COP29 gets underway in Baku; but is anything changing with climate change?

We are now well into the second week of the latest edition of the UN’s annual Conference of the Parties, known in popular parlance as the COP. The latest in Baku is number 29. Some COPs are more significant than others. The most famous, in Paris in 2015, established beyond doubt that manmade fossil fuel production and use is the main factor driving global warming, and set the target of keeping that warming to 2°Cabove pre-industrial levels, with 1.5°C identified as the safer target. The participating states (which in practice means all 193 UN members) agreed to submit nationally defined contributions setting out their level of ambition in reducing their CO2 emissions and getting to net–zero by mid-century. The COP26 in Glasgow agreed to phase out coal, the biggest polluter, although formal commitments do not mean that action will follow. Coal burning increased by 4.5% over the past 12 months. Last year, in Dubai, COP28 went a step further in agreeing to phase out all fossil fuels (notably oil and gas), although it is understood that gas (less polluting than oil) will still be needed as a transition source of energy for decades to come. The Dubai COP also committed to increase the use of renewables threefold by 2030. Despite this breakthrough, fossil fuel emissions have increased by 1% in the twelve months since Dubai. Climate change policy is always a race between the ongoing warming of the planet (this year, the 1.5°Cbarrier has been breached for the first time) and the willingness and capacity of the global community to take decisive action to get it under control before irreversible turning points are passed, making catastrophic climate change inevitable. In recent years, the COP process has at least offered some slim hope that the global community is waking up to the enormous threat of unchecked climate change, and is making a serious collective effort to limit its impact. The perfect will always be the enemy of the good, but at least there seemed to be some momentum. By this benchmark, COP29 has got off to a bad start. Many world leaders have not made the trip to Baku, including Presidents Biden, Xi, Lula da Silva and Macron, as well as Chancellor Scholz of Germany, Prime Minister Meloni of Italy and EU Commission President von der Leyen. Other significant players like Prime Ministers Modi of India, Albanese of Australia and Trudeau of Canada are also absent. APEC meetings in Chile and the G20 in Brazil were unfortunately timed to overlap with the COP dates. Indeed, during the first week, only UK Prime Minister Keir Starmer, among the G7 leadership or the group of Western countries, was visible in Baku. He pledged the UK’s continued commitment to decarbonisation by mid-century, and the 470 UK representatives in Baku, including ministers, MPs and senior civil servants suggested that the UK intends to lead on climate change action internationally after the successful Glasgow meeting. Yet Starmer offered no new money. Matters were not helped when Argentina announced that it was withdrawing from the COP negotiations and possibly from the Paris Agreement altogether if, as expected, incoming US President Trump takes the US back out of the Agreement soon after his inauguration next January. Then, France and the Netherlands threatened to withdraw their delegations from COP after Azerbaijani PresidentAliyev, the meeting’s host, criticised them for their colonial past. Azerbaijan was also embarrassed when the BBC broadcast a video of the Chief Executive of the Azerbaijani COP team, Elnur Soltanov, openly touting his country’s interest in using the COP meeting to secure further oil and gas production contracts. PresidentAliyev surprised many in the room by using his opening speech to declare that Azerbaijan’s considerable oil and gas reserves were “a gift from God” and that the country intended to increase its output by a third over the next decade. Meanwhile, NGO representatives, always at COP meetings in their thousands to lobby governments and animate the trade fair dimension of these gatherings, complained of harassment by the Azerbaijani authorities, which arenot noted for a blameless human rights record. With major oil and gas producers now organising the COP two years in a row, and oil and gas industry lobbyists again outnumbering green energy representatives by two-to-one, many have now begun to question the utility of the COP process. In an open letter to the UN Secretary General, a group of international personalities, including the former UN Secretary General, Ban Ki-Moon, the former UN climate chief, Christiana Figueres and the former President of Ireland, Mary Robinson, said that smaller, regional COP meetings would be more productive than the big tent annual gatherings, and that only countries truly committed to phasing out fossil fuels and to the green energy transition should be allowed to host them. Finally, adding to the downbeat mood was the shadow of the election of Donald Trump and his imminent return to the White House. Not only Trump but many of his cabinet nominees are climate sceptics. His nominee for Energy Secretary is Chris Wright, the CEO of Liberty Energy and a long-standing advocate of fracking and removing environmental restrictions on drilling for oil and gas in the national parks, such as Alaska. The fear of climate activists is that Trump will stop more investment in wind farms, renewables and electric vehicles and batteries, and use the money still available in Biden’s multi-billion dollar Inflation Reduction Act (designed to promote investment in green technologies and infrastructure) to fund another round of tax cuts. Even though the bulk of these investments and subsidies (to the tune of $135bn thus far) have been spent in Republican-controlled states. Trump will also lift the ban on US liquefied naturalgas exports to develop new markets for US fossil fuels. If “drill, baby, drill” becomes the leitmotif of the Trump presidency all in the cause of reducing the pump price for gas of the American motorist, the world’s largest industrial economy will pump billions of additional CO2 emissions into the atmosphere, thereby pushing the 2°Ctarget for global warming beyond reach. Congress may well also block US funding for international climate projects such as the $100mn pledged by Joe Biden to the Amazon Fund.

