COP29 Outcomes

Introduction

COP29 came to a close in the early hours of Sunday 24 November (35 hours into overtime) with some fraught, last-minute negotiations to finalise the key texts. With its remit being the ‘finance COP’, COP29 achieved a result on setting a new climate finance goal. However, many developing countries were unhappy with both the outcome and the process that underpinned this result. In good news, however, the final set of rules required to operationalise the Paris Agreement’s Article 6 carbon trading mechanisms were finalised. Other matters, such as progressing the outcomes of the global stocktake from last year’s COP in Dubai, will be carried forward to COP30 in Brazil next year.

If you are interested in finding out more about the COP outcomes, please join us for our webinar on “Beyond COP29 – Reshaping climate action, climate finance and carbon markets” taking place at 12pm on Thursday 28 November. Register to attend at the link here.

Operationalisation of Article 6

Article 6 of the Paris Agreement

The Paris Agreement, signed at the 21st COP (COP21) in 2015, introduced Article 6 as a mechanism to enable Parties to voluntarily collaborate to achieve their Nationally Determined Contributions (NDCs) (i.e. their national emissions reduction targets) and higher ambitions in their mitigation outcomes.

Article 6 provides three avenues (Article 6.2, Article 6.4 and Article 6.8) by which Parties can do so:

• Article 6.2 allows Parties to enter into bilateral and/or multilateral agreements whereby emissions mitigation taking place in one country (Host Country) can be used by another country (Buyer) towards its NDC. That mitigation is referred to as an internationally transferred mitigation outcome (ITMO). A Host Country must ensure it does not count an ITMO towards its own NDC. This is achieved through the Host Country applying an accounting mechanism known as a “corresponding adjustment”, which essentially requires it to “add-back” the emissions mitigation onto its national accounts.
• Article 6.4 provides for an international voluntary carbon market to be established under the supervision of a UN supervisory body (previously referred to as the Sustainable Development Mechanism, but now known as the Paris Agreement Crediting Mechanism).
• Article 6.8 recognises the role of “non-market approaches”, such as technology transfers and capacity building, by which Parties can assist one another to achieve their NDCs.

At COP21, the Parties were unable to reach a consensus on decisions required to operationalise these carbon trading mechanisms. As such, at each subsequent COP, the Parties have sought to agree rules for how they should work in practice. In particular, a key focus heading into COP29 was achieving the operationalisation of Article 6.4.

Article 6.2 

Before COP29, Article 6.2 was technically operable, and Parties have already been engaging with it. The rulebook for this mechanism was adopted at COP24 and subsequently developed at COP26 and COP27.

The International Emissions Trading Association reports that, as of 21 November 2024, there have already been 51 cooperative approaches (including both signed bilateral agreements and memoranda of understanding) and 29 letters of authorisation issued.

However, key components to ensure greater transparency and integrity of Article 6.2 remained outstanding. These included:

• the required content of “authorisations” (i.e. the permission given by a Host Country for an ITMO generated within its jurisdiction to be used by a Buyer, usually with restrictions on who can use it and in what circumstances);
• once provided, how and when changes can be made to “authorisations”;
• the operation of the registry which records cooperative approaches;
• how to address inconsistences in reporting; and
• the definition of “cooperative approaches”.

At COP29, the Parties reached a key agreement on Article 6.2 (please find the advance unedited version of this decision here), which provides:

• specifications on the content of an authorisation (and a request to the UNFCCC Secretariat to prepare a voluntary standardised template authorisation);¹
• that authorisations may only be changed before the “first transfer” of an ITMO (unless in accordance with the cooperative approach agreed between the Host Country and Buyer), and that the circumstances for any changes should be specified in the authorisation itself;²
• details on when a “first transfer” may take place and how this should be recorded by Parties;³
• that the mechanism’s centralised accounting and reporting platform will allow for the generation of summaries of non-confidential information submitted by Countries (relating to authorisations, first transfers, use of ITMOs towards NDCs, etc) as a transparency measure;⁴ and
• a process by which reporting inconsistences can be identified, notified to the Parties and then corrected by a Party or Parties participating in a cooperative approach.⁵

Following these developments, some of the Parties already engaging in Article 6.2 may need to review their arrangements (for example, to ensure that their authorisations contain all required information). However, more broadly, we should now anticipate a rapid uptake in Article 6.2 engagement.

