The 29th United Nations Climate Change Conference (COP29), held in Baku, Azerbaijan, concluded with controversial financial outcomes that will shape global sustainability efforts. Here are the key takeaways and their implications for businesses and organisations committed to driving meaningful climate action.

1. Climate Finance: $1.3 Trillion Encouraged, $300 Billion Committed

COP29 concluded with an outlined annual target of $1.3 trillion in climate finance by 2035, outsourcing contributions from both public and private outlets of developed nations. Economists identify this figure as essential to effectively combat global warming.

However, such nations pledged via the Baku accord to officially mobilize just $300 billion annually by 2035 via grants and low-interest loans to assist developing countries in mitigating and adapting to climate change. While the $300 billion target does increase the earlier commitment from wealthy nations to provide $100 billion per year in climate finance by 2020, concerns are raised due to the initial target being belatedly achieved in 2022.

The list of countries obligated to contribute—comprising around two dozen industrialised nations such as the U.S., European countries, and Canada—traces back to agreements made during U.N. climate talks in 1992. European governments have called for contributions from sizeable developing nations such as China—the world’s second-largest economy—and oil-rich Gulf states. While the deal encourages these countries to provide funding, it stops short of making this mandatory.

Implications

This increase in climate finance presents opportunities for businesses, particularly those in renewable energy, clean technology, and sustainable infrastructure sectors. The private sector will play a key role in achieving the $1.3 trillion target, encouraging businesses to align their strategies with these funding streams.

2. Carbon Credit Trading: Kyoto Credits Recycled to Baku

The Clean Development Mechanism (CDM), established under Article 12 of the Kyoto Protocol, enables countries with emission-reduction targets (Annex B Parties) to carry out emission-reduction projects in developing nations. These projects generate certified emission reduction (CER) credits, each representing one tonne of CO2, which can be sold and used to help meet Kyoto Protocol commitments.

At COP29, the Article 6.4 carbon crediting mechanism rules established allow old CDM projects to transition easily to the Article 6.4 mechanism and issue credits for reductions between 2021 and 2025, with minimal scrutiny apart from approval by their host countries.

While some key principles were established, such as tighter baseline-setting for carbon credits and likely exclusion of projects that rely on fossil fuel infrastructure, critical gaps remain in the rules for carbon removals and ensuring the long-term storage of CO2. Starting next year, the Supervisory Body will work on clarifying these rules, guided by the latest science, including research suggesting that CO2 storage must last at least 1,000 years to neutralise emissions effectively.

Implications

The carbon market outcomes from COP29 present both opportunities and challenges for businesses. While the Article 6.4 mechanism offers a pathway for companies to engage in carbon markets and contribute to emissions reductions, the reliance on transitioning CDM projects and the lack of clear rules for removals and long-term storage raise concerns about credit quality and market integrity.

3. Predicted USA Policies Leave Opportunity for China

At COP29, President Biden’s delegation highlighted America’s recent strides in climate action. Key achievements included the Inflation Reduction Act, the world’s largest clean energy investment, and a $11 billion contribution to international climate finance in 2024—a significant portion of the $100 billion annual commitment by wealthy nations. The delegation also outlined plans to triple nuclear energy output by 2050 and touted progress in reducing methane emissions, a highly potent greenhouse gas.

However, with Donald Trump set to take office in January, the US is expected to withdraw from the Paris Agreement again, reversing Biden’s decision to rejoin. Trump has also vowed to expand fossil fuel production and reduce incentives for clean technologies like electric vehicles, signalling a dramatic shift in climate policy.

Adding to these challenges, Trump is likely to impose tariffs on Chinese clean energy products, such as solar panels and electric vehicles. These tariffs could raise costs for critical technologies, slowing their adoption and complicating decarbonisation efforts in the US.

This policy change comes as the urgency to address climate change grows, following a year of catastrophic disasters, including record heat waves, hurricanes, and wildfires. These events disproportionately impact nations that contribute the least to global emissions. As the US retreats from global climate leadership, China has indicated its willingness to step into the void, solidifying its dominance in clean energy technologies and positioning itself as a key player in international climate action.

Implications

The expected policy shift under Trump, including tariffs on Chinese clean energy products and reduced incentives for renewables, could disrupt supply chains and raise costs for US businesses reliant on solar panels and EVs. Companies may need to adapt by diversifying suppliers or focusing on domestic production. Globally, businesses aligned with sustainability and resilient practices will be better positioned to navigate these challenges and capitalise on emerging opportunities in clean energy markets.