COP29 is called the Climate Finance COP

Source: The post COP29 is called the Climate Finance COP has been created, based on the article “A role for India in South-South climate cooperation” published in “The Hindu” on 12th February 2025

UPSC Syllabus Topic: GS Paper3- Environment

Context: The article discusses COP29, called the Climate Finance COP, and its role in implementing Article 6 of the Paris Agreement. Article 6.2 allows countries to trade carbon credits to meet climate goals. India can benefit by attracting climate finance, collaborating internationally, and supporting South-South cooperation, especially with African nations.

For detailed information on COP 29 Outcomes read this article here

Why is COP29 Called the Climate Finance COP?

1. COP29, held in Baku, Azerbaijan, focused on financial mechanisms for climate action.
2. A major achievement was operationalizing Article 6 of the Paris Agreement, enabling carbon markets.
3. Article 6.2 allows trading of Internationally Transferred Mitigation Outcomes (ITMOs) to fund emissions reductions.
4. India demanded $1 trillion annually in climate finance for developing nations.

What is ITMO Trading?

1. Definition and Purpose

• ITMO (Internationally Transferred Mitigation Outcome) trading allows countries to trade carbon credits under Article 6.2 of the Paris Agreement.
• It helps developing countries reduce emissions while attracting finance, technology, and capacity-building support from developed nations.

2. India’s Role in ITMO Trading

• India is the third-largest greenhouse gas emitter in absolute terms but faces financial and technical constraints in meeting its 45% emission intensity reduction target by 2030.
• Before COP29, India demanded $1 trillion annually from developed nations for climate finance.

ITMO transactions can fund climate-resilient projects and green technology development.

3. Key Sectors Benefiting

• India identified 14 priority areas, including renewable energy (RE), energy storage, carbon capture, and sustainable aviation fuel.
• India has partnerships with South Korea, the European Union, and Japan to develop these technologies.

What is India’s Role in South-South Cooperation?

1. Supporting African Nations: India can help African countries tackle climate impacts in agriculture and water resources.
2. Technology and Capacity Building: India can share expertise in renewable energy, digital tools, and sustainable agriculture with African nations.
3. Policy Commitment: PM Modi’s 10 principles for India-Africa engagement emphasize economic cooperation and climate resilience.
4. Climate Finance Mobilization: Article 6.2 allows India to generate ITMOs while investing in African sustainable projects to meet global climate targets.

What Challenges Does India Face?

India faces several challenges in utilizing ITMOs under Article 6.2:

1. Risk of Developed Nations’ Over-Reliance: Developed countries might buy low-cost emissions reductions from India, avoiding significant emissions cuts domestically.
2. Opportunity Cost: Selling ITMOs could hinder India from achieving its own sustainability goals.
3. Governance and Transparency Issues: Inadequate regulation can lead to inefficiencies and inequities in ITMO transactions.
4. India needs robust policies to ensure fair ITMO agreements that benefit its climate ambitions while supporting global climate goals.

Question for practice:

Examine why COP29 is referred to as the “Climate Finance COP”?