Article 6.4 

Prior to COP29, there had likewise been a consistent failure of the Parties to substantively operationalise Article 6.4, particularly in relation to the registry mechanism and the content and timing of authorisations.

An additional complexity of Article 6.4 is that it permits the issuance of emissions reduction units which are not authorised for use towards another party’s NDC or other international mitigation purposes (OIMP) (and thus they do not require the generating Party to carry out a corresponding adjustment).

The Parties had previously been undecided about whether to permit ‘non-authorised’ units to be authorised at a later date for these international uses (which would grant more flexibility to the generating Parties but would complicate the Article 6.4 mechanism’s overall accounting protocols).

In the COP29 closing plenary, further guidance was adopted in relation to these issues. This provides that:

• the registries operated by participating Parties may voluntarily connect to the Article 6.4 registry and this connection will enable the “ability to pull and view data on and information on holdings” to avoid double counting and ensure transparency;⁶
• in relation to ‘non-authorised’ units, generating Parties may authorise these post-issuance (for use towards other Party’s NDCs or OIMP) within a timeframe to be determined by the Supervisory Body (if it determines that such a timeframe is necessary);⁷ and
• afforestation and reforestation project and programme activities under the Clean Development Mechanism (CDM) may be transitioned to the Article 6.4 mechanism before 1 January 2026 so long as both: (a) the request to transition has been made by the project participant; and (b) the approval of such transition has been given by the designated national authority.⁸

The projects which transition across from the CDM will need to comply with the recently adopted Article 6.4 standards. These were initially drafted as recommendations from the Supervisory Body, which the Parties failed to adopt at COP28 in Dubai. As such, in October 2024, the Supervisory Body took the unusual step of converting them into the following two standards:

• a standard for methodologies (incorporating rules and protocols for the development and assessment of Article 6 methodologies (i.e. for generating Article 6.4 credits));⁹ and
• a standard for removals (with requirements for Article 6 activities involving removals).¹⁰

In response to this development, the Parties “took note” of these standards as part of the COP29 opening plenary on 11 November.¹¹ With the intention of avoiding future roadblocks, the Parties noted that the Supervisory Body will elaborate and implement these standards (whilst reporting to the Parties on its implementation of them).¹²

Since this event, we have heard from the UNFCCC Secretariat that the Supervisory Body will be looking to start drafting methodologies with a focus on those pertaining to energy, waste, distribution systems (including cookstoves) and rural electrification.

It has been suggested that the first new Article 6.4 projects (i.e. not transitioned across from the CDM) may be registered as soon as next year. To accommodate this, it is expected that the registry and centralised accounting and reporting platform will also be finalised in 2025.

It is worth noting that is unlikely any further changes will be made to the Article 6 Rulebook itself until COP33 in 2028, when a review of these rules has been scheduled. This timing is intended to ensure that the focus of the next few years is on the implementation and operationalisation of Article 6.

New Collective Quantified Goal

COP29 in Baku was labelled the ‘finance COP’. This is because, under the Paris Agreement, Parties agreed to extend the $100 billion finance pledge made by developed countries at COP15 in Copenhagen through to 2025 (when it was understood that a new climate finance goal would take effect). This new target became known as the New Collective Quantified Goal (NCQG).

Finance is both the most critical issue negotiated under the UNFCCC (it is a frequently stated truism at COP summits that no workstream can be actioned without it first being financed) and the most contentious. As we see increasingly more devastating (and costly) consequences of the climate crisis, Parties such as the Least Developed Countries (LDCs) and Small Island Developing States are acutely aware that they are paying a heavy price for the current and historical greenhouse emissions of developed countries.

To illustrate this point, the final NCQG text from COP29 highlights that developing countries will require “USD 5.1-6.8 trillion” to meet the costed needs of their NDCs up to 2030 and a further “USD 215-387 billion” in adaptation finance up to 2030 too.¹³

At COP, the NCQG was the primary issue which drove the negotiations into overtime. (Throughout COP, there had been consistent talk on the ground about the divergence in the proposed NCQG texts and the possibility of no deal being reached at all). To the very end, developed and developing countries clashed over the exact amount of climate finance which developed countries should be explicitly required to contribute to the ultimate goal of mobilising $1.3 trillion for climate action in developing countries.

