With COP29 beginning next week in Baku, Azerbaijan, all eyes are on the global climate finance landscape. This conference is pivotal, as world leaders, climate experts and financial stakeholders meet to address crucial issues like climate justice, equitable funding and scaling carbon finance for effective climate action.

At Opna, we will be closely monitoring the discussions, hopeful for ambitious commitments that push carbon finance and carbon removal forwards while prioritising vulnerable communities disproportionately impacted by climate change.

What is carbon finance?

Carbon finance is a specialised area within climate finance, focused on investments that specifically reduce, avoid, or remove carbon emissions. It’s a driving force behind climate action efforts in developing nations, helping them mitigate climate risks and adapt to new challenges.

Carbon finance vs climate finance: explained

While climate finance broadly supports all efforts to address climate change, including both mitigation (reducing emissions) and adaptation (preparing for climate impacts), carbon finance concentrates solely on mitigation. It ensures that funding flows to initiatives that actively lower CO₂ and other greenhouse gases, whereas climate finance more broadly includes projects that improve resilience and infrastructure in vulnerable communities.

Why this distinction matters at COP29

As COP29 opens, the importance of both carbon and climate finance will be underlined. By distinguishing between them, we can better target funding for direct emissions reductions as well as support for communities adapting to climate impacts—each a crucial component of a balanced, effective response to the climate crisis.

Crucially, the importance of carbon finance extends beyond environmental impact—it is also a tool for promoting climate justice by ensuring that financial resources reach those bearing the brunt of climate change. COP29 holds the potential to reshape how carbon finance flows globally, as long as discussions focus on the need for a redefined approach that prioritises inclusivity, resilience, and long-term impact.

Key issues on the agenda for COP29

The outcomes of COP29 will hinge on a few landmark initiatives, each poised to influence the future of carbon finance.

The New Collective Quantified Goal (NCQG): A new era in climate finance

The New Collective Quantified Goal (NCQG) seeks to establish a more robust and equitable climate finance framework, replacing the previous target of $100 billion annually set in 2009. It aims to significantly increase both the quantity and quality of financial resources available to developing nations for mitigation and adaptation efforts starting in 2025.

With a new funding structure focused on public finance and the inclusion of loss and damage provisions, the NCQG is set to direct support to communities most affected by climate change. This includes both financial resources to help offset damages from climate-induced events, and non-economic support for issues like mental health impacts from displacement.

Operationalising Article 6: Unlocking global carbon finance

The NCQG is also closely tied to Article 6 of the Paris Agreement, which provides a framework for international carbon markets. Operationalising Article 6 (and especially Article 6.4, which focuses on creating a centralised global carbon market) could allow countries to trade carbon credits more effectively, creating new opportunities for investments in carbon projects in developing nations. This would be a major win for carbon finance, as funding would support both nature-based solutions (like afforestation and soil sequestration) and emerging technological carbon removal methods.

By creating better financial pathways for these projects, Article 6’s operationalisation could support rapid scaling, allowing carbon removal projects to reach their full potential.

The Loss and Damage Fund: Addressing climate inequality

A core issue at COP29 is the full operationalization of the Fund for Responding to Loss and Damage, originally established at COP27 in Egypt. This fund is designed to help communities hit hardest by climate disasters, from hurricanes to rising sea levels. Although last year saw some progress, including Germany and the UAE pledging $100 million each to the Fund, the urgency for immediate and effective funding is undeniable.

Developed nations have historically contributed the majority of greenhouse gas emissions, so they’re expected to fund support for communities facing climate-related challenges. This new funding structure could ensure that resources are transparently allocated, prioritising communities in greatest need and aligning financial flows with the Paris Agreement’s human rights commitments.

Climate justice and carbon finance inglobal south

Hopes for COP29 and beyond

As we look toward COP29’s close, there is reason to be optimistic about the future of carbon markets. The full operationalisation of Article 6 will offer businesses in the carbon space an opportunity to align with new regulatory standards, engage in global carbon trading, and contribute to a market-based approach to climate action. With transparent and well-regulated carbon markets, companies can better meet their climate goals while supporting a fair transition for the communities most impacted by climate change.

Opna is committed to advancing carbon finance solutions that address these challenges, channelling funds into projects that support climate resilience and community-led initiatives. We are hopeful that COP29 will serve as a turning point, building a more resilient, transparent, and impactful framework for climate finance.

To learn more about our impact-led projects, contact us at hi@opna.earth.