Briefing Paper: COP29 Outcomes and implications for Africa

The two most pertinent results of the negotiations at COP29 are further clarity on Article 6 (governing carbon markets) and a last-minute agreement on climate finance, in the New Collective Quantified Goal (NCQG). This note captures the key outcomes and their reception and identifies the key implications and suggested priorities for Africa.

Climate finance and the NCQG

COP29 negotiation outcomes

Key elements of discussion for the NCQG included

• The overall quantum
• The quality of and access to finance (questions such as the balance between provision and mobilisation, and between grant (equivalent), concessional loans, and commercial finance)
• The so-called contributor base (who is obliged to contribute and who can do so voluntarily)
• Allocation and destination (for example, whether or not there would be ring-fenced portions for adaptation and for loss and damage, or for specific groups of developing countries )
• Transparency mechanisms

Most press coverage has gone to the quantum agreement – which has often been shortened to the statement that the previous $ 100 billion annual goal has been tripled to $ 300 billion (and falling much short of the $ 1.3 trillion needed per year). It is more nuanced than that. The $ 1.3 trillion ambition has stayed alive, yet the $ 300 billion includes both public funds, private funds mobilised by public funds, and alternative funds, as well as all MDB climate finance flowing to developing countries (irrespective of the source of that funding). Moreover, the $ 300 billion is a nominal objective and is not corrected for inflation.

The agreement also includes decision on the other elements. Two of the best sources describing the outcomes on NCQG, include an overview by Joe Thwaites from NRDC and a detailed breakdown of decisions by GFLAC, which includes an assessment of these results from a Global South perspective.

Perceptions of and responses to these outcomes

Many activists have pointed out that the agreed-upon ‘core’ falls short of the finance needed, even more so when inflation is taken into account – and many state that this reflects a disregard for developing nations by developed nations. The agreement to include MDB resources could limit the additionality of these funds. Many feel that the approach to the negotiations by the COP chair did not help to achieve a more ambitious outcome. A good overview of the political economy prior to and during the negotiations, can be found in this step-by-step account by Michael Jacobs.

Notwithstanding this criticism, many actors close to the negotiations acknowledge the tough geopolitical circumstances: a much higher number of core funding was not expected. Nobody really expected the full needs of $ 1.3 trillion to be covered by public funds and the question always was how to best mobilise and leverage other sources of funding on the back of public funds committed.

Implications for Africa

There are 5 key implications for Africa. Some require individual country action, some collective action – in either the UNFCCC and COP processes or other processes,

1. Proactively shape the “roadmap to Belem”. The NCQG decision mandated the Presidencies of COP29 and COP30, Azerbaijan and Brazil, to produce a “Baku to Belem Roadmap to $1.3T” to look at how to scale up climate finance to developing countries (paragraph 27), including through grants, concessional and non-debt-creating instruments, and measures to create fiscal space. This is a crucial next step in which African countries, through AGN, should engage proactively, to make sure their needs and preferences are included.
2. Link the roadmap process to ongoing efforts to reform the international financial architecture by prioritising engagement with these reforms. The include in particular efforts around the MDB reform, the Global Solidarities Levies Taskforce, the Independent Expert Review on Debt, Nature and Climate, and the UN Tax Convention. For all but the MDB reform, African countries (individually or collectively) are amongst the chief architects of these initiatives. Yet their capacity to continue proactive engagement with these processes is constraint which could lead to a lessening of African voice and influence on these important processes that, if successful, can yield additional ‘alternative finance’, and improve African debt positions.
3. Develop and implement national, regional and continental policies and regulation that optimise Africa’s opportunity as a destination for (commercial) climate finance. The necessary climate finance cannot be met with public sources alone – and plenty of opportunities exist to attract commercial climate-oriented capital. That capital not only requires attractive pipeline, but also the right ‘enabling environment’ with clear and consistent policies and regulation. African countries should tap into the ‘core’ finance for assistance to accelerate the transformation of their economies – and the associated policies and regulation (including but not limited to those governing carbon markets). Africa should also use its mechanisms for continental collaboration such as AfCFTA, AU, and regional blocks to harmonise where needed.
4. Use the updated NDCs to inch the target upwards in 2025. In a last-minute addition, the words “at least” were added to the $ 300 billion and the $ 1.3 trillion objectives. This opens up a key window for advocacy in the ‘road to Belem’ in 2025. Early 2025, updated NDCs need to be submitted and they tend to include an unconditional commitments and a conditional one – for developing countries, this is usually conditional upon availability of finance. If the updated NDCs were to make clear that conditional commitments can achieve global climate objectives, but unconditional ones cannot, that offers great input for a strong global advocacy campaign to put pressure on global leaders to up commitments at COP30; not unlike the process followed to get to the Paris Treaty. For this, African countries need to (1) develop strong NDCs with a clear distinction on conditionality and ambitious conditional goals, and (2) engage actively with various global advocacy movements (who are keen to take this up).
5. Make the most of the agreed-upon 5-year review. Again in a last-minute addition, a 5-year review of the targets was included in the agreement. Shaping this review process early, can yield an important mechanism – not only to increase ambition, but also to track progress towards it.