As the positions narrowed, developing countries called for this figure to be $500 billion a year whilst developed countries offered $250 billion a year. In the final agreement, developed countries agreed to take the lead on a goal of providing $300 billion to developing countries per year by 2035.¹⁴

While explicit references to carbon markets were deleted from the final NCQG text, the language used may nonetheless indicate possible openings for this with the origins of funding including sources both “public and private, bilateral and multilateral, including alternative sources of finance”.¹⁵

Immediately following the gavel coming down on the final COP29 agreement, many countries were quick to demonstrate their disapproval of the NCQG. A negotiator from India stated that it was “indicative of a lack of trust” and another from Nigeria referred to the text as an “insult”.

The possibility of the NCQG being subject to further negotiations was recognised in the text itself with the last-minute addition of a vague commitment to launch a “Baku to Belém Roadmap to 1.3T” to scale up climate finance.¹⁶

Other developments

In addition to the landmark progress made in relation to Article 6 and the NCQG, we also saw developments (or a lack thereof) in other areas too.

Adaptation

Within the adaptation track, the priority item for COP29 seemed to be the global goal on adaptation (GGA), which aims to enhance capacity and resilience, and reduce vulnerability to climate change. Another outcome of the Paris Agreement, the GGA can be conceived of as the ‘adaptation equivalent’ of that agreement’s more famous 1.5oC and 2oC global warming targets.

Last year at COP28, the Parties agreed on eleven targets for global climate resilience, in addition to a UAE-Belém work programme to establish indicators for the progress towards these targets. These indicators were the focus of the COP29 negotiations with some contention surrounding the inclusion of a “means of implementation” indicator (i.e. finance) and the vaguer need for “transformational adaptation”. To reach an agreement, the final GGA text included both phrases.¹⁷

However, there was less progress made in relation to National Adaptation Plans (NAPs), which are a tool for developing countries and LDCs to map out their medium- and long-term adaptation plans. Despite progress in the first week, a persistent divergence in views was demonstrated by the 6-page working text on NAPs containing 159 square brackets by the end of week two. As such, the Parties agreed to postpone further negotiation of the text to the next meeting of the Subsidiary Bodies (SB) in 2025.

Likewise, other items under the adaptation workstream, including the adaptation fund and the report of the adaptation committee, were postponed to the SB meeting in Bonn in June next year.

Loss and Damage

The Fund for Responding to Loss and Damage (Fund) was agreed to at COP27 and formally established on the first day of COP28. It stands as a measure to compensate vulnerable countries for the damage caused by the impacts of the climate crisis.

Following Sweden’s $200 million pledge to the Fund in the first week of COP29, on 19 November, Australia announced it would also contribute USD $32 million.¹⁸ The Fund is expected to begin financing projects, such as adaptation measures, from 2025.

Nationally Determined Contributions

On the second day of the summit, COP29 President Mukhtar Babayev called for countries to submit their updated Nationally Determined Contributions (NDCs) ahead of the February 2025 deadline.

The United Arab Emirates was the first country to submit an updated NDC (in November 2024, ahead of COP29), whilst three other Parties (including Brazil and the UK) submitted their NDCs during COP29. The UK has been applauded for its new and more ambitious target of reducing its emissions by 81% below 1990 levels by 2035.

It remains to be seen whether Australia will submit its 2035 NDC by the deadline of February 2025, having regard to the fact that an election is likely to be called in the first quarter of next year.

Hosting COP31

Finally, Australia had hoped to be confirmed at COP29 as the host of COP31 in 2026 (a role it has promised to share with a Pacific Island nation). However, Türkiye has still not withdrawn its own bid to host the summit and, owing to the UN’s consensus-driven process, no decision can be reached until one country drops its bid.

A decision on the host of COP31 will now need to be made at Bonn in June 2025 or at COP30 in Brazil, which unfortunately leaves less time for the eventual host to undertake the necessary preparations.

Conclusion

The outcome of COP29 was not the transformative change that many hoped for from Baku. However, as highlighted above, we nonetheless saw meaningful progress across several key tracks. This is especially true in relation to Article 6 of the Paris Agreement, and we look forward to assisting clients to leverage the fresh opportunities which will arise from the operationalisation of Article 6.2 and 6.4.

If you would like advice on how the outcomes of COP29 may affect you and your business, please do not hesitate to contact a member of NRF’s climate change practice.

Our COP29 Webinar

We recently held a COP29 outcomes webinar which provided even more insights on the final agreement from Baku, and its potential implications. You can watch the webinar recording here.