After a shaky first half, we have to hope that COP29 can produce a substantial outcome in its second half. All is not lost as, at least during its first week, COP delegates made some progress on how carbon markets can operate. Yet before its opening, this COP was billed as the “COP of Finance” with the worthy objective of not coming up with even more ambitious but essentially unfunded pledges but actually delivering on those already made at the last dozen or so meetings since Paris in 2015. Two decades ago, a meeting in Copenhagen agreed to deliver $100bn each year in transition finance to help the poorer countries most vulnerable to climate change disruptions and least able to deal with them to build more climate resilience. But this pledge was never met by the wealthier countries. In the meantime, COP27 in Egypt was caught up in a protracted debate over “loss and damage”, or the historical responsibility of the industrialised countries to compensate the less developed countries for the damage they have suffered from climate change, even though they have produced only a tiny amount of overall greenhouse gas emissions. The US, for instance, emits more CO2 every three days than Somalia has in its entire history. Loss and damage is a well-grounded principle but it would take many years to establish precise definitions, responsibilities and liabilities. As with compensation for slavery, do we need to make states or the private companies involved in the harmful activities (or their descendants) responsible; and does the compensation (if an amount can be agreed) go to the states making the claim or to particular groups or communities? Given these complexities and the urgency for the poorer countries to secure financial support (either through grants, low interest loans or debt forgiveness in exchange for climate change investments), it is a good thing that the debate in Baku is returning to the earlier issues of a climate transition fund to help both CO2 mitigation and adaptation to climate impacts. But now the financial transfers demanded every year have spiralled from $200bn to $1 or even $1.2tn. It is obviously going to be very difficult to achieve this level of funding, particularly on a multiyear basis, and there are lots of complicated questions that go with it. How much will government versus private sector finance be, and how can the private sector be incentivised to contribute? If oil and gas companies believe that the tide is turning in their favour as political and public support for the climate transition weakens, will they redeploy investments away from renewables back to new drilling and refinery projects? How will the Climate Fund be administered and who will ensure that the funds are well spent on sustainable and prioritised projects? The Western countries will try to spread the burden onto the shoulders of other relatively rich countries like China, Saudi Arabia and the UAE; but it is far from clear if they are willing to step up. The response from the Saudis has so far been disappointing. There is also the question of how much of the money should go to CO2 mitigation and how much to adaptation? Obviously the less spent on the former, the more that will have to be spent on the latter. Moreover, mitigation is universal as everyone benefits, whereas adaptation to extreme weather events is local. So the rich countries and the small island states may have very different views here. Finally, there is the question of whether the $1tn can be programmed fast enough to make much of a difference to global warming. Yet if COP in Baku can at least clarify how much money is needed, who will pay and how the fund will be distributed, the COP will not end in failure. However, the process is tough, and the UN Climate Change chief, Simon Stiell, has sent a letter to the G20 meeting in Rio de Janeiro asking the leaders there to help solve the financing conundrum. All the CO2 emissions produced by so many jets flying to so many international meetings can be offset if the leaders skipping Baku are at least able to confront the finance issue in Rio and come up with a framework approach to be sent back to the Baku COP before it ends on Friday.

