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Is the Paris Agreement dead? Report back from COP29 in Baku

COP29, which just concluded, gathered country delegations, observers, businesses, and NGOs for several rounds of heated negotiations and discussions. Since the groundbreaking adoption of the Paris Agreement in 2015, COPs have largely revolved around painstaking efforts to implement its articles. Mukhtar Babayev, the climate summit’s president, called this year’s COP the ‘moment of truth for the Paris Agreement’. 

In its State of the Climate 2024 Update, the World Meteorological Organization (WMO) reports that the past decade is the warmest in 175 years, with 2024 on track to be the warmest year on record. This year, temperatures from January to September suggest we are on track to breach the 1.5°C threshold, an early alarm for worsening climate conditions. The Global Stocktake further paints a grim picture of the prospects for staying on course to meet the climate targets under the Paris Agreement, which are required to stabilize global temperatures at or below the threshold.

Adding to the uncertainty, the outcome of the US presidential election may be the final nail in the coffin. President-elect Donald Trump has threatened to once again withdraw the US from the Paris Agreement. Therefore, the stakes were high in the run-up to COP29 organized in Baku, Azerbaijan, a country by the Caspian Sea that is also, perhaps aptly, known as the ‘Land of Fire’.

Keeping the fire alive

This year’s COP was called the ‘finance COP’, because the focus is on the New Collective Quantified Goal (NCQG) for climate finance. In short, it defines how much external financing will be available for mitigation and adaptation spending in the developing country parties, who pays that money, and how it will be spent. 

As climate conditions continue to deteriorate, the need for investments is increasing fast. The funding is expected to come from various sources, including multilateral development banks, public grants, concessional loans, and private financing.

So, what was achieved? In COP29’s final agreement, developed country parties agreed to triple financing, from the previous goal of USD 100 billion annually to 300 billion by 2035. While it can be argued that just reaching this agreement is an important achievement, it is also obvious that the developing country parties are disappointed by the outcome, considering it completely inadequate given the magnitude of the challenge.

Besides agreeing on the total amount of funding, several areas need further improvement to set the stage for major increases in financing for green investments, coming from both public and private sources. For example, capital costs in developing economies are still much higher than in more advanced economies. To reduce those costs, one key question for investors is how to separate the country risk from the project risk.

COP29 also finalized the rule book for Article 6, outlining the principles and details on how a global carbon market is expected to operate under the UN system. Once operational, such markets will increase the flow of private financing to climate projects, and buyers of credits can use them to offset their emissions.

For instance, in the context of its carbon tax policy, Singapore has been actively collaborating with Bhutan to build and align Bhutan's institutional capacity with Article 6 carbon markets. Singapore has also established similar cooperation with Ghana, Paraguay, and Vietnam. These types of bilateral collaborations are gaining traction.

Moving forward

To stay on course, the world must transition away from fossil fuels, and it must do it faster. As a cause for optimism, impressive progress has been made in driving down the costs of green technologies. Carbon pricing is also expanding, although much too slowly.

Next year’s COP30 will gather in Belém, Brazil, with high stakes, not least because the new Nationally Determined Contributions (NDCs) are due in 2025. Countries are expected to submit more ambitious NDCs that should be aligned with the Paris Agreement targets. 

So, is the Paris Agreement dead? Although many are disappointed, and perhaps rightly so, coming to that conclusion is still premature. The compromise reached in Baku guarantees that the process continues to move forward, with the next moment of truth set for the meeting in Belém. 

COP29 has kept the flame alive, even in the presence of considerable headwinds. The world simply cannot afford anything less.

Olli-Pekka Kuusela is a Research Fellow at UNU-WIDER.

The views expressed in this piece are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.