The UN COP29 conference in Baku was projected to be a failure. Instead, it has turned merely into a disappointment.
According to many headlines, COP29 delivered a “landmark trillion-dollar deal” to avert the climate crisis. UK Energy Secretary Ed Milliband said, “If this finance is used in the right way, it could cut the equivalent emissions of one billion cars and could protect nearly a billion people from the impacts of climate change.”
In fact, the member states agreed that the developing world would receive $1.3 trillion a year by 2035 to promote the shift to low-carbon economies and adapt to extreme weather events. That is a lot of money—a lot of promise.
But climate negotiations, starting with the Kyoto Protocol in 1992, have never been short of promise. What they have lacked is delivery. Generous offers have not been matched by credible implementation mechanisms. COP29 is no exception. The cycle of hope and despair is likely to continue.
Of the promised $1.3 trillion, only $300 billion will come from governments through grants and low-interest loans. The rest is meant to come from private sector investors, plus the possibility of new sources of finance, such as fossil fuel levies. There are no institutional safeguards to guarantee that the promised $300 billion will actually be paid.
Nor is there any assurance that the private sector will come up with the remaining $1 trillion. In fact, private investors currently have no incentive to do so. The existing economic system places legal obligations on business leaders to prioritize financial performance. Business leaders who ignore these fiduciary obligations to their shareholders will lose their jobs. This is the reason why the world has failed to transition towards a green economy that would avoid the ravages of climate change.
Though much progress has been made in promoting energy efficiency and exploiting renewable energy sources, this progress has been much too slow. Thus, the world’s global carbon budget continues to erode at an alarming rate.
Though it is in our collective interest to solve this problem, it is not in people’s individual interests to do so. The private sector faces no penalty for those who fail to live up to the COP29 target. Governments face no penalty for making commitments but failing to deliver on them. Consequently, voluntary contributions by governments and the private sector to climate action are doomed to be inadequate. “Coalitions of the willing” inevitably evaporate when pressures such as wars and energy insecurities arise.
It is, therefore, no surprise that the COP29 deal amounts to developed-country governments telling the developing countries, “We offer you a lot of money, but most of this money will come from someone else – private-sector investors – who have no reason to oblige. Nor do we bind ourselves to delivering on our commitments. And besides, these commitments are due in a decade.”
It is small wonder that many developing countries, such as Bolivia, Cuba and Nigeria, reacted angrily to the COP29 deal.
To make real progress at the pace required, a policy and governance framework needs to be negotiated whereby governments are legally required to honor their commitments and businesses are able to promote climate action through their pursuit of profit.
Businesses are designed to pursue profit. Some business leaders seek voluntarily to combine this pursuit with climate action, but as long as there is no penalty for engaging in deficient climate action, such voluntary action will inevitably fall short. The goal must become the creation of a policy and governance framework that aligns the pursuit of profit with environmental sustainability. This can be done institutionally through suitable licenses to operate, giving business leaders the requisite legal obligations to be nature-positive. It can also be done through regulations, tax subsidy incentives, government targets, and government procurement conditions that reward businesses for climate action and penalize them for inaction.
If future COP negotiations tackle this issue – giving different countries distinctive pathways toward a common climate goal – then future COP treaties will become more than potentially idle promises.
Featured image: COP29 Closing Plenary in Baku, Azerbaijan, from Official COP29 Photo Album
The views and opinions expressed in the Solutions Spaces blog are those of the author and do not necessarily reflect the official position of the Global Solutions Initiative.