Breakthrough Progress Needed on All Terms of Paris Climate Agreement

The 29^th Session of the Conference of the Parties to the UN Framework Convention on Climate Change (ÑÎÐ29) will take place in Baku from 11 to 23 November, less than 30 days from now. Preparation for the momentous event has entered a final stage. On October 10-11, the Azeri capital hosted the Pre-COP29 conference. Delegates from all over the world, including high-ranking UN officials, representatives of governments and international organizations as well as climate experts, came together to coordinate their agenda positions in anticipation of international climate talks. 

Enhance Ambition and Enable Action

The Pre-COP29 conference, themed «Enhance Ambition and Enable Action», is the last key milestone in the run-up to the full-scale global climate summit in November. The theme choice was by no means arbitrary, as Azerbaijan’s COP29 Presidency vision is based on the two pillars of enhancing ambition and enabling action.

Pre-COP29 was focused on reinforcing commitments under the Paris climate agreement and building a roadmap towards the November summit. In the various panel discussions held during the conference the participants aligned their positions on the key COP29 priorities, including climate action finance, adaptation and support of vulnerable communities in global climate solutions.

It is worth to note that the Republic of Azerbaijan (RA) was designated as the host country of one of the most prominent international forums on December 11, 2023 at the COP28 plenary in Dubai, UAE. Azerbaijan’s bid was supported unanimously by all East European Parties to the UN Framework Convention on Climate Change (UNFCCC). Looking back, this momentous international agreement was adopted at the Rio de Janeiro Earth Summit in 1992 with the view to prevent dangerous anthropogenic impact on the Earth's climate system. UNFCCC went into effect on March 21, 1994. As of today, the Convention has been ratified by 197 countries (Parties). 

The pre-Conference of Parties Pre-COP29 began with a welcome address by President of Azerbaijan Ilham Aliyev read by Mukhtar Babayev, COP29 President-designate and RA Minister for Ecology and Natural Resources. In his address, the head of the Azerbaijani state noted, in particular, that climate change affects all country across continents [1], the small island developing nations being the most vulnerable. It adversely impacts livelihoods globally and impedes progress towards achieving the Sustainable Development Goals.

Of course, Azerbaijan is also affected by global climate change. Every year the republic faces decreasing water levels in its rivers leading to water scarcity. In an earlier statement made at the 2023 Baku Water Week international conference and exhibition, RA Minister of Agriculture said that in 2023, nearly 160 thousand hectares of land became barren due to drought and water shortage. Caspian Sea shallowing and desertification are recognized as a separate regional problem.

With 2024 declared, by a special presidential decree, as the «Year of Solidarity for a Green World», Azerbaijan has long been addressing environmental issues. The country is an active participant in regional environmental projects. Besides, RA is a party to a number of international agreements aimed to counter climate change. While accounting for just 0.1% of global greenhouse gas emissions, Azerbaijan has committed to achieve a 35% reduction of CO₂ emissions by 2030 and a 40% reduction by 2050, as against the 1990 level.

The national strategy «Azerbaijan 2030: National Priorities on Socio-Economic Development» is currently under implementation. One of its five priorities is to turn the Republic of Azerbaijan into a country of «green growth and clean environment».

Azerbaijan possesses a rich potential capacity of renewable energy sources (RES), estimated at nearly 200 GW, of which 157 GW is attributed to the wind resource of Azerbaijan’s Caspian Sea sector. This allows for long-term, ambitious planning in the field of clean energy and hydrogen production and export. There is significant RES potential in the liberated territories of Karabakh and Eastern Zangezur, already assigned the «green energy» zone status, where net zero emissions are expected by the middle of the century.

In the last few years the government of Azerbaijan has been prioritizing alternative energy programs. According to the RA Ministry of Energy, as of early June 2024 the country’s installed RES capacity reached 1,748.6 MW, or 20.1% of the total electric power generation system. By the end of 2027 this percentage is expected to reach 33% and by 2030, 35%.

In his address to Pre-COP29 participants, President of Azerbaijan remarked that the country invests revenues from oil and gas productions in green energy. In his view, this clearly demonstrates that being rich in fossil fuels does not prevent Baku from striding towards promoting green agenda. Ilham Aliyev added that Azerbaijan’s determination to support global climate action led it to bidding for the COP29. «I consider the unanimous support extended to Azerbaijan as a sign of the international community’s trust in our country. We are proud that the first COP in the South Caucasus and the wider region will take place in Azerbaijan», the President pointed out.

