INTERVIEW: COP29 set for tough talks on new climate fund to replace $100 billion/year financing, says IETA

The COP29 UN Climate Change Conference in Azerbaijan in November is expected to feature tough intergovernmental negotiations on a new climate fund to support developing nations, but including private sector finance in the discussions would help to accelerate deliverables in the fight against climate change, according to the International Emissions Trading Association's CEO and President Dirk Forrister.

Parties at COP29 in Baku will look to set up a new climate finance target as part of the New Collective Quantified Goal to replace the $100 billion/year fund set up as part of the Paris Agreement in 2015 that is ending next year.

“This will be a really tough negotiation... because public coffers are not in good enough shape to commit to the really high numbers,” Forrister told S&P Global Commodity Insights in an interview on the sidelines of the Oct. 22-24 Asia Climate Summit in New Delhi.

“The work on the New Collective Quantified Goal… is related closely to the topic of Article 6 because having a functional Article 6 market could bring additional finance to bear from the private sector.”

Forrister emphasized that discussions must prioritize speed in mobilizing finance, which would only be possible with the help of private sector funding and robust carbon markets, if the rise in global temperature is to be kept well below the targeted 2 degrees Celsius, ideally at 1.5 C, above pre-industrial levels.

“I don't think you can get to $1 trillion/year without markets and there are some people that are arguing that they shouldn't count private finance... I think that's shortsighted,” he said, referring to the push from developing nations for large fund targets.

India, which has taken a leadership role for developing nations, has repeatedly called for developed countries to provide $1 trillion/year in climate finance, with others mentioning even larger sums. A group of African countries asked for $1.3 trillion/year at the recent African Ministerial Conference on the Environment while independent experts appointed by the G20 suggested $1.8 trillion/year.

Platts, a part of Commodity Insights, assessed CAC current year at $1.4/mtCO2e Oct. 28, up 7.7% month on month. It assessed CRC current year at $12.1/mtCO2e Oct. 28, up 0.8% from a month ago.

Lifting emissions cuts ambitions

COP29 is also expected to lay the ground for the next round of more ambitious Nationally Determined Contributions ahead of COP30 in Brazil and Forrister said since the existing targets are not compatible with the 1.5 C goal, ambitions would need to be raised.

He advocated deepening of emissions reduction targets and inclusion of more sectors into the emissions reduction programs.

“That's what Europe is doing -- it's going to deepen the cuts so that it can achieve net-zero more quickly,” he said. “They have not agreed in law for what the 2040 target for Europe would be, although the [EU] President [Ursula von der Leyen] has stated her intention.”

“But that story has played out in many other places, and it will be important to either broaden the sector coverage or deepen the targets.”

In addition, accounting of indirect Scope 3 emissions would have to be to be tightened too, Forrister said.

“We at IETA think that they must... be required to do so and that if they're willing to do so voluntarily, that that's a good thing,” he said.

“I'm hoping that some of the recent signals are positive that they're recognizing that to really get to net zero, you're going to need to have Scope 3 emissions compensated -- or else the other alternative is that everybody's Scope 1 [direct emissions] targets are stronger.”

National carbon markets need collaboration

Asian nations are embracing energy transition and recognizing the need to have a carbon price, yet more efforts are required to balance emissions from fossils with removals of various types, with the help of carbon markets, Forrister said.

In Asia Pacific, which accounts for nearly half of global greenhouse gas emissions, GHG emissions stood at 26.25 billion mtCO2e in 2023 and are seen falling to 26.03 billion mtCO2e by 2030, according to data from Commodity Insights.

“There are a lot of exciting developments on the penetration of renewables and on the penetration of new, more efficient technologies, but the sad truth is that there's not enough of that to push out the fossil fuels, which is what we really need if we're going to make the transition,” Forrister said.

Both nature-based and technology solutions are necessary, “but making an integrated system really requires government policy and government frameworks,” Forrister added, emphasizing the need for compliance markets to have a structured transition with a timetable that fits the national circumstance.

Forrister said the national carbon markets must have a collaborative future where “major elements will be harmonized" and ultimately, what can bring them together would be "mutual recognition of carbon credits that are created using common standards.”