needed for the poorer countries, as wealthier governments can typically access cheap debt more easily,” said Clare Shakya, global managing director of climate from the Nature Conservancy.

Going forward, the group of MDBs, including the World Bank, European Investment Bank and Asian Development Bank, said they would aim for their lending to bring in an additional $65 billion in private sector cash. “While the scale of MDBs’ financial commitments is essential, MDBs’ most significant impact comes from our ability to drive transformative change,” the group said in a statement.

However, the group warned their ability to do more largely depended on the commitment of banks’ shareholders from both developed and developing countries, who needed to show “greater ambition”.

“Provision of climate finance at scale also depends on increased MDB internal resources; a larger pool of grant and concessional funds to support enhanced policy dialogue, finance public goods and mobilize private finance; and additional capital to unlock more MDB financing,” the statement said.

“We welcome the ambition set out today by the multilateral development banks, which played a key role in scaling up climate finance to exceed the $100 billion goal,” a U.S. official, who declined to be named, said on the sidelines of the gathering.

“The MDBs are a key part of the climate finance architecture.”

Baku, Azerbaijan:

Countries at the United Nations COP29 climate summit in Azerbaijan will attempt to agree rules for a global system for trading carbon offset credits.

Here’s what you should know:

WHAT ARE CARBON OFFSETS?

Some governments and companies may struggle to reduce their planet-warming greenhouse gas emissions to meet their climate targets. Supporters of carbon offsets see them as a key means to help meet these goals.

These offsets allow one nation or company to offset some of their emissions by paying for actions to cut emissions elsewhere. These actions might include rural solar panel installations or converting a fleet of petrol buses to electric.

WHAT IS ARTICLE 6?

Article 6 of the Paris Agreement helps countries work together to reduce their carbon emissions. It sets out two options for countries and companies to trade offsets, helping them meet the goals they set to reduce planetary-warming gases in their climate action plans, known as nationally determined contributions (NDCs).

One allows two countries to set their own terms for a bilateral carbon trading agreement, this is known as Article 6.2. The second aims to create a central, UN-managed system for countries and companies to begin offsetting their carbon emissions and trading those offsets, known as Article 6.4.

Article 6 is seen an important mechanism for delivering climate finance to developing countries, and a Paris Agreement carbon market, if launched, could continue operating even if the United States under Donald Trump withdraws support for the Paris Agreement.

WHAT’S BEEN DECIDED SO FAR?

At the COP26 climate summit in Glasgow, negotiators reached a breakthrough agreement that established a broad rulebook to regulate trading of carbon credits.

But after two weeks of talks at COP28 in Dubai, countries failed to seal a deal on necessary details to operationalise a central carbon trading system or to clarify rules for nations wanting to make bilateral arrangements.

Some countries like Japan and Indonesia have decided to press ahead with bilateral agreements without those clarifications and are already preparing to trade carbon credits, known as “internationally transferable mitigation outcomes” (ITMOs). The UN says 91 agreements had been made between 56 countries as of October this year. Thailand and Switzerland completed the first sale in January, and the market for bilateral trade agreements is still quite small.

Some buyers are worried there are not adequate rules to stop countries changing the terms of the agreements, or revoking them, and that there is not a robust system to ensure that credits bought and sold are not being counted by both the buying and selling countries.

WHAT WILL BE DECIDED AT COP29?

Officials are keen to secure an early “win” on Article 6 at this year’s climate conference.

Market watchers are hopeful an agreement can be reached to set guardrails for the bilateral agreements and to operationalise the UN-backed centralised marketplace.

Guardrails include checks and balances to provide assurance countries are buying and selling actual emissions reductions. Some countries for example want methods nations use to generate credits to be checked internationally.

Countries will also negotiate whether the UN’s central registry can itself house credits that can be transacted and retired or whether it should operate just for accounting purposes.

An expert group elected under United Nations rules has already hammered out a framework for the multilateral trading system to ensure credits meet basic quality standards. But countries at COP29 can decide to either sign off on this standard, open up further discussions, or reject it.

After COP29, the technical expert group will meet again to agree which methodologies for generating carbon credits through cookstoves projects or reforestation for example can issue credits into the new Paris Aligned system.

If the key points are resolved this year, the system could launch as soon as 2025.

WHAT DOES THIS MEAN FOR THE VOLUNTARY CARBON MARKET?

Some companies that are under no legal obligation to cut their emissions have set voluntary targets, which they can meet partially through buying credits on a voluntary carbon market. In 2022, the voluntary market was valued at about $2 billion worldwide. But the market value plummeted to $723 million last year after being shaken by repeated scandals.

