Activists participate in a demonstration for climate finance during the COP29 U.N. Climate Summit on November 23, 2024 in Baku, Azerbaijan.
| Photo Credit: AP

Despite running into overtime, very little headway had been achieved at the U.N. climate summit in Baku late on Saturday (November 23, 2024) in terms of bringing developed and developing countries any closer to agreeing to a new global financial target, called the New Collective Quantitative Goal (NCQG), for a moonshot at preventing a runaway rise in global temperatures. The conference was scheduled to end on Friday.

Negotiators who had been up since Friday morning were expecting another sleepless night on Saturday, one of them told The Hindu, after the latest attempt by hosts Azerbaijan failed to bridge the gap between blocs of developing and developed countries. This year, the COP Presidency is headed by Azerbaijan Minister Mukhtar Babayev. In fact, matters were so fractious that members of the Least Developed Countries (LDC) bloc and the Alliance of Small Island States (AOSIS) said they would walk out of negotiations.

“We have temporarily walked out but remain interested in the talks until we get a fair deal,” said Evan Njewa of Malawi, the LDC chair, in a post on X.

‘Nickels and dimes’

The newest version of a draft text that is being deliberated upon raised the NCQG goal to $300 billion a year, to be given to developing countries by 2035. This was a hike from the $250 billion promised as on Friday night, after a massive outcry by most of the countries and civil society groups on the ground. These numbers are still substantially lower, they say, than the $1.3 trillion expected from developed countries.

“This is going the wrong way. Collecting nickels and dimes. They [developed countries] should have first raised $1 trillion in additional resources at the G-20, come prepared and then funded climate cleanly. Now, there is no chance. Better to call it off,” Dipak Dasgupta, a Distinguished Fellow at The Energy Resources Institute (Teri), said in a statement.

Implementation is key

Some analysts, however, suggest that there has been some progress over the last 24 hours, with a stated commitment to “triple finance flows” through specialised funds called the Adaptation Fund, the Special Climate Fund, and the LDC fund. “On the whole, a positive step forward for international climate finance – but the key lies in implementation of the stated intentions,” said Dhruba Purkayastha, director of the Council on Energy, Environment and Water.

He added that, while still not explicit, the plan seems to be that the developed world would use bilateral and multilateral institutions to channel $300 billion and use that to mobilise the required $1.3 trillion.

Other glimmers of optimism appear in paragraphs that aim to increase ‘grant financing’ (or loans that do not need to be paid back) and periodic reviews of whether those eligible for finance have the required access.

‘Headline management’

The negotiator referred to earlier said that counting money from multi-lateral financing institutions was a deal breaker as that did not reflect funds over and above what was anyway going to be provisioned for climate-based adaptation. “It is an attempt at headline management, rather than a desire to effect meaningful change,” the negotiator said.

It is not unusual for the climate talks to extend well beyond its scheduled end. For instance, the COP held at Madrid in 2019 went two days beyond its deadline before agreeing to a text though that was widely described as a “watered down” agreement.

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.)

People pose near a sign outside the venue for the COP29 U.N. Climate Summit, Sunday, Nov. 10, 2024, in Baku, Azerbaijan.
| Photo Credit: AP

COP29, termed the “climate finance COP,” has one major objective: establishing a concrete financial commitment from developed countries to support climate action in developing nations. As the United Nations climate talks begin in Baku, the primary debate centers on who will provide funding and, more crucially, how much is needed.

Developing nations face mounting expenses due to climate-driven issues like extreme heat, floods, droughts, and storms, costs they cannot bear alone. Experts and numerous reports estimate that addressing these issues will require trillions of dollars. The financing in question covers three key areas: aiding the transition from fossil fuels to clean energy, supporting adaptation to climate impacts, and compensating vulnerable nations for climate-related damages.

However, discussions are likely to be tense following the re-election of former U.S. President Donald Trump, a vocal climate change skeptic whose campaign pledged a second withdrawal from the Paris Agreement.

While the current U.S. delegation is under the Biden administration, Trump’s re-election casts uncertainty over future U.S. climate commitments, putting funding pledges in question and complicating an already challenging negotiation.

People walk near the Baku Olympic Stadium, the venue of the COP29 United Nations Climate Change Conference in Baku, Azerbaijan on October 18, 2024.
| Photo Credit: Reuters

In the run-up to the 29th edition of the Conference of Parties (CoP) in Baku, Azerbaijan, next month, India is at an advanced stage in deciding on the carbon dioxide emissions intensity targets for select industries, a senior official in the Environment Ministry told The Hindu.

Numerically specifying the targets is a precursor to the setting up of a ‘compliance’ carbon market. This means that companies have to ensure that their carbon emissions intensity is within the specified limit or they must ‘buy’ credits from organisations that have surplus credits. Every tonne of carbon dioxide saved, over and above the target, is worth one credit. The price of a credit varies depending on demand and supply, and regulatory pressure, and this is mediated by the market. Emissions intensity are caps on carbon dioxide emissions per unit of production.

“We expect a final position on this very soon. There are still discussions going on with industry, but we want to ensure that the final document is clear and covers all aspects,” the official said.

As per a notification by the Bureau of Energy Efficiency (BEE) in December 2023, India is obliged to launch its compliance market in the 2025-26 financial year.

A body called the National Steering Committee for Indian Carbon Market (NSC-ICM), which is co-chaired by Secretary, Ministry of Environment, Forest and Climate Change, and Secretary, Ministry of Power, is tasked with having “direct oversight” of the functioning of the Indian carbon market.

India’s emission caps for industries are expected to build on an existing scheme called the Perform, Achieve and Trade Scheme under which industries are expected to meet prescribed energy efficiency targets. The sectors that are expected to come under the compliance industry are the aluminium, chlor alkali, cement, fertiliser, iron and steel, pulp and paper, petrochemicals, petroleum refinery, and textiles. These are ‘hard to abate’ sectors as the costs of implementing technology to curb emissions is expensive.

While the focus on the CoP in Baku is expected to be on countries agreeing to a new financial goal for developed countries to transfer to developing countries, expectations are high that carbon markets will get a formal go-ahead under the United Nations-backed climate charters. A specific section under the Paris Climate Agreement of 2015, called Article 6, specifies the contours under which carbon markets – enabling carbon trading among countries – can be operationalised. “There are still some outstanding issues on accounting for these credits. It is only once negotiations start next month that clarity will emerge,” the official added.