COP29: Negotiations Go Down to the Wire

Tim Mohin

Published Nov 22, 2024

What’s in this week’s newsletter:

COP29 financing negotiations go to the wire amidst some positive agreements
The EU Commissioner hints at combining and simplifying the CSRD, the CSDDD and the Taxonomy regulations while maintaining the goals.
The EU Green Deal continues to march on, approving three new ESG regulations.
Biden claims his climate agenda cannot be reversed. Will the private sector step up?
ISSB and ISO release new guidance.

It wouldn’t be a climate COP without negotiations going down to the wire. This year’s talks will likely go into the wee hours of tomorrow morning as delegates try to push through an agreement. The talks are particularly tough as delegates try to increase climate funding for developing nations 10 fold - from $100 billion to $1 trillion by 2030.

Those with their COP bingo cards out would not have been disappointed as this year’s event ran the gamut of a typical COP with impassioned speeches from the likes of Al Gore all the way through to oil and gas majors calling fossil fuels “a gift from God.”

While the final agreement has yet to take shape, there have been a lot of positives. Here is a snapshot of some of them:

Low Carbon Tourism and Coal Abatement Agreement: 25 countries plus the EU agreed not to add any new coal-fired electricity generation to their energy makeup. This agreement included countries like Canada and the UK, but some of the world’s largest emitters, China, India, and the US, did not sign up. There was also an agreement from 50 countries on including tourism, which makes up 8.8% of global emissions, in their nationally determined contributions (NDCs - the country-specific plans to reduce emissions).
A Turning Point for Carbon Markets: On day one of the COP, there was an agreement to establish carbon credit quality standards. While some of the intricacies of this deal are still to be ironed out, a UN-backed carbon market will bring some much-needed credibility to the voluntary carbon market and deliver funding to developing nations.

As negotiations go into overtime, here are the main agreements still pending:

Who Pays: Should so-called developing nations like China (which overtook Europe as the second-largest historical emitter of GHG this year), Saudi Arabia, and India pay the same amount as developed nations? The problem is that the definition of developing and developed nations was created in 1992 and needs to be updated. There is also the question of loans or grants and whether to tax emissions-intensive industries like shipping and aviation to help pay for climate damages and adaptation.
Fossil Fuel Transition: While the EU is pushing for a deal to encourage a phase-out of fossil fuel, OPEC countries are fighting it.

The closer we get to Friday’s deadline, the less confident delegates seem about getting a positive and impactful final deal over the line. Late on Thursday, while writing this, a whole bunch of numbers were being tossed about. Ranging from a $1.3 trillion request from developing nations to an EU proposal of $300 billion, which was met with – “Is that a joke?” The impasse really became evident when a draft materialized, with an ‘X’ where actual figures should have been.

The stakes are high. Without proper funding, governments in emerging economies will struggle to develop low-carbon technologies and adapt to a changing climate. However, even if this COP fails to reach an agreement, the private sector, NGOs, and climate advocates will continue to work toward the inevitable transition to a low-carbon economy.

EU Green Deal Faltering?

EU Commissioner Ursula Von Der Leyen Márton Mónus/Reuters

Last week, we shared that the EU’s landmark sustainability disclosure regulation could be in jeopardy of being weakened. This week, EU Commissioner Ursula von der Leyen said the European Commission would propose an omnibus legislation to “reduce bureaucracy [and] reduce reporting burdens.” She specifically referred to merging and simplifying the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU taxonomy.

She added that “the content of the laws is good, and we will maintain it. So it’s our task to reduce this bureaucratic burden without changing the correct content of the law.” However, as an EU lawyer said, reopening these policies means “everything is fair game.”

Information on how this plan would be implemented is still thin. However, it could be part of a wider 12-point plan to launch a “simplification revolution” under the New European Competitiveness Deal (Budapest Declaration). The Budapest Declaration aims to reduce red tape and reporting requirements by at least 25% in the first half of 2025.

If the CSRD is to be reopened, it will impact thousands of companies that are set to begin reporting in 2025 - just over a month from now. For context, here is a link to a 10-minute keynote talk on CSRD that I gave at an EU Commission event last week.

