The 60th session of the Subsidiary Bodies ( SB60 ) climate change negotiations concluded on Thursday 13 June, closing two weeks of discussions on increasing climate change action and preparations for the 29th Convention of the Parties ( COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) in November in Baku, Azerbaijan.
While some progress was made, there were limited developments in respect of the ‘key ticket’ items and more work is needed to promote global climate ambition. Azerbaijan, as the COP29 Presidency, highlighted during SB60 that the New Quantified Climate Goal (NQCG) and technical issues concerning Article 6 of the Paris Agreement and its international carbon market mechanisms will be its priorities for COP29. However, limited progress on both issues was made in Bonn, suggesting that the months leading up to COP29 will be critical.
In the words of UN Climate Change Executive Secretary, Simon Stiell, in his closing speech : “We’ve taken modest steps forward here in Bonn [But] too many items are still on the table . . . We’ve left ourselves with a very steep mountain to climb to achieve ambitious outcomes in Baku.”
Below, we analyse the progress made at Bonn, particularly in respect of the five focus areas identified in our SB60 introduction article . We also identify the outstanding issues that will be the focus in the lead-up to COP29 and what this means for Australian businesses.
Key outcomes from SB60:
Article 6: International carbon markets under Article 6 of the Paris Agreement continued to be a hot topic at SB60. Parties were able to progress several issues in the Article 6.2 and 6.4 decision texts, including the parameters for authorisation processes, in preparation for the adoption of the decision texts at COP29.
Climate finance: Progress on negotiating the New Collective Quantified Goal on Climate Finance (NCQG ) has been slow and divisive, with developing and developed countries some way apart on both the ambition and scope of the NCQG. Significant work will need to be done in the lead-up to COP29 with further meetings scheduled in October to progress discussions.
Loss and Damage: With the Adaptation Fund set up at COP28 and attention now focusing on the NCQG, loss and damage was less prominent in the SB60 discussions. Nonetheless, agreement was reached on the Terms of Reference for the 2024 review of the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts (WIM ). In addition, the World Bank confirmed it will host the Loss and Damage Fund (LD Fund ) in the interim period before the fund arrangements are formally established. The question was also raised (but with no outcome yet) as to whether loss and damage should be a sub-goal of the NCQG.
Lima Work Programme on Gender : SB60 marked the commencement of the final review of the enhanced Lima Work Programme on Gender which focused on identifying progress, challenges, gaps and priorities. A draft text on Gender and Climate Change was also prepared which the Subsidiary Body for Implementation (SBI ) will continue consideration of with a view to recommending a draft decision for consideration and adoption at COP29 in Baku.
Linkages between Technology Mechanism and Finance Mechanism: SB60 ended without any decisive outcomes for progressing the issues related to increasing the linkages between mechanisms to develop and disseminate climate technologies to those countries most in need of them, with the finance flows needed to fund those activities. A draft text prepared during SB60 remains to be fleshed out and finalised at COP29. A report on linkages progress, along with identifying remaining gaps, is to be prepared for consideration at SBI62 in June 2025.
Loss and damage
Article 6.2
In relation to Article 6.2 - the accounting framework for the bilateral trading of internationally transferred mitigation outcomes (ITMOs) between countries - SB60 negotiations centred on the 'crunch issues' including authorisations, the agreed electronic format, sequencing of reviews and addressing inconsistencies, and registries. Notably:
Authorisations : Parties considered authorisations in detail and this has been a contentious issue for some time. Key discussion points related to the number of authorisations required and whether each individual cooperative approach between Parties require authorisation, as well as whether authorisations provided can be later revoked. Some Parties oppose enabling revocation to occur at any point, while others are seeking flexibility.
Registries : Parties discussed the extent of the interoperability of Parties’ national registries and the connection between the Article 6.4 mechanism registry and the international registry. An area of strong divergence between Parties on whether authorised Article 6.4 emission reductions could be transferred from the Article 6.4 mechanism registry to the international registry maintained under Article 6.2.
Currently, the draft Article 6.2 decision text prepared for COP29 contemplates the following issues, which will need to be refined at COP29 to enable a decision to be made:
the scope and definition of a cooperative approach, with two options:
cooperative approaches being referenced by reference to compliance with the requirements of the CMA/Article 6 rules; or
cooperative approaches being mutually agreed upon between the Parties in implementing their Nationally Determined Contributions (NDCs ), supporting sustainable development and allowing for mitigation and adaptation action, and the transfer and use of ITMOs is consistent with the requirements of relevance and a decision relating to Article 6.2;
cooperative approaches being referenced by reference to compliance with the requirements of the CMA/Article 6 rules; or
changes to authorisation, notably whether changes to authorisation could be permitted, with eight different options outlined. We expect this to remain a contentious issue at COP29 and some compromise will need to be made to reach a decision;
the definition and deemed timing of the first transfer; and
procedural and administrative requirements, such as the information required to be submitted in reporting
Article 6.4
Authorisations : the issue of whether Article 6.4 mitigation contributions can be issued before authorisation by the host party was a contentious issue, with many stakeholders including Australia and the UK arguing that issuance should only occur after authorisation. Developing countries seeking to engage in Article 6.4 carbon markets, such as the African Group, Brazil and India argued that authorisation can be provided at or after issuance. This links to the overarching divergence on issues of authorisation that will need to be settled at COP29 for progress to be made.
Registries : most Parties supported the inoperability of the mechanism registry and Parties’ national registries. Parties also considered new proposals relating to the share of proceeds for adaptation, transition of Clean Development Mechanism (CDM ) afforestation and reforestation activities to the Article 6.4 mechanism, and baseline methodologies.