It is noteworthy that Azerbaijan has an impressive experience in holding large-scale events with international participation in different spheres including energy, culture and sports. Twenty-ninth session of the Conference of Parties to the UN Framework Convention on Climate Change will be the largest international event in the history of Azerbaijan and the first one on in the post-Soviet area. During the COP29 climate conference Baku will receive an estimated 70 to 80 thousand guests from foreign countries, including representatives of various environmental movements and organizations, energy companies, international financial institutions, leading international media groups, and high-ranking politicians. As was previously reported, more than 50 heads of state and government have confirmed their participation in COP29.

The main venue of COP29 will be the Baku Olympic Stadium which hosted the opening and closing ceremonies of the first ever European Games in June 2015. Final preparations for the global UN-sponsored climate conference are underway there. An area of 49 hectares was allocated for the Baku event, subdivided into the «blue» and «green» zones corresponding to the traditional arrangement of the global climate conference.  

The Azerbaijani ÑÎÐ29 Presidency is inspired by the slogan «Solidarity for a Green World» and throughout the process of preparation demonstrates its full commitment to inclusivity, engaging with all stakeholders in a constructive and transparent manner. Over the period the COP29 Organizing Committee team visited many countries which participate in different negotiating groups in order to hear their views and consider their needs.

The COP29 Presidency has its primary focus on addressing climate change-related problems that befall developing small island states. In the words of President Ilham Aliyev, Azerbaijan considers assistance to those countries to be its moral duty and supports them both financially and politically, including through the Commonwealth of States.

The Azerbaijani leader called on all stakeholders to engage constructively and in good faith for the sake of humanity. «While states have common but differentiated responsibilities, they should put aside disagreements, stop blaming each other and find common ground. We cannot afford to waste time on defining who is guilty for global warming, or who caused more environmental harm», Ilham Aliyev emphasized.

Focus on Climate Finance

The Baku climate summit will see the adoption of some 60 decisions. According to Yalchin Rafiyev, Azerbaijan’s Deputy Minister of Foreign Affairs and COP29 Lead Negotiator, two of them are of special importance. The first is related to climate finance and the other, to carbon markets introduction and regulation. The adoption of these two decisions will mark an important milestone for the COP process [2].

As a reminder, at the 2009 Copenhagen UN Climate Summit the developed countries collectively committed to contribute $100 billion in annual support to developing countries in satisfying their climate action needs till 2020. By that time, however, the target was never met. In May, the Organization for Economic Co-operation and Development announced that the developed countries had fulfilled their long-standing obligation in 2022 by providing close to $116 billion in climate finance to developing countries. Of that amount, nearly 70% was loans. Later on, however, the international NGO Oxfam reported that in 2022 total climate finance provided by developed countries did not exceed $35 billion.

Meanwhile, multiple international studies indicate that developing countries need trillions of dollars annually to combat climate change and address its impacts. One report found that their total financial requirements for those purposes will add up to $5.8-5.9 trillion by 2030. Other estimates put this cost at $7.8-13.6 trillion [3]. In turn, the UN Conference on Trade and Development forecasts that towards the end of this decade, global anti-climate change efforts will require annual investment of $1.55 trillion.

Agreeing on a fair and ambitious New Collective Quantified Goal (NCQG) on Climate Finance, responsive to the needs of developing, least developed and small island developing states, was defined by Azerbaijan, in the early days of its COP29 Presidency, as its top priority for the November climate conference. The NCQG, to go into effect from 2025, will be the first major climate finance target since the adoption of the Paris Agreement. It is expected to reflect all the developments that took place over the 15 years since the global economic summit in Copenhagen in the area of climate change as well as in the global financial and economic system.

The ÑÎÐ29 team works incessantly to support the parties in achieving an agreement on NCQG by arranging talks at different levels, including with high-ranking UNFCCC officials and experts. Admittedly, such talks are challenging, as countries have diverse positions on certain issues [4].

One such controversial point is an agreed climate finance amount to be provided to developing countries on an annual basis. Developing countries expect such amount to be measured in trillions of US dollars, arguing that the actual cost requirement, dictated by the drastic climate change that occurred over the last 15 years and the relevant response effort, is far beyond the initially agreed $100 billion. For instance, a group of Arab countries including Saudi Arabia, UAE and Egypt have suggested that the annual contribution be set at $1.1 trillion, of which $441 billion would be provided directly by developed countries’ governments as grants. India, African countries and small island states also believe that the required annual amount is in excess of $1 trillion, although they differ on the share which should be allocated form public funds. 