New EU Regulations

As uncertainty grows about the fate of some EU policies, EU lawmakers approved a new carbon removal certification system, which will create a system for monitoring, verifying, and accurately quantifying carbon removals. The EU also passed a new Forced Labour Regulation (FLR). The FLR will ban any product made using forced labor from the EU market, which will be enforced by assessing hotspots for forced labor and investigating potential violators. It will be implemented from 19th November 2027 (3 years after it was adopted).

Finally, the EU also approved a new ESG ratings regulation, which will give the EU’s securities regulator, the European Securities and Markets Authority (ESMA), power to authorize and oversee the work of ESG ratings providers. The aim is to make ESG analytics more transparent and consistent and reduce conflicts of interest. The rule will come into force in early 2026.

The Climate Agenda Can’t Be Reversed

Despite President-elect Trump’s fossil fuel-friendly cabinet nominees, President Joe Biden claimed at a G20 meeting from the Brazilian Amazon, “Some may seek to deny or delay the clean energy revolution that’s underway in America, but nobody — nobody — can reverse it.” His speech coincided with the release of a White House Fact Sheet cataloging Biden’s climate legacy and how he plans to protect the Amazon.

The Trump administration’s actions, or lack of action, on climate change, won’t stop companies from working on climate, but it might change their reasons. “If you don’t see the action coming from the policy environment [under a Trump administration], arguably, there’ll be more pressure on the private sector,” said Alison Taylor of NYU School of Business. “A lot of corporations are underestimating angry employees, angry consumers, more campaigns, more activism.” Additionally, many business leaders and even House Republicans are asking Trump to hold off on reversing climate policies, such as the Inflation Reduction Act.

The ISSB and ISO Release New Guidance

The International Sustainability Standards Board (ISSB) released new sustainability-related risks and opportunities guidance this week. The guidance is designed to help companies identify their material sustainability risks and opportunities. It also covers how companies can use the ISSB standards along with other standards like GRI and the European Sustainability Reporting Standards (ESRS).

Also, this week, the International Organization for Standardization (ISO) launched the ISO ESG Implementation Principles (IWA 48: 2024) to help embed ESG in company culture.

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Other Notable News:

Global Weirding

Extreme droughts are having a profound impact on energy. Hydropower is the world’s largest renewable energy source, but as droughts worsen across the globe, the lack of water is turning the lights out in Africa, South America, and Canada.
A deadly “bomb cyclone” hit the Pacific Northwest this week, knocking out power for more than half a million residents.

New Regs

New York’s Metropolitan Transportation Authority approved NY Governor Kathy Hocul’s plan for a $9 vehicle congestion tax in lower Manhattan. The tax is below the original $15 Hochul wanted but could be implemented as soon as January 2025.

Climate Litigation

Two companies won climate litigation cases this week. Evian (Danone) won a case against them, saying their ‘carbon neutral’ claim was not accurate, and Pepsico had a case dismissed over its plastic pollution.

Sustainability Research

A new UNICEF study finds that the number of children exposed to extreme heat waves will be eight times higher in 2050.
This new research from my company, BCG, looks at how the best route to a net zero future is “coopetition.” Coopetition is a collaboration among competitors. This will be the key to companies benefiting from a low-carbon transition.

Notable Podcasts:

The last two episodes of The Outrage and Optimism podcast have featured on-the-ground interviews from COP29.

The first episode featured Ed Miliband, the UK’s Secretary of State for Energy Security and Net Zero, and others to discuss the importance of ambitious nationally determined contributions (NDC) and the countries that have brought more ambitious versions.

The second features an interview with Barbados Prime Minister Mia Mottley, who gives an update on the Bridgetown Initiative, an ambitious initiative she set up in 2022 that calls for reforms to make the global financial system more inclusive.

In this week’s episode of the Harvard Business Review’s The Climate Rising podcast, host Mike Toffel looks at how AI can optimize energy demand use. Mike spoke with Pasi Miettinen, CEO of Sagewell, a company that uses AI to help utilities manage energy demand efficiently. Pasi explains how AI can help reduce peak electricity usage and save energy, reducing costs and emissions.