Written By: Michelle LIE
Verified By: William DANIEL
It has been weeks since COP 29, hosted in Baku, Azerbaijan, concluded its agenda. While efforts to limit global warming to 1.5°C remain ongoing, several significant outcomes from COP 29 stand out. What do these developments mean for the future of global climate action?
Climate Finance Allocation
A total of 23 developed countries, along with the European Union, reaffirmed their obligations under the United Nations Framework Convention on Climate Change (UNFCCC). The long-term financial target is set at $1.3 trillion annually by 2035, mobilized from both public and private sources. This includes tripling the annual finance for developing nations to $300 billion by the same deadline. These measures aim to redirect the global financial system toward climate action, such as transition to renewable energy, increase resilience to extreme weather patterns, and prioritizing the needs of vulnerable nations.
Finalization of Article 6 of the Paris Agreement
A focal point of COP 29 was the finalization of Article 6, which governs carbon markets
Article 6.2 establishes an international body allowing countries to trade Internationally Transferred Mitigation Outcomes (ITMOs), carbon credits that can be traded internationally through cooperative approaches, including bilateral, multilateral, and unilateral agreements. ITMOs represent emission reductions in one country that can be purchased and applied toward another’s climate targets. However, concerns remain as the United Nations (UN) will neither oversee the quality of environmental outcomes nor enforce penalties for errors or inconsistencies.
Article 6.4 establishes a global crediting mechanism for emissions reductions, managed by the Article 6.4 Supervisory Body. Credit issuance and trading are expected to commence in 2026. Notably, older Clean Development Mechanism (CDM) projects can transition to this mechanism for reductions achieved between 2021 and 2025 with host country approval. A portion of these credits—5%—will fund the Adaptation Fund, supporting climate resilience in developing countries. Additionally, 2% of credits will be automatically cancelled to ensure an overall mitigation of global emissions, effectively acting as buffer credits.
Nature-Based Solutions (NBS): A Missed Opportunity?
Despite their proven cost-effectiveness, nature-based solutions were largely overlooked at COP 29. Current climate pledges remain insufficient, aligning with a warming trajectory of 2.5°C to 3°C. While the growing attention on carbon markets presents a significant opportunity to integrate NBS, the disparity on these solutions underscores the urgent need for more targeted efforts to prioritize NBS within global climate strategies.
Nature Based Solutions projects can provide up to one-third of the global mitigation potential. Yet they remain underfunded and underutilized. For instance, projects like:
Reforestation: Kenya’s Green Belt Movement has successfully restored degraded Mau Forest while empowering communities through forest management, organic farming, and water harvesting activities.
Mangrove restoration: in a collaborative effort between Indonesia Ministry of Environment and Forestry, WWF Indonesia, and the World Bank, the Mangroves for Coastal Resilience Project, not only involves planting mangroves but also improves water quality and prevent coastal erosion, benefitting local communities through increased fisheries profits and job opportunities.
These kinds of projects have the potential to attract market-driven investments, but this requires robust regulation and tailored incentives. These measures are essential to ensure that NBS projects receive adequate funding, maintain high environmental and social integrity, and are effectively incorporated into broader climate finance frameworks.
What to Expect Next Year?
With Nationally Determined Contributions (NDCs) due for an update in 2025 under the Paris Agreement, businesses play a pivotal role in advancing climate goals. Setting science-based targets (SBTs) allows companies to align their strategies with the Paris Agreement’s long-term objectives, driving momentum for stronger climate policies. SBTi’s Financial Institution Net-Zero Standard, expected in 2025, will offer clear guidance for businesses and financial institutions to meet global targets. By adopting SBTs, businesses contribute to a feedback loop where private sector actions strengthen national policies, accelerating global climate progress.
Conclusion
COP 29 highlight an increasing reliance on market mechanisms to drive climate action. While this offers promising growth opportunities for carbon markets, it also necessitates strong governance to maintain transparency and integrity. For NBS, greater investment and policy focus are essential to unlock their transformative potential and position them as a cornerstone of global mitigation efforts. Looking ahead, COP 30 will likely intensify the pressure on both private and public sectors, with heightened expectations for more ambitious and actionable commitments are expected to be seen in the new updated NDCs.
At Mt. Stonegate, we guide businesses through the dynamic carbon credit market by tapping into the potential of nature-based solutions and guiding them in setting science-based targets. Our expertise open doors to new growth opportunities, driving sustainable progress as you move toward a net-zero future. Reach out today and let us help you transform climate action into your competitive advantage, shaping a greener tomorrow together.
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