Strengthening climate finance and carbon markets: What to expect from COP29

The 29th Conference of the Parties of the UNFCCC, or COP29, will take place in Baku, Azerbaijan from 11–22 November. This year’s conference promises to be pivotal, with several critical issues on the table, including Article 6, the New Collective Quantified Goal, and other pressing discussions. 2025 is a milestone year towards the Paris Agreement’s 2050 goal of net zero emissions, so how will this conference address the needs of taking effective and immediate climate action?

Lessons from last year and the challenges ahead

Two unresolved items from COP28 will be important agenda topics this year. Article 6, which regulates how voluntary and compliance markets interact, will be revisited following last year’s consensus around the importance of the voluntary carbon market (VCM). And another issue still awaiting resolution is the Loss and Damage Fund, which despite an operationalisation agreement, remains underfunded.

As with last year’s host, the United Arab Emirates, this year’s host country, Azerbaijan, is also a petrostate, and COP29 will be presided over by Mukhtar Babayev, a 26-year veteran for the State Oil Company of the Azerbaijan Republic (Socar). Climate activists are concerned whether key agreements will be met, especially given the ties to fossil fuel interests.

Priority negotiations on carbon markets: Article 6

Carbon markets have the potential to mobilise significant financial resources for climate action by allowing countries to trade emissions reductions. However, the implementation of Article 6 has been slow, with previous COPs failing to finalise the necessary guidelines.

At COP29, negotiators will aim to fully operationalise Article 6. This involves establishing clear rules for carbon market transactions by ensuring transparency and preventing greenwashing. A well-functioning carbon market could provide a debt-free way to finance green projects and help countries meet their climate targets more efficiently. Key aspects under discussion include the creation of a centralised accounting system to avoid double counting of emissions reductions, setting robust standards for carbon credits, and guaranteeing that market mechanisms contribute to sustainable development and environmental integrity.

Climate finance and the NCQG

One of the most urgent topics at COP29 is the establishment of the New Collective Quantified Goal (NCQG) on climate finance. Established by the Paris Agreement to strengthen the global response to climate change, this new target aims to replace the previous $100 billion annual goal set for 2020, which has yet to be fully met. The NCQG is expected to align climate contributions with the actual financial needs of developing countries, addressing both mitigation and adaptation efforts.

However, the path to a new goal is fraught with challenges. Key issues include determining the new target amount, identifying contributors, and defining the scope of the finance involved. Developing countries, which are the most vulnerable to climate-related issues, are advocating for a more ambitious target that reflects the escalating costs of climate impacts and the need for sustainable development.

Global financial cooperation and climate change mitigation

As seen with the need to set a new NCGQ target and guidelines on international trading for carbon markets, COP29 will focus on necessary climate contributions that closes the global financial gap.

Growing the Loss and Damage Fund

COP29 will focus on increasing contributions to the Loss and Damage Fund and ensuring its effective management. This includes appointing an executive director and engaging the private sector to boost financial inputs. The fund aims to provide financial assistance to countries facing irreversible losses due to climate change, such as rising sea levels, extreme weather events, and loss of biodiversity.

Updating Nationally Determined Contributions (NDCs)

Cornerstone of the Paris Agreement, NDCs represent each country’s commitment to reduce greenhouse gas emissions and adapt to climate impacts. Countries are required to update their NDCs every five years, with the next update due in 2025. According to the recent UN Emissions Gap Report 2024, countries must collectively commit to cut 42% of annual greenhouse gas emissions by 2030 and 57% by 2035 before the next round of negotiations. Without those reductions, the 1.5°C goal will be gone within a few short years.

Can we make a difference this year?

As the world watches Baku for two weeks, the outcomes of COP29 will determine how effectively we can mobilise resources, implement solutions, and support those most affected by climate change. This annual conference unites political leaders and private sector stakeholders, bringing together tens of thousands of participants from nearly 200 countries to shape decisions for a sustainable future.

ClimatePartner will have its own contingent present throughout the conference to follow key events and decisions, participate in panel discussions, and host events. To stay up to date with climate action, sign up for our newsletter and get insights delivered straight to your inbox.