Yet, as the impact of climate change accelerates, even colossal sums like the $1tn per annum in transfers from rich to poor have to be seen in the context of the mounting cost of recovering from natural disasters and the impact of extreme temperatures. On average, these are already running at $16mn a day in the industrialised economies, and are calculated to consume 7.5% of GDP by mid-century. The daily sequence of natural disasters puts the human tragedy into these statistics. Over 200 people died in the flash floods in Valencia. A year’s worth of rain fell in just 8 hours. The clean-up operation will take months and cost billions. Over 130,000 cars were destroyed, making the impact on people’s livelihoods even more severe. The lack of adequate warning and the slow response of the civil emergency teams and army caused uproar and anger and calls for the provincial governor to resign. We have also seen melting glaciers in northern Pakistan and Nepal leading to major flooding and infrastructure collapse; category 4 and 5 hurricanes hitting the United States causing thousands to evacuate; wildfires in Greece, Portugal and Canada; Places that rarely see any rainfall like Qatar experiencing urban flooding; the worst drought in 120 years in the Amazon basin in Brazil; drought and wildfires in Ecuador. Meanwhile, air pollution in Lahore and Delhi (estimated by the WHO to be at 60 times the maximum permissible level) is forcing people to remain indoors and is a severe risk to public health. The list goes on and on. No continent or country is immune from the greater regularity and severity of these extreme weather events. The warming of the oceans is pumping moisture into the atmosphere which will lead to more storms and torrential downpours. So increasingly governments and local authorities are having to establish contingency funds running into the billions to provide emergency relief and reconstruction support to their stricken populations.

As these adaptation costs escalate, the idea of putting more money into climate mitigation efforts no longer looks so daunting. After all, $1tn a year is around 1% of global GDP, not nothing, but not impossible in the global scheme of things either. At the same time, $1tn in climate transfers has to be set against all the finance that will be going into more oil and gas production in the US, Azerbaijan and elsewhere. In 2024, oil companies spent $100bn on offshore deep-sea drilling alone. This year, the Paris-based International Energy Agency estimates that $3tn will be spent on new energy production- 3% of global GDP. Two-thirds of this amount will be invested in renewables like solar, wind and hydro. Back in 2015, it was only one-third; and about 75% of the overall investment is made by the private sector. So although Trump and the US fossil fuel industry will try to reverse this trend, there will be states and businesses in the US and elsewhere that have already invested massively in onshore and offshore wind farms, solar panels, interconnectors and storage facilities for renewable energy. With peak oil demand due to be reached in 2030 as the energy transition is driven forward, these banks, private investors and businesses will not see the business case to start new major fossil fuel projects. Especially if electricity from renewables becomes much cheaper than from coal, oil and gas. The American consumer no doubt wants to go back to paying less than $4 a gallon at the pump, but they need to find affordable flooding and fire house insurance (particularly if they live in Florida or California), as well as health insurance against smoke inhalation and reductions in the cost of air conditioning units to cope with 40°C plus summer temperatures. This makes it all the more incredible that US oil and gas executives should talk of “drill, baby, drill” as “just common sense” for the American consumer, focusing only on the expected short-term gain and ignoring the longer-term consequences. So a world in which decarbonisation does not take place is not going to save governments much money. It is pay now or pay much more later. According to one calculation by the consultancy Wood Mackenzie, quoted in The Economist, keeping to 3°C of global warming by 2050 (still a catastrophic scenario) would require $52tn investment in the energy system, whereas staying below 2°C would cost $65tn. Given the 25-year timeframe, this is an affordable price to pay for a massive difference in outcomes.

The bad news is that climate scientists now agree that it is no longer possible to keep global warming below the 1.5°C limit. The good (or slightly less bad) news is that it is still possible to stay within the 2°C limit and that every fraction of a per cent can make a significant difference. Technology and the rapid progress of renewables in the energy mix offer some hope here. China, for instance, added more solar capacity in people’s homes in 2024 than the whole world accomplished in 2015. Renewables become cheaper with each passing year, and as smart grids and electric vehicle charging stations multiply more and more consumers are incentivised to use them. Virtually the entire car stock on the roads of Norway is now electric, although the country is a major gas producer. Indeed, two terawatts of global solar capacity have been added in the last two years alone; that is more than in the preceding 68 years combined. As a result of this progress, emissions will continue to fall. A few years ago, climate scientists were predicting global warming as high as 5°C by the end of the century because of the lack of action on fossil fuel use. Today, the International Energy Agency is predicting 2.4°C, still too high but showing how the rollout of renewables at scale can still turn the situation around and make it once again manageable. Although much of this success story is the result of private sector mobilisation, the role of governments in driving greater reliance on renewable energy in the decade ahead will be essential. There is still a need to connect grids to the places (wind farms, solar farms ) where the energy is generated. Grids need to be engineered to take all types of power and to have storage and demand management systems that can ensure constant supply even when wind or solar are intermittent. Public policy has also to stop wasting money on things that will be disproportionately expensive and only offer partial solutions. It is much better for the environment not to burn oil in the first place rather than deal with the emissions through carbon capture and storage technologies. Carbon taxes are a useful instrument for pricing carbon emissions at their true cost, but making them too generous or transferable through swap arrangements can make industry conclude that they are an acceptable price for business as usual rather than an incentive to decarbonise.

