The 29th Conference of the Parties lacked a landmark agreement—and that’s okay. Negotiators continued incremental progress in implementing the Paris Agreement and struck a compromise on climate finance and on carbon markets.
Expectations were not particularly high for the 29th Conference of the Parties (COP29) in Baku, Azerbaijan. The conference in 2024, like the conference in 2023, was hosted by a major producer of fossil fuels and coincided with enough perturbations domestically and globally to distract ministers and heads of state (or deter them from attending altogether). While the fact that COP29 ran into overtime is not indicative of the merits of the outcome of the conference (most COPs end late), optimism seemed especially sparse in the hours before a deal was struck. But in the end, a deal was struck. The question now is, Will the outcome of these COP negotiations help facilitate progress with global climate policy?
In this blog post, we’ll discuss some of the main outcomes of the conference, including agreements for climate finance and international carbon markets, along with developments in policies related to climate and trade. But first, we’ll share reflections on the purpose of the annual COP and the prospects for achieving global climate policy ambitions through these conferences.
The Conference of the Parties Is Evolving
The aim of most COPs—until COP21 in Paris in 2015—was agreement on a new architecture for determining international climate policy. This aim made the primary negotiations at each COP of central importance. Painstaking negotiations were required for questions that are now settled, such as the overall goal of international climate policy, whether temperature targets should be set, how to differentiate efforts to mitigate emissions and provide financing for climate adaptation and mitigation among countries, and the principles of governing these efforts by individual countries.
After the Paris Agreement was passed at COP21, negotiations shifted to more technical rules that would operationalize the agreement. Especially important are the Global Stocktake, which is the mechanism through which progress toward the Paris Agreement is reviewed, along with the provisions in the Paris Agreement that delineate an international carbon market.
As the rulebook for the Paris Agreement gradually was completed over the past decade, the negotiations at each COP increasingly focused on specific actions that would support climate mitigation and adaptation, which usually required unanimous agreement from all member nations in the United Nations Framework Convention on Climate Change as part of the so-called “cover decisions” that are finalized at the end of a given conference. Recent examples include the Glasgow Climate Pact, which was finalized at COP26 in 2021 and refers to “the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies,” and the Sharm el-Sheikh Implementation Plan from COP27 in 2022. Notably, COP29 did not yield a cover decision; Azerbaijan, which held the presidency of the conference, had little interest in repeating language that signaled the phasedown (or phaseout) of fossil fuels.
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Some observers now are questioning the merits of the Paris Agreement and the annual COPs, given that global greenhouse gas emissions still have not peaked. But the COPs are not intended to achieve annual breakthroughs, nor even to negotiate the implementation of climate policies, which primarily is a domestic affair. And the five-year cycles for the Global Stocktake have barely started; the first Global Stocktake concluded at COP28 in 2023. These cycles, during which countries are supposed to pledge more ambitious emissions reductions, are designed to yield climate policies that become incrementally stronger over time.
While global emissions still are inching upward, the rate of increase has slowed markedly compared to a decade ago. Inevitably, bending the global emissions curve toward rapid reductions first results in a period of slower emissions growth. With the rulebook for the Paris Agreement complete, annual COPs largely will reflect progress in domestic implementation of climate policy across the nearly 200 countries that signed the Paris Agreement (and the United States, which recently announced a second exit from the agreement), along with developments in geopolitics more broadly.
Negotiations in the domains of climate finance and adaptation inevitably will continue. But the lack of momentous new global agreements at annual COPs should not be understood as the failure of a process that is designed to ratchet up the ambition of national climate policies and structure global cooperation over decades. Negotiations at COP29 instead yielded a few smaller agreements, of which we’ll highlight three.
Climate Finance
COP29 was dubbed the “finance COP.” A central aim of the conference was to establish a new target for the amount of funding that developed countries provide annually to developing countries to support climate adaptation and mitigation. The idea was for the new target to replace the previous target of $100 billion. However, negotiations extended into 35 hours of overtime due to disputes over three critical issues: which countries should contribute funding, what counts as funding, and the funding target itself.
Unanimous consensus is required to finalize an agreement at the COP; making a deal that everyone is happy with is nearly impossible. Developed countries pushed for China, the second-largest historical emitter of greenhouse gases, to contribute. Developing countries insisted that financing come solely from public sources—specifically, foreign aid—and rejected the inclusion of investment by foreign companies in an agreement. Developing and developed countries also were at odds over the scale of the funding required. Developing nations estimated that $1.3 trillion would be needed annually by 2035 to help address climate change—an amount that far exceeded the $100-billion target that developed nations only recently met.
The lack of momentous new global agreements at annual COPs should not be understood as the failure of a process that is designed to ratchet up the ambition of national climate policies and structure global cooperation over decades.