The Western developed countries argue that the $100 billion contribution should be increased only moderately, otherwise their economies may encounter serious problems. They believe that the only way to set a higher target is to expand the pool of donors by including some developing countries, in particular, China (as the world’s second largest economy), and countries with high per capita GDP such as Qatar, Singapore, South Korea, Saudi Arabia, and the United Arab Emirates. In their view, these nations are capable of making financial commitments as part of the anti-global warming effort and, moreover, must do it given their respective greenhouse gas emission contributions.

The COP29 Presidency works hard to build bridges between political leaders who must overcome most difficult issues to reach an agreement at the upcoming climate summit. Baku is encouraging the parties to converge positions on those matters towards a final solution. As some of the current differences on NCQD are related to political concerns, Azerbaijan makes the point of raising the climate finance issue in all available multilateral forums as part of its strategy to reach a consensus at COP29 [5].

In particular, last September, in the course of the 79th session of the United Nations General Assembly (UN GA) in New York the COP29 team held a series of talks on NCQG with high level representatives of a broad range of countries including the chairs of negotiating groups. On September 27, RA Foreign Minister Jeyhun Bayramov addressed the Informal Ministerial Dialogue on climate finance. As he spoke at the 79th UN GA session the Azerbaijani top diplomat called on the attending parties to work constructively on the NCQD and steer the process to a successful outcome at the November summit [6].

Official ministerial talks on NCQD that preceded Pre-COP29 as well as the informal meeting of negotiating teams’ chairs appear to invite cautious optimism. There is some indication of possible convergence on certain elements of a new finance goal, ÑÎÐ29 President-Designate Mukhtar Babayev said as he spoke at the Pre-ÑÎÐ29 conference. He pointed out that Baku is now focused on laying a solid foundation for negotiating other elements.

In his address to Pre-COP29 participants President of Azerbaijan Ilham Aliyev reiterated that reaching a consensus on NCQG will require cooperation throughout the international community: «Neither Azerbaijan in its capacity of the COP29 Presidency, nor any other state, can take decision on behalf of others. Our role is to provide platform for facilitating negotiations, which we believe we have been fulfilling impartially».

Regulated Carbon Markets

As we noted before, the Baku COP29 Presidency’s second priority will be for the summit to resolve on the establishment of a regulated carbon market in line with Article 6 of the Paris Agreement – a decision awaited over a number of years by the international climate community.

Carbon markets are trading systems in which carbon credits are sold and bought. Companies or individuals can use carbon markets to compensate for their greenhouse gas emissions by purchasing carbon credits from entities that remove or reduce CO₂ emissions. One tradable carbon credit equals one ton of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered or avoided. When a credit is used to reduce, sequester, or avoid emissions, it becomes an offset and is no longer tradable.

As of today, there are broadly two types of carbon markets: compliance and voluntary [7]. The former are created under a law or other regulatory instruments; they are regulated by legal mechanisms and aimed at CO₂ emission reductions, including through the system of quotas. One example is the European emissions trading market established in 2005 following the adoption of the 1997 Kyoto Protocol, which provides for fixing emissions reduction targets for the signatory nations.

Voluntary carbon markets, national and international, refer to the issuance, buying and selling of carbon credits on a voluntary basis. The current supply of voluntary carbon credits comes mostly from private entities that develop carbon projects, or governments that develop programs certified by carbon standards that generate emission reductions and/or removals.

Voluntary carbon markets have been developing since the 2000’s in parallel with compliance carbon markets, responding to the demand from organizations that were not obliged to participate in emissions reduction programs. In contrast to the compliance arrangement, voluntary markets are not normally subject to any special government supervision.

According to COP29 Lead Negotiator Yalchin Rafiyev, a resolution on the establishment of regulated carbon markets is crucial for many countries, predominantly the developing economies. In fact, if carbon markets were to evolve into a solid regulated market, they could provide developing countries with an additional source of funding for their own climate action. In this respect Azerbaijan is taking active steps to promote the relevant decision. Inter alia, the ÑÎÐ29 Presidency team cooperates closely with a number of states which maintain their special positions on the issue consolidating them through various platforms.

In his article published recently by Climate Home News, COP29 President-Designate Mukhtar Babayev wrote that the Pre-COP week began with progress on the technical work needed to agree on and establish Article 6 of the Paris Agreement at COP29, the basis for implementing effective carbon markets, which could provide up to $250 billion of annual efficiency savings by 2030. 

The Baku Declarations

The reader will be reminded that under the COP29 Presidency, Baku has launched 14 global initiatives aimed to drive action across all climate pillars such as energy, finance, agriculture, cities, human development, and the climate-peace nexus, among others [8]. They were developed by Azerbaijani experts in collaboration with ÑÎÐ29 Presidency partners globally, in particular, the United Nations Task Force on climate summit and 30 different UN agencies, as well as international organizations and multilateral bodies, national governments and non-state actors.