In the final analysis, there are three challenges that future COP meetings have to tackle if technology is to fully deliver on this more optimistic scenario to stabilise global warming at around 2°C.

The first is to figure out how to decarbonise transport and agriculture, two of the most intractable areas for CO2 emissions. Home heating and industrial production are much easier. Transport, with the debate around electric vehicles and curbing emissions from air transport, has already been extensively covered in previous COP meetings and climate change discussions. Agriculture has had less focus, especially as we have started to worry about food price inflation, farm subsidies and farm incomes and security of supply in the wake of the COVID-19 pandemic. But agriculture is responsible for much of the methane and nitrous oxide emissions which are even more toxic than CO2. This week, Denmark was the first country to introduce a tax on farmers for the methane emitted by their cows, a move which had majority support in the Danish Parliament, but which has provoked outrage among farmers and populists. We need to see how this measure is implemented and if it is followed by other EU member states and beyond. Yet the problem remains of which technologies can be developed to decarbonise agriculture, and with what speed and cost?

The second area concerns investment in poorer countries. In Baku, the conversation is about fixed annual transfers in the form of grants and loans. But long-term mitigation and adaptation efforts in those countries most vulnerable to climate impacts will need capital investments too, especially from the private sector. The problem here is return on capital. According to the Climate Policy Institute, an investor in a solar farm in Germany needs a return on investment of 7% to be worth the risk, but that figure rises to 38% in an African country like Zambia. This is because of very high lending rates for business. So, a priority for groupings like the G7 and the G20 going forward is to see how they can reduce the financing costs and risk premiums for climate adaptation projects in the poorer countries. The World Bank and its investment arm, the IFC, clearly have its role to play here alongside regional development banks in Africa and Asia.  

The more the private sector sees a favourable environment to invest, the less pressure on the Western taxpayer to fund government grants and transfers, especially at a time when, as said previously, rich countries have their own mounting disaster response costs at home to cover too.  

Finally, the problem with any article on climate change is that it starts from the premiss of rational analysis leading to a rational assessment of the pros and cons of any given action; and then rational conclusions and policy recommendations. But in our post-truth, social media-driven society, it is easy to deny the basic facts, question or totally ignore the science, pretend that climate change is not happening, or at least not to us, or to declare that climate change is a hoax nurtured by a conspiracy of elite interests against the average person. In this atmosphere, it is easy for populists to lobby against fuel taxes, the phaseout of diesel cars and the installation of fuel pumps. Yet even rational politicians who well understand the consequences of unbridled climate change find it difficult to stand up to mining companies, steel plant operators or fracking applications from big oil and gas where jobs are on the line. Domestic car producers and other manufacturers demand protection against foreign competition in electric vehicles, batteries and solar panels. A Trump trade war against China could deprive the US and the wider world of cheap green energy products, particularly where they can benefit consumers most directly, and hinder the joint ventures, cross investments and common technology standards that could help the world to make the energy transition before 2°C becomes as irretrievably lost as 1.5°C. So perhaps the most important political challenge facing efforts to combat climate change is for activists not to lecture the badly informed voter, but to find ways to seriously engage them not just on the necessity of the climate transition but its benefits to them and their families too. The greatest tragedy would be if, at the very moment when technology and economics are giving us the opportunity to reduce both the extent and speed of global warming, we throw this opportunity away because of the irresponsibility and cynicism of the populists. It is high time to put the change into climate change and there is no time to wait for the next COP to get the message across. Speaking of “a master class in catastrophe”, as the UN Secretary General described the state of climate action in his opening address in Baku, is a timely wake-up call. But our focus has to be on finding the solutions and implementing them.  

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.