COP29 in Baku: Mitigation – raising stakes, creating markets

15 October 2024, Category: All insights, News, Tags: LBD News

Two key areas to accelerate decarbonisation efforts in the run-up to COP29 are the next round of Nationally Determined Contributions (NDCs) and the operationalisation of Article 6 of the Paris Agreement. 

Ratcheting up ambition

The upcoming third submission of updated NDCs presents a crucial opportunity for signatories to the Paris Agreement to demonstrate increased climate ambition. Due between November 2024 and February 2025, these new NDCs will set targets for 2035 and strengthen existing 2030 goals.

For NDCs to be truly ambitious, they must align with the Paris Agreement’s 1.5°C warming limit. This requires steep emissions reductions in the near term; the IPCC indicates global emissions must be slashed by at least 60% from 2019 levels by 2035 to keep 1.5°C within reach. Major emitters, particularly developed nations with historical responsibility, must lead with deep cuts while supporting developing countries’ efforts.

These third-generation NDCs are expected to serve as comprehensive investment and transformation plans. They should take heed of the findings from the first Global Stocktake agreed at COP28 in Dubai. For them to be ambitious, they need to include, science-based targets, have robust implementation plans, concrete financial commitments, and clear transparency mechanisms.

Yet ongoing tensions between developed and developing countries surrounding financing for NDC-related investment plans (such as on the NCQG) threaten to obstruct efforts to collectively develop ambitious NDCs. The investment plans that the new NDCs are supposed to include are at least an implicit answer to funding deficits, particularly in developing countries. Yet, the exact form and potential of these investment plans remains unclear.

To ensure NDCs are both credible and achievable, countries should engage in broad stakeholder consultations that include vulnerable communities, indigenous peoples, and other marginalised groups, align NDCs with long-term strategies and national development plans, build in flexibility to respond to technological advancements, and prioritise actions with co-benefits for sustainable development. Ambitious economy-wide NDC targets should be built on detailed sectoral plans informed by 1.5°C compatible benchmarks.

“Increasingly, we’re seeing projects that address both mitigation and adaptation challenges, presenting opportunities for governments to meet NDC targets while building climate resilience. These cross-cutting projects demonstrate how countries can design NDCs that tackle multiple climate challenges simultaneously, maximising the impact of climate action.

At E Co, we’ve helped develop several such initiatives. For instance, the PEEB Cool programme constructs energy-efficient buildings that reduce emissions and vulnerability to climate change. The &Green Fund supports sustainable agriculture practices that avoid deforestation while increasing community resilience. We’re also currently developing Nature-based Solutions projects in the Philippines that sequester carbon and strengthen adaptive capacity to climate impacts.”

Clare Wingfield, Senior consultant

Unlocking the potential of carbon markets

Article 6 of the Paris Agreement establishes a framework for countries to cooperate in reducing greenhouse gas emissions through carbon markets, offering the potential to lower costs and increase ambition in climate action. The operationalisation of Article 6 of the Paris Agreement is a critical focus for COP29, which has been dubbed the “finance COP.” Recent economic modelling shows Article 6 has the potential to significantly lower the costs of implementing climate action and drive more ambitious mitigation efforts by enabling countries to cooperate in achieving their NDC targets. While some progress was made at the Bonn Climate Change Conference in June 2024, several critical issues remain unresolved and will be central to negotiations at COP29.

Article 6.2, which allows for bilateral cooperation between countries through internationally transferred mitigation outcomes (ITMOs), is already operational with some bilateral agreements in place, and with the first Article 6 transaction having taken place earlier this year between Switzerland and Thailand. Yet there are outstanding issues that COP29 negotiators will need to address, such as:

• Clarifying when authorisations for ITMOs can be amended or revoked, and specify their timing and scope. This is crucial for market security and predictability;
• Finalising the Agreed Electronic Format for reporting on Article 6 transactions to ensure transparency and accountability;
• Deciding on the specific functionalities of the UN-managed international registry for tracking and recording carbon credit transactions under Article 6.

The Bonn conference made some progress on common nomenclatures for reporting and procedures for handling confidential information. However, substantive decisions on issues like whether ITMOs could include emission avoidance were postponed to 2028.

Progress on Article 6.4, which establishes a centralised global carbon crediting mechanism (now known as the Paris Agreement Crediting Mechanism), is even more critical, as the mechanism remains inoperational. One positive development since COP28 is that the CMA has adopted the basic framework for how Article 6.4 projects will be designed, implemented, and verified. The Supervisory Body has since laid further important groundwork by recommending guidelines, such as for removals, but these have twice been rejected by the CMA in the past, which was one key issue stalling the operationalisation of the mechanism. A key breakthrough occurred on the 10th of October 2024 when two standards were finalised after intense negotiations, one for Article 6.4 mechanism methodologies, and one for activities involving removals.

Plenty of other technical details will need to be ironed out during the COP29 negotiations besides the guidance and methodologies on removals, such as addressing concerns about the potential for double counting of emissions reductions, finalising the sustainable development tool, establishing the share of proceeds for adaptation funding, engaging with indigenous peoples and local communities, providing capacity building for developing countries to enable their participation in the mechanism, and transitioning CDM activities to the mechanism. 

COP29 lead negotiator Yalchin Rafiyev has emphasised the full functionality of Article 6 as a key goal for the upcoming conference in Baku. Progress on these issues could finally unlock the potential of international carbon markets to drive more ambitious and cost-effective climate action. Whether this is possible remains to be seen, as negotiators, as always, must balance the need for robust rules, methodologies, and safeguards with the flexibility required to accommodate diverse national context and encourage broad participation.

The road to COP – upcoming E Co. insights

While climate finance will be the headline issue in Baku, it’s far from the only critical topic on the agenda. In our next two installments, we’ll be delving deeper into two further key areas that will shape the outcomes of COP29:

2. The Global Goal on Adaptation: measuring adaptation

3. Resilience: addressing loss and damage

We’re inviting you to be part of the dialogue! Our team will be present at the COP29, and we’d love to connect with you there.

For us at E Co. COP29 is a highly valuable forum to meet face-to-face with our global climate finance and sustainable development community. We invite you to connect in Baku with our Managing director, Rowan Putman and our Senior analyst Victoria Verdesoto Phothirath by sending a message to amy@ecoltdgroup.com to set up a meeting and share your news and ask your questions.

Whether you’re attending in person or following the proceedings remotely, we want to hear your thoughts, questions, and experiences. How do you see the outcomes of COP29 impacting your work? Reach out to us on LinkedIn, or come find us in Baku!