How will COP29 impact your business?

This year at COP29 there will be with several key issues on the table that will set the green transition agenda over the next decade, shaping discussions across governments and businesses alike. There are four key trends at the top of the agenda that all business leaders should be aware of: 

1. Setting the target and scope of climate finance over the next decade to >$500 billion per annum 
2. Boosting investment in energy connectivity  
3. Accelerating clean hydrogen  
4. Unlocking carbon markets to accelerate the energy transition and support business’ decarbonisation.

Do connect with us if you are going to COP29 or would like to discuss the opportunities and consequences of COP29 for your business.

1. Setting the target and scope of climate finance over the next decade to >$500 billion per annum

Climate finance will be one of the biggest agenda items at COP29 and is critical for every business with interests or investments in the energy transition.  

For the first time in 15 years, countries will come together in Azerbaijan to agree an updated financing goal to supersede the previously agreed $100 billion per annum target set in 2009 (which was only recently met). This New Collective Quantified Goal (NCQG) aims to be more ambitious in addition to outlining the relative contribution from different states, timeframe, and in-scope activities for financing. Current proposals for the NCGQ range from targets of $500 billion to $1 trillion per annum. 

Collectively, governmental commitments on finance mobilisation will continue to inform how private financial institutions respond and how much private capital is deployed.  

There is widespread recognition that the volume of investment needed will require close collaboration with the private sector as public financing will not be able to match the ambition required alone. This is likely to impact government policies and market incentive structures to unlock closer and better aligned private sector investment flows in the coming years. Several governments have already started to announce targets to support this (eg India announcing $75 billion in support to energy producers and consumers to support low carbon technologies). This is a sizable opportunity for private sector leaders looking to scale-up their climate investment and represents a pivotal moment for new-commers as the market grows.

These discussions will underpin the next generation of climate action. Understanding outcomes and implications will therefore help guide business’ investment plans and financing strategies, and the response of their financiers, over the coming years.

Speak to our Financial Services and Sustainability teams for more information.

2. Boosting investment in energy connectivity

COP29 will also see the topic of energy connectivity high on the agenda, transcending country-specific discussions to look at cross-country green and resilient infrastructure development. Understanding the outcome of these discussions will be critical for energy producers and investors, especially as it opens new opportunities to strengthen clean energy business cases. Further, these discussions also provide an important platform for multi-party discussions to ensure collaboration across government, developers and suppliers.

Countries pursuing a Green Energy Pledge will look to establish cross-border green energy corridors, zones, grids, and storage systems to delivery on their energy transition plans at scale and at cost. This represents a sizable opportunity for energy producers and developers as new markets and businesses cases for investment in low-demand or saturated countries grow. Indeed, these projects are already attracting significant investment with the European Commission planning to invest €2.3 billion in the Black Sea corridor².

Speak to our Energy and Resources team for more information.

3. Accelerating clean hydrogen

The importance of clean hydrogen as a low carbon energy vector has been consistently recognised as crucial in previous COPs, especially in supporting the energy transition in hard-to-abate sectors. Numerous commitments and policies have been launched to support project development and market building (eg EU mandates for renewable hydrogen in RED III or US tax credits for low carbon hydrogen under the Inflation Reduction Act). However, many projects are still stalling due to wider challenges. Global clean hydrogen demand is expected to grow to 38 million tonnes per annum by 2030 (from a base of less than 1 million tonnes today), but only 12% of this required new growth has yet reached Financial Investment Decision (FID)^3,4. Reasons for this shortfall include cost issues driven by equipment and financing costs, supply chain constraints, and certification questions that are limiting offtake demand. 

The COP29 presidency has put these challenges on the agenda at Baku. Topics on the table include regulatory, technological, financing, and standardisation barriers for clean hydrogen production and commercialisation. It will be crucial for business leaders to be part of these conversations as COP29 drives towards tangible solutions rooted in practice.  

Speak to our Low Carbon Solutions team for more information.

4. Unlocking Carbon Markets as a proven solution to accelerate the energy transition and support business decarbonisation 

Carbon Markets are a powerful accelerator for climate action especially to support low carbon business cases. In fact, carbon trading schemes are playing a significant role in enabling major energy projects across Europe, Asia, and Africa, and have already been identified as a driver of European decarbonisation helping to lower emissions by 47% since 2005⁵. Scaling up Carbon Markets to a global scale therefore has the potential to shift the needle on accelerating carbon abatement and enabling the energy transition. This will be critical for wider governments and businesses looking to drive their own low carbon investments. 

Whilst Article 6 of the COP21 Paris Agreement created the framework to enable ‘international trading of mitigation outcomes’ (eg carbon credits), the operationalisation of a functional global carbon market has been elusive, partially because of political differences. COP29 Lead Negotiator Yalchin Rafiyev has called out ‘finalising Article 6’ as a key pillar to the negotiations at COP29. Negotiation outcomes will send powerful signals about the future of carbon markets and influence broader transition risks and opportunities for businesses. 

Speak to our Commodity and Energy Trading team for more information.

How can you engage at COP29? 

The convening of global energy, finance, and industry leaders makes COP a valuable opportunity to build key partnerships needed to tackle the energy transition, and we have extensive experience helping our clients do just this.  

Our Sustainability Team will be present in Baku in November 2024 and would love to connect with you on the ground. Similarly, we are also happy to share our insights and advise you on how to maximise your COP programme and response to outcomes.  

Reach out to Shuayb Ismail or Darshan Grover for guidance on how to use COP to showcase projects, identify target relationships, and catalyse new partnerships with customers, suppliers, technology providers, government, and investors. 

References

¹ Azerbaijani minister names main tasks of COP29, Azernews (2024). 

² Azerbaijan, Georgia, Romania and Hungary begin process of creating joint venture for Black Sea Energy project, Interfax (2024). 

³ Global Hydrogen Review, IEA (2023). 

⁴ Hydrogen Insights 2024), Hydrogen Council (2024). 

⁵ What is the EU ETS?, European Commission (2024). 

⁶ What You Need to Know About Article 6 of the Paris Agreement, World Bank (2022).