According to COP29 Lead Negotiator Yalchin Rafiyev, the climate summit is expected on translate many of those global initiatives into declarations and commitments that will go down in COP history as Baku documents [9]. One important finance initiative is establishment of the Climate Finance Action Fund (CFAF) with the headquarters and secretariat located in Baku [10]. CFAF is designed to offer immediately accessible funding to address the consequences of natural disasters in Small Island Developing States, Least Developed Countries, and to other vulnerable developing communities. CFAF stands out among other funds in that contributors are fossil fuel producing countries as well as oil, gas and coal companies. The member countries will commit to transfer annual contributions as a fixed sum or based on volume of production.

CFAF will become operational at the conclusion of the initial fundraising round, which seeks to capitalize the fund with $1 billion, and when 10 contributing countries are committed as shareholders. Its board of directors is expected to include representatives from contributors, and an independent audit committee will publish quarterly data including financial reports and project evaluations. Decisions will be made by shareholders collectively.

CFAF will be the first catalytic public-private partnership fund in the COP history, mobilizing the private sector and de-risking investment. It will allocate 50% of revenue to target climate projects in developing countries, with special emphasis on clean energy, energy efficiency, climate resilience and green technologies. The other half will help the parties to meet their NDC commitments, to keep the 1.5°C target within reach. Twenty percent of investment earnings will be deposited in a Rapid Response Funding Facility (2R2F) to provide highly concessional, immediately accessible grant-based support for disaster recovery operations.

Another crucial initiative of the Azerbaijani COP29 Presidency is the Baku Global Climate Transparency Platform (BTP), presented in the country’s capital city during the High-Level Dialogue on Climate Transparency in early September.

Notably, with the adoption of the Paris Agreement the UNFCCC parties created the Enhanced Transparency Framework (ETF). Under EFT, countries must submit Biennial Transparency Reports (BTR).

BTRs, scheduled to be submitted by countries for the first time in 2024, will play a key role in providing an objective assessment of their climate change-related efforts. The reports will facilitate fulfillment of countries’ commitments under the Paris Agreement and will contribute substantially to the global action against climate change. In this context, the BTP mechanism is aimed to enhance global cooperation towards climate transparency, promote trust, and support developing countries in the preparation of their biennial reports – a process which is quite complex, both technically and in substance [11]. Apart from the sheer volume of work to be completed, the BTR process involves collection and analysis of substantial statistical datasets, which in turn is demanding in terms of expertise and specialist skills required. Since the beginning of the year, Azerbaijan has initiated and supported training programs for African states in Togo and Kenia. Similar programs were delivered in Kazakhstan for the countries of Eastern Europe, Southern Caucasus and Central Asia.

The Climate Troika

Back in 2015, nearly 200 parties to the UNFCCC signed the Paris Agreement at the ÑÎÐ21. In doing so they set themselves the key climate goal, i. e. to limit the increase in global temperature by 1.5 degrees Celsius over the pre-industrial level. Each state thus committed to cut greenhouse gas emissions, promote green energy, and take other steps to combat climate change. The goal however seems to be increasingly unattainable, as global greenhouse gas emissions are still on the rise. The UN estimates that by the end of the century the world will warm up by 2.5-2.9°C. According to the Intergovernmental Panel on Climate Change, the 1.5°C threshold is likely to be reached between 2030 and 2035.

The UNFCCC parties are currently implementing their measures to counter climate change through Nationally Determined Contributions (NDC), a key element of the Paris Agreement designed to facilitate the attainment of its long-term goals. The NDCs fix the targets that countries undertake to meet and that will be subject to evaluation. The Paris Agreement requires the parties to put forward new NDCs every five years, and every time the commitments package must be tighter and more ambiguous than the previous one. ÑÎÐ29 Presidency plays a leading role and is currently working on Azerbaijan’s updated national target.

One important aspect of COP29 Presidency is further elaboration on the outcomes of the first Global Stocktake (GST) adopted at COP28 in Dubai on December 13. GST outcomes indicate that the global community is off track to Paris Agreement goals. Given that the top level goal is to keep global temperature rise to below 1.5 degrees Celsius, the Parties rallied behind a shared understanding of the gaps in global climate action and developed a common understanding of the required course correction. The Dubai climate summit created the COP Presidencies Troika format to include the UAE, Azerbaijan, and Brazil. The latter, as is well known, will host the next UN Climate Conference in 2025.

