Right now, nations are preparing new emissions reductions targets after progress was made in two specific areas at COP29: climate finance and carbon trading.

Early next year, parties to the Paris Agreement are required to submit their national ambitions for 2035 to cut carbon emissions. These are formally known as Nationally Determined Contributions (NDCs).

Two agreements at COP29 will help shape those ambitions:

• Developed nations committed to a new climate finance goal of $300 billion annually by 2035 to help developing countries cope with the impact of climate change and accelerate the energy transition as part of a broader $1.3 trillion target.
• Rules for international carbon markets were agreed, paving the way for a UN-backed carbon market. Rules for country-to-country carbon trading were also established. These have significant potential to reduce the cost and accelerate the pace of the global energy transition.

The So What

While there has been criticism of the amount of money promised, it’s now time to focus on mobilizing the flow of finance, says Wendy Woods, a managing director and senior partner at BCG.

“What matters is accelerating the pace at which public sector funding is actually mobilized and deploying that finance in a way that successfully unlocks significant private sector finance.”

Proof of COP29’s success will be seen in the national ambitions delivered ahead of COP30, and by the size and credibility of new carbon markets.

Emissions need to fall rapidly to limit warming to 1.5°C and governments’ current targets fall short: there is an estimated 26 gigaton ‘ambition gap’ by 2035.

Brazil, the UK, and the UAE have already announced their new NDCs to build momentum into 2025.

• To have a 50% chance of limiting warming to 1.5°C by 2100, emissions must fall by 30 gigatons of carbon dioxide equivalent (GtCO2e) by 2035.
• Current ambitions suggest emissions will fall by 4 GtCO2e by 2030.

“Governments need to release ‘investable NDCs’ that provide clarity and confidence to investors on the pace and shape of national transitions,” says Edmond Rhys Jones, a BCG partner who leads the firm’s work related to the UN Framework Convention on Climate Change.

“NDCs are as much about sending a message to the market as they are to other parties to the Paris Agreement.”

Despite agreement on these two deals, COP29 failed to significantly advance the consensus reached the previous year to transition away from fossil fuels, triple renewable power generation capacity or double energy efficiency this decade.

Now What

Support the COP30 agenda. The national ambitions will be a dominant theme of COP30 in Belém, Brazil, and climate leaders should advocate for bolder NDCs, supported by transformative policies to close the 26 GtCO2e gap between conditional targets and the 1.5° goal. Forests and agriculture are also likely to be high on the COP30 agenda, given that Brazil is home to 12% of the world’s forests and agriculture accounts for nearly half of its exports. Brazil is also a leader in biofuel production, which accounts for about a fifth of the nation’s transport energy, demonstrating the potential to scale biofuels globally.

Prioritize quality carbon credits. There are ongoing concerns over the mechanisms to provide oversight and transparency of carbon credit trading to ensure carbon markets reliably lead to reductions in greenhouse gas emissions. More details about the launch of the carbon market are expected in 2025, but companies can start to focus on the quality of carbon credits now. With the onus on the buyer to ensure the quality of credits, firms should carry out appropriate due diligence. Companies can also engage with the governments of countries where credits are being bought in order to help shape quality controls.

Deliver on finance pledges. The money promised must be quickly mobilized in order to leverage private finance. Business, governments and the multilateral development banks must focus on creating bankable projects. There will also need to be renewed commitment to the focus of finance provided so that there is a rebalance toward adaption, and on quality so that grants and concessional finance are provided rather than loans. The $300 billion deal also falls short of the independent advisory group to COP which calls for $390 billion of core financing by 2035 and well short of a call from the G77 for $500 billion.