Linking up carbon projects currently in the voluntary market with the Paris Agreement system could boost confidence.

Developers of projects like mangrove restoration to regenerative agriculture can apply to have their credits sold under the UN system, meaning that if approved, they could sell in either that system or on the voluntary market. Experts expect UN-approved credits to carry a higher price tag.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

A view shows a sign of the COP29 United Nations Climate Change Conference with a backdrop of the cityscape in Baku, Azerbaijan October 31, 2024.
| Photo Credit: Reuters

This month’s U.N. climate summit – COP29 in Baku, Azerbaijan – has been dubbed the “climate finance COP” for its central goal: to agree on how much money should go each year to helping developing countries cope with climate-related costs.

That discussion could be tough following Tuesday’s re-election of former U.S. President Donald Trump, a climate denier whose campaign vowed to remove the top historic greenhouse gas emitter and leading oil and gas producer from the landmark 2015 Paris Agreement to fight climate change for a second time.

COP29 delegates will also be looking to advance other deals made at previous summits.

Here are some of the top agenda items for the Nov. 11-22 summit.

Climate finance

The acronym dominating this year’s summit is NCQG – which stands for the New Collective Quantified Goal.

That refers to the new annual climate financing target, which is meant to kick in when the current $100 billion pledge expires at the end of this year.

Wealthy nations have only sometimes met that annual goal since 2020, leading to growing mistrust among the world’s climate-vulnerable nations.

As COP29 aims to set a much higher target for the years ahead, wealthy nations insist the money cannot come entirely from their budgets.

Instead, they are discussing a far more complex effort that would involve reforming the global multilateral lending complex in ways that de-escalate climate-linked financial risks and encourage more private capital.

It is unclear how much of the total annual target would be offered by rich nations. Also unresolved is whether fast-developing nations like China or the Middle East Gulf oil states should also contribute, a position championed by the United States and European Union.

By reforming the global banking system, countries hope to drive up the annual climate finance sum. U.N. agencies estimate that trillions of dollars are needed yearly, but officials with the COP29 host Azerbaijan said that a number in the “hundreds of billions” has a more realistic chance of being approved by consensus.

Fossil fuel transition

Last year’s COP28 summit in Dubai ended with countries agreeing for the first time to “transition away from fossil fuels in energy systems.”

Since then, however, both fossil fuel use and export sales have continued to rise globally, while new areas have been approved for oil and gas production in countries like Azerbaijan, the United States, Namibia, and Guyana.

With countries and companies unclear in their resolve to quit coal, oil and gas, negotiators said COP29 was unlikely to deliver timelines or stronger language on fossil fuels, though some countries might push for a halt in new coal plant permitting.

Countries will also be discussing progress in their pledge to triple renewable energy capacity and double energy efficiency, as a way of easing demand for fossil fuels.

Rules for carbon market

Governments are eager to resolve rules for trading carbon credits earned through the preservation of forests and other natural carbon sinks.

While these credits are meant to be issued to nations as optional offsets to their countries’ emissions, they can also be traded on open markets. Business leaders are looking for COP29 to set rules for guaranteeing transparency and environmental integrity in projects logged with the Paris Agreement Crediting Mechanism (PACM).

Still to decide are key issues including how the PACM supervisory body will set standards, if credits should be evaluated before being traded, and whether and when credits can be revoked.

Boosting transparency

Azerbaijan hopes countries will submit their first climate action progress reports during the summit ahead of a Dec. 31 deadline, but it is unclear if countries will do so.

These so-called Biennial Transparency Reports (BTRs) are meant to describe a country’s progress in reaching its climate goals – and how much further they need to go in setting fresh goals by February. As it stands, national pledges to cut emissions still fall far short of what is needed, the U.N. said last week.

The BTRs will also offer insight into how much finance is currently needed in developing countries, both for transitioning their economies away from fossil fuels and for adapting to the conditions of a warmer world.

Adaptation in focus

Countries last year committed to a framework of guidelines for national plans to help people adapt to climate disruptions such as warmer days, rising sea levels or parched farmlands.

But the framework for adaptation lacks details, such as quantifiable targets for measuring progress or strategies for linking projects with climate finance.

Countries hope to set more specific adaptation goals during COP29.

Money for loss and damage

Two years since Egypt’s COP27 summit agreed to help poor countries with the costs of climate-driven disasters like extreme floods, storms or drought, about $660 million has been mobilized through the newly created Fund For Responding To Loss and Damage, that will be headquartered in the Philippines.

Climate-vulnerable countries will call on wealthy nations to offer more for the fund.