Azerbaijan outlines COP29 priorities, to launch climate finance fund

Azerbaijan confirmed it will create a climate fund sponsored by fossil fuel-producing countries, as it looks to double down on its efforts to focus on climate finance at the upcoming 29th UN Climate Change Conference in Baku.

The COP29 host, a sizable oil and gas producer, outlined a series of initiatives Sept. 17 as it hopes to build a global consensus around climate action, with several programs focusing on a wide array of energy themes, such as green energy corridors, hydrogen and renewable storage.

The Climate Finance Action Fund will include voluntary contributions from fossil fuel-producing countries and companies across oil, gas and coal, with Azerbaijan as a founding contributor.

"Members will commit to transfer annual contributions as a fixed-sum or based on volume of production," it said in a statement. "CFAF will become operational after the initial fundraising round, which seeks to capitalize the fund with $1 billion, and when 10 contributing countries are committed as shareholders."

Finance COP

Global leaders are under pressure to build a new global climate finance framework, known as the New Collective Quantified Goal on Climate Finance for COP29, which is seen as a key enabler across the entire climate agenda.

Many have labeled Baku as the "finance COP," and Azerbaijan will have a pivotal role to help bridge the divide that exists between developed and developing parties on the thorny issue of climate finance.

The COP29 Presidency also launched initiatives focusing on green energy zones and corridors as part of global efforts to triple renewable energy capacity and double energy efficiency by 2030.

"Green energy zones are needed to act as centralized hubs where sustainable energy generation is maximized. Secondly, green energy corridors are needed to allow for cost-effective transmission over large distances and across borders," the statement said.

Azerbaijan also said it is calling on countries to adopt the COP29 Global Energy Storage and Grids Pledge that will set a global target to increase installed energy storage capacity to 1,500 GW by 2030, six times the 2022 level.

"To facilitate the development of green energy grids, endorsers of the Pledge will commit to enhance grid capacity through a global grid deployment goal of adding or refurbishing over 80 million kilometers of grids by 2040," the statement said.

Azerbaijan is a key oil and gas exporter and a member of the OPEC+ alliance. It produced an average of 480,000 b/d of crude in August, according to OPEC+ survey data from Platts, part of S&P Global Commodity Insights. The country's natural gas exports in the first eight months of 2024 rose 3.8% year on year to 16.4 Bcm, according to official data.

Azerbaijan has been steadily increasing its gas exports to Europe since the start of the Southern Gas Corridor project and expects to supply 13 Bcm to the region in 2024, up from 11.8 Bcm last year.

The Presidency also said it will launch the COP29 Hydrogen Declaration to support the harmonization and development of hydrogen markets.

"There is an urgent need to harmonize international frameworks, regulations and standards to create viable business models for the end-to-end value chain for hydrogen," it added.

Carbon markets

However, there was no mention of carbon markets in the Presidency's "action agenda" which is somewhat at odds with the UN, which has repeatedly said that making progress on Article 6 of the Paris Agreement is a key priority for climate talks in Baku.

Negotiations to activate Article 6.4, which will create a new market, opening up fresh demand for credits, have been fraught in recent years due to integrity concerns and issues related to carbon removals and project methodologies.

Industry sources are hopeful a resolution of key aspects pertaining to Article 6.2 and Article 6.4 will be resolved at COP29.

Article 6 sets the rules for global trade in greenhouse gas emissions reductions, and under Article 6.2, countries can adopt to allow cross-border exchanges of credits.

Article 6.4 specifically allows a company in one country to reduce emissions domestically and have those reductions credited so that it can sell them to a different company in another country.