APPEC: COP29 at Baku will be “finance COP", says S&P Global’s Kramarchuk

Climate finance and who pays for it will be a dominant theme that determines the success of the upcoming UN Climate Change Conference at Baku, Azerbaijan (COP29) in November, Roman Kramarchuk, Head of Climate Markets and Policy Analytics at S&P Global Commodity Insights, said at the APPEC 2024 conference in Singapore.

He said the final decision for Azerbaijan to hold the summit didn't happen until fairly late and they were put in a position of getting results in a tight time span, which is why the country will have to pick certain topics for which Baku will be remembered.

"Everyone is talking about Baku being what is called the finance COP," Kramarchuk said. "There's a clear need to pay for energy transition. The willingness and ability to pay isn't necessarily there. So, one of the key issues that we expect to be at the forefront of COP in Baku is the idea of finance, of who pays."

Baku is also happening one year before 2025 when countries are due to refresh their climate commitments under the Paris Agreement called nationally determined contributions, making COP30 in Brazil a critical one for assessing global progress in emissions reductions.

"These targets may seem abstract, but the reality is that these targets do translate into national policies. They do then get reflected in targets on renewables, targets on nuclear, targets on energy efficiency, targets on methane," Kramarchuk said.

Road to Baku

Kramarchuk said several key global events will set the stage in the run-up to COP29 on Nov. 11-22.

"Notably, it's happening at the same time as the G20 Summit," he said, adding that G20 will be talking about what COP29 means from a national perspective and assess whether climate goals can line up.

Other events will include the New York Climate Week in late September, the 79th session of the UN General Assembly (UNGA 79) this week, the World Bank and the IMF meetings in late October and the US elections in November just before COP29.

The US election will play a role and it will be interesting in terms of determining the feel and tone of negotiations at COP29 because the two presidential candidates have different viewpoints on the climate discussion, he said.

Financing issues

Loss and damage, a major success of the previous COP outlining funding for nations suffering most from climate change, $100 billion pledged in annual climate financing and the $1 trillion plus being requested by developing countries will be discussed at COP29.

"That $100 billion came through, but it took a while, in 2022. It took over 11 to 12 years between the promise of $100 billion to the realities of it actually happening. And this is at the top of the Azeri summit this year," Kramarchuk said.

"If I had to look at one theme to come out of COP 29, it will be something on finance. And if it isn't, then this is a way to judge that it didn't do what it was supposed to do, because they put it out as their goal," he added.

Kramarchuk said that the two sides -- the developed countries and the developing countries -- are still far apart in their agreements despite preparatory meetings happening all year.

The two sides are still apart because the developed world is saying it needs to see the financing being leveraged, the private sector needs to step up and stakeholders need to take a role in both providing the finance and the execution of projects, with a genuine commitment to mitigation and adaptation.

There is also a delineation over who is considered the developed world such as some of the economic powerhouses like China, India, Saudi Arabia and UAE, he added.

On the other side of the divide are the developing countries who are saying wealthier countries must contribute regardless of the technical definitions with around $1.1 to $1.3 trillion needed per year by 2030, for things like mitigation, adaptation and loss and damage during disasters like typhoons.

Kramarchuk also said the role of China will be in question, whether they contribute to the pool of financing and if they end up on the left-hand side of the ledger or on the right-hand side.

Azerbaijan is also going to be focusing on energy priorities such as green hydrogen, energy storage and energy corridors for other wins, as it is extremely interested in having a framework around exporting clean energy resources into Europe.

"This [financing theme] is a tough loggerhead for Azerbaijan to work through. They certainly have their work cut out for them. There's going to be some degree of them wanting to see a victory from this," Kramarchuk said.