The Strategist

COP 29: Too little, too late

The international community could only reach a minimal consensus at the 29th UN Climate Change Conference in Baku. The results fall far short of expectations. While the world is heading for the hottest year on record and is likely to exceed the 1.5°C limit, progress on much-needed climate action is stalling.

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Cedric Baur, Equity Analyst, LGT Private Banking
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10 minutes

The Strategist COP29
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After a delay of around 35 hours, the international community finally agreed on a joint final text at the 29th Climate Change Conference in Baku, Azerbaijan. This averted a diplomatic disaster and the failure of the conference last Sunday. However, many questions were left unanswered and, as is usually the case, postponed until next year. The outcome of the climate conference is an unambitious minimum consensus that was vehemently opposed by poorer countries in particular. Nine years after the Paris Agreement, no progress has been made towards the goal of limiting global warming to +1.5°C. With climate change already causing devastating disasters around the world, this year's COP 29 was yet another missed opportunity.

In 2024, the world is expected to exceed the 1.5°C limit for the first time

The signs of where the world is heading are becoming increasingly clear: According to data from the EU's Copernicus Earth Observation Service, 2024 is on track to be the hottest year on record (since records began in 1850). A trend that is set to continue after the record has been broken every year for the past ten years. In fact, 2024 is likely to exceed +1.5°C compared to the pre-industrial era (1850-1900). So the world has almost certainly already missed the Paris Agreement target. This is not surprising as global greenhouse gas emissions are reaching new highs. In 2023, emissions have increased by +1.3% compared to the previous year, while the average growth rate between 2010 and 2019 was around +0.8%. The main drivers are fossil fuels. According to the United Nations (UN) Emissions Gap Report, the Earth will warm by +2.6–3.1°C by 2100 if countries do not massively accelerate their efforts to meet their stated targets. This year's severe weather around the world was a taste of what is to come.

Steps to reach the funding targets still unclear

Despite ongoing geopolitical conflicts, the climate conference managed to agree to increase funding for developing countries from USD 100 billion to USD 300 billion per year. However, this amount falls far short of the USD 1.3 trillion needed and will take until 2035 to be reached. This will do little to help countries in the global South to make the fundamental shift away from oil and gas and adapt their infrastructure to increasingly extreme weather. Moreover, the tripling of funding is only on paper, as the amount is not adjusted for inflation. The wording in the final text is also rather vague, as the money is to come from "a variety of public and private, bilateral and multilateral, and alternative sources". The previous target was set in 2009, but was not met until 2022, two years after the deadline. The way to the USD 1.3 trillion is to be worked out at COP 30 in Brazil next year. Major emitters such as China and Saudi Arabia were still classified as developing countries in 1992, the founding year of the climate conferences, and make no or only voluntary contributions. It is therefore highly questionable whether the pledged amounts will actually be met. On the other hand, developed countries have not yet lived up to their historic responsibility. Next year is unlikely to be any easier, as the US under President Trump is unlikely to be a reliable partner going forward. 

The minimum consensus on financing must therefore be seen as a small success. At least funds will be made available for the countries most affected by climate change. It is also positive that there has been no backtracking on the wording of the "transition away from oil and gas" and on the expansion of renewable energies. The restructuring of energy production based on renewables or infrastructure is already underway in many countries and is unlikely to be stopped. In a conservative scenario, the International Energy Agency (IEA) estimates that global electricity demand will double by 2050. A significant proportion of this will come from renewables. Renewable energy capacity is not expected to triple, as stated at last year's COP 28 in Dubai, but is expected to increase by a factor of 2.4. 

Private investment remains central to global decarbonisation. However, developing countries must not be left out, as they too need to reduce their greenhouse gas emissions and adapt to a new climate reality. However, it is questionable whether a breakthrough in securing the necessary funds can be achieved at future climate conferences. To meet their responsibility, developed countries will have to work bilaterally or multilaterally to mobilise substantial support outside the conferences. Today, we are already starting to pay the first bills for missed investments. They could be much higher in the future.

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