The final agreement reflected the reality of what developed countries considered achievable. The deal commits them to lead efforts to provide developing countries at least $300 billion annually by 2035. This money can come from both public and private sources and includes financing from multilateral development banks. This language in the agreement followed the language in the previous $100-billion target and allows developed countries considerable flexibility in meeting commitments. Developing countries are encouraged to contribute on a voluntary basis, which exempts China from any official commitments. The agreement also calls on all actors to enable financing to scale up to $1.3 trillion, but provides few details about how this increase might be achieved.
Article 6: Setting Up International Carbon Markets
Article 6 of the Paris Agreement delineates how countries can cooperate to achieve emissions reductions; generally, these provisions are framed as carbon markets, which allow companies and countries to exchange credits that represent emissions reductions or removals. Article 6 always has been among the more complicated and contested sections of the agreement, given that carbon accounting across international borders is challenging due to the considerable flexibility that countries have in defining their commitments to mitigate climate change.
Yet the potential of a successful international carbon market is huge; such a market could enable more ambitious climate policies without higher costs. Since the Paris Agreement was signed in 2015, COPs have made progress toward finalizing Article 6 by introducing key concepts, such as “corresponding adjustments” to inventories for greenhouse gas emissions that are used in carbon accounting and ensure emissions reductions are not counted twice; “internationally transferred mitigation outcomes,” which refer to emissions reductions that are realized in one country, but accounted for in another; and the “share of proceeds,” a sort of tax on the trades that occur in the carbon market. But many details have remained undecided, which has prevented the new forms of international emissions trading from becoming operational.
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During the first day of COP29, Azerbaijan opportunistically used its presidency to push through the approval of a set of standards (or guidelines) for the UN mechanism that will enable international carbon markets on the basis of projects that reduce emissions or remove carbon dioxide from the atmosphere. By the end of the COP, the remaining political choices related to Article 6—e.g., whether the United Nations should oversee registries of these projects, and what information about trades and projects should be transparent—were decided, as well.
The new guidelines mostly cover processes and may remain open to various interpretations. Arguably, the success of international carbon markets in the future depends on buyers of carbon credits caring at least as much as sellers about the quality of these credits; in other words, the extent to which the credits actually represent the emissions reductions they promise. Expecting a set of rules to prevent every project with questionable quality is unrealistic, so long as buyers primarily are motivated by finding credits at the lowest cost. Nevertheless, the potential for companies and countries to pursue emissions reductions abroad at much lower cost than domestic emissions reductions could be a game changer in bending the global emissions curve—even if those domestic emissions ultimately will need to be addressed.
Climate and Trade
Policies that address climate change and trade were a major focus throughout the conference, reflecting the rapidly evolving landscape of global policy in this area. Several notable developments occurred since COP28: Companies that import goods to the European Union began submitting data to comply with the carbon border adjustment mechanism (CBAM) that the bloc instituted in 2023, which will charge importers a fee based on the emissions associated with certain products starting in 2026. (The fee is linked to the domestic carbon price in the European Union.) Also, the United Kingdom announced plans to implement a CBAM.
However, nations in the Global South tend to consider such policies protectionist and in violation of the principle of “common but differentiated responsibilities” that was established under the UN Framework Convention on Climate Change. Brazil, South Africa, India, and China attempted to add “unilateral trade measures” to the official agenda of COP29 on the first day of the conference. This addition effectively would have included CBAMs in formal negotiations and increased scrutiny on climate and trade policies, but the European Union successfully kept the issue off the agenda (for now) by referring the issue to the World Trade Organization.
Despite the exclusion of climate and trade from formal negotiations (beyond discussion of the ripple effects of domestic climate policies, known as “response measures”), the topic remained a hot one throughout the conference. Resources for the Future hosted two side events that focused on the global impacts of climate and trade measures. Key discussions included how the design of CBAMs influence global incentives for carbon pricing and how the EU CBAM already is fostering the adoption of carbon pricing across the world.
Participants also considered the landscape for policymaking related to climate and trade in the United States. Given the results of the US election, any climate and trade measures passed in the near term are unlikely to include requirements that domestic companies reduce emissions. A more likely approach is the Foreign Pollution Fee Act, which was first proposed in 2023 and would levy tariffs on certain imported commodities based on the emissions associated with those products. This approach may have different impacts on global incentives to reduce emissions.
These discussions also focused on the more technical dimensions of climate and trade, including the calculation of the emissions associated with a given product and how to ensure that competing climate and trade policies don’t create barriers to trade, a consideration known as interoperability. These technical considerations are essential in reducing the administrative costs of implementing policies and will be a key focus of our research in 2025.
