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The road to COP29: Finance, geopolitical uncertainty, and the need for a new global paradigm

February 15, 2024

2024 begins with plenty of promise and opportunities for global climate action, stirred by progress at COP28 and beyond, but yet more challenges to confront. 2023 was the hottest year on record, and the conclusion of the first Global Stocktake confirmed that the world is far off track from its commitments to address climate change and rapidly reduce greenhouse gas emissions. While COP28 yielded major wins for technology inclusivity and pledges to scale key technologies, the fruit of those agreements and the world’s ability to get back on track will depend on effective planning, financing, and implementation. Ahead of COP29 in Azerbaijan this November, countries and regions will need to mobilize new planning processes and financing for climate action while navigating the geopolitical, economic, and security challenges  in the year ahead.  

COP28 in the United Arab Emirates brought landmark pledges and agreements, kickstarting a shift towards sector-specific implementation in climate negotiations. The final negotiated decision highlighted key roles for nuclear energy and carbon management for the first time, a major step forward in technology inclusivity at the multilateral level. That decision also acknowledged that different regions will have diverging energy transition strategies and timelines, a critical recognition that one size will not fit all when it comes to transition pathways.  

These pragmatic adoptions demonstrate a welcome and necessary shift in multilateral climate negotiations toward adapting to reality, rather than willing reality to adapt to the challenge. Outside of the negotiations, countries pledged billions in new methane abatement funding, to triple renewable energy and double energy efficiency, to scale carbon management technologies, and to triple nuclear energy globally. Major oil and gas producers committed to the groundbreaking Oil and Gas Decarbonization Charter, once again signaling the urgent need for methane abatement and carbon management in the oil and gas supply chain.  

In all of these ways and more, the COP process has been somewhat successful in achieving what it was designed to achieve: increased ambition. Now we need to rethink our planning processes and financing to get steel in the ground and make that ambition achievable. 

But with ongoing conflicts around the world, along with rising geopolitical tensions and a period of high interest rates, the economic and geopolitical context in which these steps must be taken is murky at best. In 2024, for the first time ever, more than half of the global population will vote in democratic elections, including potentially pivotal elections in the United States, the European Union, the United Kingdom, in a third of the African continent, and in Taiwan. With governments increasingly focused on their electorates, domestic, security and economic imperatives will come before climate action. These imperatives have also driven industrial and trade policies that aim to decouple from global supply chains and favor domestic industries, precisely when open access to clean energy markets for all nations is most critical. How geopolitics, elections, and trade unfold in 2024 may well make or break the world’s ability to execute upon its climate ambition. The potential for and role of multilateral institutions — already hotly contested — and discussions will similarly be firmed or broken; and if recent trends are any indication, the latter may be more likely.  

Three things to expect at COP29 in Baku 

It will be in that global context that the negotiations and discussions leading up to and at COP29 will take place. Azerbaijan will host, marking the second consecutive major fossil fuel exporter to host the climate conference; and in this case, a petrostate inextricably linked with geopolitical complexity, as a major gas exporter to Europe, an importer of Russian gas, and a state in the midst of its own regional conflict with Armenia. The country — not a European Union member state — also sits in Eastern Europe as a door to the Asian continent, providing a unique regional perspective and context to the conference. With continued fragmentation of the western-dominated geopolitical paradigm, COP’s history as a western-driven conference may be fractured for good, allowing new voices to take the lead but potentially making collective action even more difficult.  

1. Geopolitics, oil and gas, and the geopolitics of oil and gas

Geopolitics and the role of oil and gas will thus once again be at the fore, along with the urgent need for mobilizing finance, with the new collective quantified goal on climate finance (NCQG) to be agreed by the end of this year. Building on COP28’s focus on the phase out of fossil fuels, there is likely to be a shift in attention to fossil fuel subsidies, including to ensure that the agreement from COP26 (to phase-out inefficient fossil fuel subsidies) is being implemented, and that investment is channeled into clean energy rather than fossil fuels. Increased ambition in nationally determined contributions (NDCs) will also continue to feature on the agenda, as Parties call for countries to respond to the Global Stocktake. A clearer definition of what Parties should include in NDCs (known as ‘NDC features’ — which has been historically difficult to reach any consensus on due to the nationally determined nature of NDCs) may also find its way onto the agenda, providing an opportunity to further highlight the importance of sectoral implementation to achieve country targets.  

2. Figuring out finance, and facing shortfalls

While finance is the buzzword ahead of COP29 — already called the “Finance COP” — some challenges remain underappreciated and some of the often-touted financial instruments do not scale to reach what’s needed. A headline of COP28 was the operationalization of the Loss and Damage Fund and roughly $700 million in pledges to fill the fund. For comparison, the global climate financing gap is estimated between $4.5 to $10 trillion dollars per year. Emerging and developing economies are estimated to require at least double to quadruple the amount of clean energy investment compared to today, an estimate that does not include needs for adaptation or other development goals. Moving forward, it will be important to recognize that the often-promoted remedies to this challenge do not scale to the needs, including blended and concessionary finance. Importantly, most models that produce global pathways for decarbonization lack many of the key basic elements of macroeconomic constraints or realistic representations of capital markets, leaving policymakers blind to real-world constraints. A full set of scalable solutions can only be developed with a better understanding of the challenge, which will require a better assessment of whether or how the overall increase in energy system capital needs can be sourced, how capital can be made more affordable to emerging and developing economies and how policy can accelerate capital deployment timelines. 

3. Fractures, fissures, and new fusions 

In an increasingly fractured world, more progress at regional climate weeks and in bi- and trilateral partnerships will be critical to advancing action. China and India’s hesitance to sign the 3x renewables pledge at COP28 — eventually agreeing to add it to the negotiated agreement — despite being the world’s largest producer of renewable energy technologies and already having committed to massively scaling renewable power, respectively, signals the increasing geopolitical complexity of multilateral agreements. The growth of the BRICS coalition and waning consensus among OECD countries as to climate policies and pathways suggest that progress will depend on collaboration and agreements below the multilateral level. The regional climate weeks will become as important as COP negotiations, as they can facilitate regional energy development planning and foster collaboration and action at a level where it is achievable. Seeking consensus for ambition is difficult enough; consensus for action is near impossible.  

2024 could prove to be a landmark year for climate action if these shifts continue. Nuclear energy’s resurgence could bring a 24/7 clean grid and decarbonized energy system more within reach and in focus, while methane abatement investments can immediately slow warming globally. Raised ambition and investments in carbon management technologies will make a net-zero emissions world technically feasible in the longer term. And a new international climate action paradigm — featuring more diverse voices and leaders, pragmatic sectoral and region-based partnerships, and a recognition that climate is an economic and security policy priority — could clear the path for a durable and equitable transition toward a more abundant, accessible, and cleaner energy system. 

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