Carbon markets and Article 6

COP29 negotiation outcomes and perceptions and responses

COP29 operationalised two key mechanisms of Article 6: (i) Bilateral trading- Article 6.2- governing country-to-country carbon trading, which is already being implemented in some contexts; and (ii) centralised UN market- Article 6.4- establishing the Paris Agreement Crediting Mechanism (PACM), a global market for UN-backed carbon credits. Specifically, the UN Advisory Body adopted two sets of standards:

• Standards for credit methodologies: These outline requirements for transparency, measurability, baseline criteria, and additionality for credits traded in the UN-backed market.
• Standards for emissions removal and reduction projects: These address monitoring, accounting, and measures to prevent or mediate reversals for projects with reversal risks under the PACM.

Many details still require further clarification – which speaks to both the additional work, the potential risks, and the opportunities for Africa. Nevertheless, the creation of UN-backed market mechanisms is widely seen as an important boost to the credibility of carbon markets. Beyond the anticipated growth in carbon trading, experts predict that the minimum standards set by the PACM will become a baseline for quality and integrity of carbon credits globally, and will both shape the development of future methodologies and rules governing the Voluntary Carbon Market (VCM and emerging climate legislation and associated compliance markets.

More information about the outcomes can be found in this Reuters article, and this Brunswick perspective. The latter also includes an overview of responses to these developments.

Implications for Africa: risks, opportunities and priorities

With their abundance of relevant opportunities and relatively low current emissions, African countries hold a lot of potential for carbon credit generation. After a period of intense scrutiny on carbon markets, specifically the VCM, and a significant reduction in traded volume and many credits left unsold, the COP29 outcomes are expected to strengthen carbon markets.

Whilst this creates substantial opportunities for African communities and countries, there are concerns that the increased standards will increase the complexity and costs to participate in carbon markets, which could make it harder for Africa-based projects to be eligible and be traded.

In this context, we see 5 key priorities for African stakeholders on carbon markets, 3 of which are concrete activities and 2 reflect on the attitude and approach to carbon markets.

1. 1. To attract carbon investments and projects, African countries need to develop a suitable enabling environment, which includes both general investor attractiveness and Article-6 compliant carbon market policies and regulation that enable credits from projects in African countries to be traded under Article 6 mechanisms. Key regulatory priorities include developing transparent and efficient systems to oversee market activities, defining clear rules for granting corresponding adjustments (CA), including defining a white list of eligible project types, setting fair and predictable tax regimes that balance revenue generation with market competitiveness, and establishing transparent, equitable revenue distribution systems that uphold carbon credit integrity through measurable social and environmental outcomes.
   2. As standards continue to evolve, African countries must ensure that the emerging standards reflect African priorities and strengthen Africa’s intrinsic competitive advantage.
      • A key priority is inclusion of high-quality, high-integrity emission avoidance, and Nature Based Solutions (NBS), which represent a substantial part of Africa’s current project portfolio and its potential. However, the likely stringent requirements for additionality and permanence/durability risk sidelining these categories under Article 6, underscoring the need for proactive engagement to safeguard their inclusion1.
      • A second priority would be to lead global innovation on rigour around socio-economic co-benefits of carbon projects. Africa not only has unique potential to realise these in its carbon projects, but also a strong developmental need for these benefits – and upholding similar (or even higher) rigour on transparency and measurement of cobenefits as is applied to carbon, can give African projects a unique competitive advantage, especially in a global market where at least some of the buyers are keen to not just avoid negative side-effects, but realise these synergistic inputs. This focus is not new for Africa: the AU explicitly commits to this in the Nairobi Declaration, and this aligns with a coalition of project developers from the Global South writing to the Science Based Target initiative (SBTi) to ask that they allow the use of credits against scope 3 targets because of the benefits projects deliver
   3. As carbon project activity is likely to pick up increasingly, African countries should prioritise projects and approaches that can accelerate Africa’s increased participation in carbon markets. This includes, for example, fast-tracking specific projects already close to meeting new standards, facilitating regional Centres of Excellence (e.g., East African Alliance, West African Alliance) and leveraging public-private partnerships (PPPs) to co-develop pilot projects that meet standards from the outset.
   4. In their positioning, African stakeholders should strike a productive balance in which rules and procedures recognise limited African capacity and the urgent need to strengthen this (potentially include a transition mechanism that protects ongoing activities that are important to Africa), without further entrenching the idea that African credits cannot meet rigorous requirements and thus need a ‘leniency allocation’. With increased scrutiny on quality and integrity, priority for African countries should be to capture a share of new demand for highquality, high-integrity credits at a higher price.
   5. In all of this, African stakeholders (regulators, project developers, and communities alike) ideally both capture current demand and actively evolve the market. In order to achieve that, they should (1) operate from a sound understanding of buyer concerns and needs, (2) innovate to meet these expectations with a superior African offer, and (3) simultaneously work towards further evolving the market towards higher prices, higher expectations on quality, integrity, and transparency (in a way that allows Africa to capture a sizeable market share in that market). Efforts such as the AU’s drive towards an African Gold Standard ideally emphasise and strengthen Africa’s competitiveness, whilst meeting buyers where they are to make sure Africa can tap into existing demand, and working to grow and mature the market together with the buyers.

1 The PACM Supervisory Body (SBM), formerly the 6.4 SB, is tasked with expediting the development of key standards and tools, including those for additionality, non-permanence, and baselines, with a goal to finalise an additionality standard this year. Meanwhile, the Methodological Expert Panel (MEP) will draft methodologies aligned with these standards, likely mandating compliance with SBM tools for demonstrating additionality and managing non-permanence risks.