COP29 finance, carbon deals could unlock billions in global investment

COP29 deals on finance and carbon markets could lead to billions more dollars flowing around the business world if countries next year can deliver climate plans with clear policies for markets and investment. 

Those plans, which are due to the climate body of the United Nations before the next UN climate summit in Brazil, need to describe steps for making projects realistic - and less risky. 

Yet questions remain on the pace of transition after some countries sought to slow down the world's shift from fossil fuels, giving boards already wrestling with the implications of Donald Trump returning to the US presidency even more tough questions to ponder. 

Two weeks of acrimonious negotiations in Azerbaijan's capital Baku resulted in a deal for $300 billion in annual climate finance by 2035. Many developing countries said the pledge would not be enough to help them deliver robust national climate plans. 

While private sector investment was teased throughout the summit - including in a multilateral development bank pledge to mobilise $65 billion of it each year - the devil will be in the details. 

Some of those details could come up in discussions between countries in the run-up to next year's COP30 summit, where they will be mapping out their next set of emissions-cutting plans. 

Countries are meant to submit their national climate plans in February, but many have said they will miss the deadline.

Businesses have called for those plans to include projects and efforts that are "investment ready" - and with as much specificity as possible - to help investors gauge their long-term commitments and risks. 

Money will start flowing only after the shared goals agreed at events like COP29 are translated into "regulation, legislation and other policy measures", said Thomas Tayler, head of climate finance at asset manager Aviva Investors. 

Equally important will be showing commitment to implementing these policies and rules and reporting on their progress, Tayler said. 

 Mixed energy messages 

While climate negotiations are hard going even at the best of times, the latest round began in Baku only a week after Trump, a climate denier, won the Nov. 5 US presidential election. Few expect Trump to deliver climate finance from the world's biggest economy or to protect US policies friendly for climate investment. 

While countries at COP29 set the new $300 billion climate finance target, they guaranteed the sum only by 2035, though they pledged to prioritize the most vulnerable nations for those funds. 

They also have begun discussing new potential revenue streams such as global taxes - on polluting industries such as aviation and cargo shipping, on oil and gas trades, on financial transactions and on super-wealthy people. 

While these efforts could help to make infrastructure projects more appealing in riskier parts of the world, the work of attracting profit-focused investors is still in progress. 

The world's green energy transition has already been slowed by war in Ukraine and a resulting energy crisis, with governments slowing green reforms and companies like BP and Unilever rowing back on their efforts. 

On that point, COP29 did not help. Amid lobbying by countries including Saudi Arabia, according to several country sources at COP29, the summit failed to offer any steps for furthering last year's COP28 pledges to shift away from fossil fuels and to triple their renewable capacity by 2030. 

"The influence of fossil fuel lobbies remains a significant obstacle that must be addressed ahead of COP30 if it is to deliver meaningful progress," said David King, chair of the Climate Crisis Advisory Group. 

Carbon boon 

For companies involved in carbon removal projects, COP29 offered a rosier outlook by delivering a long-fought agreement to resolve rules for trading national carbon offsets, including establishing a central registry that can also issue those credits and track their sales. 

The hope is that clarity around the market structure will encourage countries and companies to invest while also addressing their worries about reputational risk. The deal, however, made clear that the UN registry's involvement did not amount to an automatic seal of approval for the quality of credits. 

"There's a lot more financing to be done on the basis of this agreement," said Eliot Whittington, chief systems change officer at Cambridge Institute for Sustainability Leadership. 

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)