THE climate summit COP29 at Baku, Azerbaijan, once again demonstrated the dominance of global capitalism led by the US over the international negotiations process under the UN Framework Convention on Climate Change (UNFCCC) to regulate greenhouse gas (GHG), especially carbon dioxide, emissions and bring under control resultant climate changes. These are already posing large-scale threats to people and ecosystems and are now on the brink of possibly irreversible changes and even greater dangers ahead. Climate impacts, where the world stands with regard to the levels of accumulated and current emissions, and where they are required to be in order to keep global temperature rise to under or well below 2 degrees C (with a threshold of 1.5 deg C now widely recognised as essential), have been discussed in detail in these columns earlier and need no reiteration here.

COP28 a year ago in Dubai had endorsed the findings of the three-year Global Stocktake (GST) or exhaustive review of the current status of emissions, climate changes and impacts, and the transfer of finances, technologies and capabilities from developed to developing countries required to enable the latter to transition towards low-carbon and ultimately carbon-neutral or zero emissions development. COP29 at Baku, and the next COP30 in Belem, Brazil, were to concentrate respectively on climate finances and updated, increased emissions reduction targets by all countries. Both finance transfers, and national emissions reduction targets particularly of developed countries, have been found severely wanting and far behind requirements.

Since focus of COP29 was to arrive at a New Collective Quantified Goal (NCQG) for climate finance, the Baku COP came to be called the “finance COP.”  Judged against that and other goals, COP29 was a total disaster. And the heavy hand of developed countries, ably assisted by international fossil-fuel interests, is clearly visible.

CLIMATE FINANCE        

The term climate finance has avoided definition from the very outset. In broadest terms, the terms embraces funds for transition to low or zero-carbon development (mitigation), for coping with climate impacts (adaptation) and for compensating loss and damage already caused by climate change. Debates have arisen over two major questions, namely: the quantum of finance required, and the source of these funds. Over the years, various efforts have been made by developed countries to, of course, minimise the quantum of fund transfers, to avoid any interpretation that could be construed as acceptance of liability, and to move away from flows of grant-based public finance to a mix of development grants, mainly loans from multi-lateral agencies, philanthropic assistance and private investments in developing countries that bring in necessary technologies. All these were at play at COP29, with developed countries forcing agreement on terms of climate financing which heavily favoured themselves, and which left developing nations, especially the most vulnerable least developed countries and small island states, dependent on small handouts and trapped in massive and unaffordable cycle of indebtedness. 

In discussions starting at COP10 in Cancun in 2009, an amount of $100 billion had been agreed upon for climate financing from different sources. This amount was cemented in the landmark Paris Agreement in 2015, as the amount to be mobilised by 2020. Developed countries and various sources have claimed that this target was reached in 2022.  However, various independent analyses including by the OECD have found that this amount includes funds from all kinds of courses and that most of this was in the form of loans carrying a huge debt burden with it. In the Global Stocktake, and in studies by UN-appointed as well as independent expert groups, it had been recommended that climate financing required to be increased substantially to around $1,300 billion annually, or even more if all requirements were taken into account, would be needed by developing countries to deal with climate change.

However, in an “agreement” insisted upon by developed countries and pushed through a full two days after the COP 29 negotiations were to end, overriding strenuous objections by several developing countries including India, a paltry sum of $300 billion annually by 2035 was decided on in Baku. Accounting for inflation, this amount would probably even be less than the $100 billion agreed in the Paris Agreement!

This figure was sought to be papered over by vague promises to “make efforts” to increase this to over $1.3 trillion by 2035 from all sources. But even this sugar-coated pill came with bitter ingredients seeking to include in this amount developing countries’ own domestic resources, as well as “voluntary” contributions by some developing countries to others through “South-South” arrangements! Things could not have been worse!

CARBON MARKETS        

To the surprise of many, the hosts announced on the very first day that an agreement had been reached on defining standards for carbon trading as per Articles 6 of the Paris Agreement, which had evaded agreement so far, and for good reason. Whereas the hosts claimed that this could open up the possibility of $250 billion of investments flowing to developing countries in exchange for carbon credits at market-determined prices that could be exchanged for emissions reduction in developed countries, experts warned that, given the loose language and procedures outlined in the agreement, such carbon trading could actually lead to more, not less, emissions. Earlier experience with the Clean Development Mechanism (CDM) also resulted in a lot of money changing hands but with highly uncertain outcomes as regards emissions reduced or avoided.

The procedures decided upon in Baku, which would still have to be defined operationally as the scheme unfolds, have many loopholes. For example, countries have been required to quite rigorously define Internationally Transferred Mitigation Outcomes (ITMO) or carbon credits, but old problems with exaggeration or other uncertainties about mitigation outcomes remain. Even more seriously, while ITMOs are recorded to UNFCCC and awarded at the time of the transaction, much time is allowed for verification and correction, with lack of clarity as to how rectification is to be done post facto.

There are fundamental issues involved regarding the carbon market itself. A more realistic price discovery for carbon credits could occur only if there is an internationally recognised upper ceiling for atmospheric carbon, which compels all actors to keep carbon emissions below this upper limit and trade accordingly. But that has precisely been the bane of the Paris Agreement, namely that there is no prescribed ceiling for atmospheric carbon, national emissions reductions are voluntary and carbon pricing therefore remains loosely determined, with carbon credits not realistically equivalent to the real value of carbon emissions reduced or avoided.

Further, it will be difficult to separate investments claiming carbon credits from those already taking place as part of routine business activity, for example in solar energy or green hydrogen. Additionality, that is outcomes which are over and above those obtained through business-as-usual activities or investments, has long been considered an important principle in climate policy. In carbon trading, this has been notoriously abused, leaving open the possibility of “greenwashing” such investments. Also, the nature of investments from developed countries that offer scale and ability to absorb the technologies so as to generate the returns that investors want, would tend to flow to markets in relatively larger, more advanced or emerging economies, possibly reducing the access of LDCs, small island states and smaller countries to these finances. This pattern was clearly in evidence in CDMs.

Carbon markets and trading are therefore likely to yield illusory reduction in carbon emissions over and above business as usual while generating revenues for investor and recipient companies and “greenwashing” such investments as climate financing.  

One expert described the Baku carbon trading agreement as “facilitating cowboy carbon markets at a time when the world needs a sheriff.”

QUESTIONING COPS

With all this sleight of hand by developed countries, and backroom maneuverings by powerful parties, while climate impacts intensify inexorably and emission targets slip further away into a dangerous future, it is small wonder that even influential players not to mention desperate vulnerable nations are questioning the UNFCCC process and the COPs themselves.

About halfway through the fractious Baku COP, 20 highly influential global figures such as former UN Secretary General Ban-Ki Moon and former UNFCCC head Christiana Figueres issued a highly damaging statement declaring the COPs “not fit for purpose” and calling for its overhaul. Clearly under pressure, they later retracted the statement claiming it had been misunderstood.

Meanwhile, Vanuatu in the south Pacific, one of the most vulnerable small island states, has filed a case in the International Court of Justice  seeking an “advisory opinion” on the legal obligations of developed countries to meet the demands of climate justice. The legal petition is based on an earlier resolution moved on behalf of 130 national government and non-governmental parties and adopted by the UN General Assembly in March 2023. The hearings on this matter commenced  just a few days back on December 2. A representative of Vanuatu in Baku expressed his nation’s total frustration and sense of helplessness in the COP.  He bemoaned his country’s fate at being compelled to participate in the COP and being present at the table or face the prospect of being eaten for lunch!

Last chance: COP30!