With the Troika, the countries aim to build continuity and coherence between Presidencies to ensure momentum going from Dubai Conference into Baku COP29 in 2024 and beyond into Belem COP30 in 2025, through an innovative and strategic partnership that can help Parties move from negotiated texts to action and implementation, in order to help put into action what was agreed multilaterally [12].

COP Presidencies Troika is working collectively on the «Roadmap to Mission 1.5 C°» approved at ÑÎÐ28. The initiative is aimed to significantly enhance international cooperation and the international enabling environment to stimulate ambition in the next round of nationally determined contributions, with a view to enhancing action and implementation over this critical decade and keeping 1.5°C within reach. The countries are expected to submit their NDCs by early 2025. The NDCs must also be informed by the first GST, including backed by accessible, affordable, transparent and inclusive climate finance and other means of implementation and provision of support so to ensure that the world can truly redefine collective ambition and accelerate implementation. A side event entitled «Troika Roadmap to Mission 1.5 C°» was co-hosted by the COP28, COP29 and COP30 Presidencies at Pre-COP29 in Baku.

In addition to putting together a broad agenda for is COP29 Presidency, Azerbaijan is focused on translating the earlier decisions adopted by ÑÎÐ28 into meaningful and practical steps. For example, Azerbaijan contributed massively to the spectacular progress that was achieved in launching the specialized fund to cover loss and damage suffered by particularly vulnerable states as a result of climate disasters (Loss and Damage Fund, LDF). The fund is intended to help developing countries cover their expenses in addressing adverse impacts of climate change, including economic and non-economic losses and damage, affecting people, nature and economy. It will be remembered that the decision to set up LDF was made at the 27^th international climate conference that took place in Sharm-el-Sheikh, Egypt in November 2022, and was recognized as ÑÎÐ27’s principal achievement. This was a major and long-sought victory for developing countries that are especially vulnerable to climate change.

The fund was declared operational at the Dubai climate conference last year. Also during ÑÎÐ28, a number of countries including UAE, Germany, Italy, France, UK, USA and China announced their contributions amounting to around $800 million. Incidentally, LDF financial support may be provided on a voluntary basis, in the form of grants and concessional financing, and used as needed by any affected country. The World Bank will be responsible for overall coordination of the fund.

In 2024, important decisions were made towards the Fund’s full operationalization. In May, the first LDF board session in Abu Dhabi discussed administrative steps necessary to launch the fund and start disbursing assistance as early as possible. Priorities included the choice of domicile for the Fund’s headquarters. As it met for the second time in July in Songdo, South Korea, the Fund Board selected the Philippines as its host country. The September Board meeting organized by COP29 Presidency in Baku culminated in the adoption of historical decisions: to assume the World Bank’s Financial Intermediary Fund status, and to fully operationalize LDF.

Another important decision was the selection of Ibrahima Cheikh Diong, a Senegalese and American national, as the LDF Executive Director. Mr. Diong brings over three decades of global experience in climate change, finance and development [13]. He will reportedly provide strategic leadership and oversight of the Fund’s Secretariat and assist the Board in delivering on the Fund’s mandate to provide financial support to vulnerable countries hardest hit by climate impacts. The Baku LDF meeting also addressed important points related to the high level dialogue on mechanisms of loss and damage compensation which is to be officially launched at COP29 world climate leaders’ summit.

LDF headquarter domiciliation and Executive Director selection constitute a major contribution of Azerbaijan to the Fund’s operationalization. As COP29 President-Designate Mukhtar Babayev put it, this breakthrough marks a crucial step in enabling action on climate change [14].

As the COP29 host, Azerbaijan is determined to work with the countries that have pledged contributions to the Fund, to pass from words to actions and sign relevant agreements on funding to be disbursed to communities who particularly need it. Baku is expected to propose additional contributions to LDF and a substantial increase in contributions to the UN Green Climate Fund and the Adaptation Fund.

Conclusions

In summary, the global community has great expectations of the oncoming climate summit in Baku because of the anticipated adoption of a new climate finance deal that will enable developing countries to finance their climate action. Therefore, having announced climate finance as its COP29 Presidency priority, Azerbaijan is seeking a fair distribution of financial burden among countries to prevent catastrophic developments caused by climate change. Baku takes great effort to facilitate a consensus between developed and developing countries on NCQG. If a new climate target is adopted, the Baku climate summit will go down in the history of ÑÎÐ as well as in world history. For Azerbaijan, it will constitute a great political and diplomatic victory, enabling it to further strengthen its geopolitical positions in the region and gain international authority.