Climate Talks: Unpacking COP28 and the State of Climate Action in 2024

With the UN climate negotiations at COP28 behind us, we reached out to our policy and public affairs leads to help unpack the outcomes. They discussed the key developments, conclusions for global carbon markets, and what the landscape for private sector action looks like in 2024.

1. First of all, did COP28 deliver?

Frederic Gagnon-Lebrun, Senior Director of Climate Policy, Finance and Carbon Markets:

On the whole, there were moves in the right direction, such as the agreement on a Loss and Damage Fund to support vulnerable countries in dealing with the effects of climate change. We even saw some significant financial commitments made by the EU and the U.S., among others.

The conference was also a culmination of the so-called 'global stocktake', which is a central outcome, as it contains every element that was under negotiation and can now be used by countries to develop stronger climate action plans due by 2025, and set targets for 2035/2040. As part of the global stocktake, an agreement was reached to globally 'transition away from fossil fuels by 2050' as well as triple renewable energy capacity.

While this decision does not 'close the books' on phasing out fossil fuels, many are hailing this as the “beginning of the end" of the fossil fuel era. We must not lose this momentum. We must focus on the collaborations, supportive policy incentives, and financing solutions that can help accelerate this shift.

Ritika Tewari, Senior Managing Consultant for Climate Policy, Finance and Carbon Markets:

While there was progress on some fronts, as Frederic mentions, there was none on others. This was the case for Article 6, which sets out the rules for global market-based collaboration around emissions reductions. It is seen as an essential enabler in providing countries and businesses with a key pathway to meet and accelerate their climate goals.

This year, there were no decisions made on Articles 6.2 and 6.4, which govern the implementation of bilateral agreements and compliance carbon markets (more on that here, for context).

The lack of agreement on Article 6.4 specifically is discouraging for several reasons. The operationalization of Article 6.4 would have provided a new structure for a global carbon market, with the UN deciding on the rules regarding eligibility.

These markets will not be operationalized within the next year, before a return to the negotiation table at COP29. In the meantime, our team will be closely following the work of the Article 6.4 Supervisory Body, which has a mandate to review work on Article 6.4 throughout 2024. In the words of Andrea Bonzanni, International Policy Director at IETA: “We have missed an opportunity to expedite the operationalisation of a crediting mechanism that would have set a high bar on environmental integrity, safeguards, and human rights."

Negotiators also failed to agree on the key details under Article 6.2, which sets out rules for country-to-country collaboration. However, these markets differ from 6.4 in that they are already in use by countries. While the lack of consensus on 6.2 is disappointing, countries will continue to implement international carbon markets under Article 6.2, and it is exciting to see several projects moving ahead in this space.

No agreement on Article 6 also delays the VCM's integration with the Paris Agreement accounting framework - the so-called 'hybrid' scenario. Many market stakeholders who were looking forward to direction from the multilateral process were left disappointed. However, this still leaves the door open for countries, standards, and bodies to deliberate and demonstrate high-integrity rules of engagement in close collaboration with one another, as well as introducing initiatives through existing mechanisms.

2. What do you see as the key takeaway from a Public Affairs perspective - what is the larger movement coming from this COP?

Ermenegilda Boccabella, Director of Public Affairs:

The larger moment of this COP is the changing climate compliance landscape globally. In light of decisions, and even preceding them, we were seeing a lot of national legislation being drafted, decided on, and already in the implementation stages. Much of this expands existing structures to define the financial instruments used in the VCM. Independent of this COP's outcomes, we expect this shift to continue. This is a changing approach from a governmental perspective in the interaction with carbon markets, among others.

Going forward, we expect progress on national policy frameworks to become even more important than the UN negotiations for Article 6. This means that we will need deliberate investments into capacity-building so that all countries have a level playing field, and can work together towards scaling impact faster.

3. What do the regulatory developments mean for the carbon market space?

Frederic Gagnon-Lebrun:

One of the most significant outcomes at COP28 for carbon markets was key industry bodies coming together. The carbon standards have announced the creation of infrastructure for the interoperability of markets - of the VCM and Article 6. This is promising, helping to scale both ambition and finance for global transitions across technological sectors and geographies.

On the other hand, with the lack of decision, there is a delay of a year to develop markets under Art. 6.4. This again emphasizes the working mechanisms we have, such as 6.2 and the VCM, which provide an existing toolkit for what high-integrity markets can and should look like going forward.

Paraphrasing Alexia Kelly, Board Member of the The Integrity Council for the Voluntary Carbon Market (IC-VCM): “We need strong international rules for a(voluntary carbon market (VCM) that will continue to exist regardless of what is agreed at the UN, and we've missed a chance to deliver that at this COP. In the meantime, it makes the work done by the IC-VCM on standardization and reform in the VCM all that much more important."

4. Going beyond the negotiations - what does all this mean for the private sector going into 2024?

Ermenegilda Boccabella:

Let's not forget that the VCM is helping to pave the way for compliance markets, and many actors are voicing their support for high-integrity market mechanisms. For example, key government regulators and financial markets self-regulatory bodies intend to contribute to strengthening the integrity of the VCM.

On top of this, the accountability of delivering national climate actions plans overall is starting to be passed on from countries to companies in the form of tighter requirements around the disclosure and progress of corporate climate and environmental efforts. New legislation around climate-related risk disclosure, including the likes of the EU's Corporate Sustainability Reporting Directive (CSRD), will provide more clarity and transparency on how private sector action is truly tracking when it comes to progress on climate and sustainability issues.

In parallel, and especially against the backdrop of increasing physical climate threats and a challenging geopolitical situation, we expect policymakers to start shifting their discourse to focus on energy security and energy independence, technology transitions, and strong, competitive, low-emission industries. Government leaders will likely start translating these needs into targeted policies. They will expand policies that incentivise the development and financing of critical climate technologies, push companies towards more sustainable ways of operating, put a price on pollution, and ensure markets value sustainable stewardship.

All of these shifts will inform the corporate landscape and agenda for 2024. It starts with companies acting on climate and then transparently speaking about it. The private sector is uniquely poised to meet the moment and to increase the ambition of voluntary action as the world waits for another year to see progress on global market-based collaborations at COP29.