Currently, the draft Article 6.4 decision text prepared for COP29 contemplates:
timing, statement and changes of authorisation (with a wide spread of different bracketed options reflecting the divergence of the Parties);
the proposal for CDM afforestation and reforestation activities to be permitted to transfer to the Article 6.4 mechanism, suggesting that the CDM afforestation and reforestation project activity or programme of activities complies with the rules, modalities and procedures for the mechanism established by Article 6.4; and
whether transfers between the Article 6.4 mechanism registry, UNFCCC international registry, and national registries will be permitted.
What does this mean for COP29?
With progress on Article 6 a key focus at COP29, and the refinement of a number of outstanding issues at SB60, the Parties to the Paris Agreement will be better equipped to land on outcomes on Article 6. These outcomes must maintain environmental integrity but encourage climate action, increased investment in clean technology solutions and deliver finance to developing countries (particularly in light of the links to the new collective finance goal). Reaching decisions on key outstanding issues for Article 6 will provide greater flexibility for Parties in meeting their NDCs and sustainable development goals.
Negotiations at SB60 suggest that the Article 6 frostbite at COP29 has begun to thaw, although the conclusions from the respective Supervisory Body highlight that trouble remains, for instance:
the draft texts for both Article 6.2 and Article 6.4 do not “represent consensus among Parties”;
the issue of whether emissions avoidance activities (Article 6.2 and 6.4) and conservation enhancement activities (Article 6.4) (such as REDD+ projects) should be permitted to generate emissions reduction units under Article 6 has been delayed until 2028. In the absence of additional guidance, these activities will not be permitted under Article 6; and
the significant divergence on issues of authorisation. Clarity on authorisation is key to enabling market growth and providing the necessary certainty for Parties and private sector participants to engage with Article 6 markets and develop projects aligned with Article 6.
New Collective Quantified Goal on Climate Finance
Finance is a critical enabler of climate action. The UNFCCC climate finance as local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change. Climate finance for developing countries is a key going on the UNFCCC. Developing countries lack access to sufficient climate finance and often are the most vulnerable to climate change impacts. as local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change. Climate finance for developing countries is a key going on the UNFCCC. Developing countries lack access to sufficient climate finance and often are the most vulnerable to climate change impacts.
In recognition of this inequity, at the 15th Conference of Parties (COP15) of the UNFCCC in Copenhagen in 2009, developed countries made a commitment to jointly mobilise at least $100 billion every year by 2020 for climate action in developing countries.
The NCQG is meant to be adopted this year at COP29 in Azerbaijan. However, deliberations on the NCQG have been slow and have failed to produce consensus on fundamental issues such as the quantum that should be provided, who should provide it, who should receive it and what kind of funds should be made available.
Across the two weeks of negotiations at SB60, there were four sessions of the ad hoc work programme on the NCQG (ad hoc work programme) and a technical expert dialogue where experts and governments exchanged views on the NCQG. The Parties’ comments primarily fell into three key categories: access, transparency and principles.
Access
Access was the category that had the most consensus among the Parties, including between developed and developing countries. Of particular concern to most delegates representing developing nations was the form of climate finance and the need for a clear definition that recognised the need to enhance access. Most of these Parties referred to the significant issues they faced in the context of their existing debt obligations and the need for the provision of grants or loans with concessions such as long-term maturity periods, force majeure clauses that take climate events into account and interest at well below market rates.
Research by the Climate Policy Initiative suggests that only 5% of all tracked climate finance flows were made up of grants between 2011 and 2020, while 61% was given as debt. This has imposed significant burdens on poorer countries.
Transparency
There was broad consensus among the Parties that there is a significant need for transparency and accountability mechanisms with regular reporting periods. However, Parties diverged on what these mechanisms should be. Key points of divergence concerned whether the existing Enhanced Transparency Framework (ETF) under the Paris Agreement is fit for purpose, and if not, whether it can be modified or should be replaced with a new transparency framework. Most Parties agreed that, at minimum, the ETF ought to form the foundation of the transparency mechanism for the NCQG.
Importantly, a statement from the Trade Union NGOs representative also advocated for an approach whereby the ETF should be reviewed to encompass more broadly the qualitative elements of the NCQG, improved reporting on loss and damage, gender and intergenerational responsiveness, the just transition and sustainability.
Principles
The Parties converged the most on issues concerning principles with many of the statements of representatives from developing countries questioning whether developed countries were attempting to move away from the principles established by the Paris Agreement.
The Group of 77 and China (G77 + China) advocated for the inclusion of the principle of ‘common but differentiated responsibilities’ (CBDR principle) into the NCQG. The CBDR principle acknowledges that all states share a collective duty to address environmental issues but does not accept that all states share equal responsibility for environmental protection (see Art 2.2 of the Paris Agreement). Incorporating the CBDR principle into the NCQG would emphasise the historical responsibilities of developed countries for causing climate change. Developed countries rejected this proposal.
Other points of divergence included issues regarding timescales of the NCQG, which countries should contribute, and which countries should be the primary recipients of the money and even how ‘climate finance’ should be defined. Currently, developed countries all employ various metrics to quantify how much finance they provide, which has undermined confidence in the figures among other Parties. Similarly, the insistence of developing countries to focus talks on broadening the contributor base and providing for ‘layered’ financing that includes money mobilised from the private sector, multilateral development banks and domestic spending has led to widespread mistrust among developing countries that prefer public funding streams.
These issues were significant obstacles to the Parties negotiating the quantum. The NCQG is meant to be based on an analysis of the needs and priorities of developing countries, which the UN estimates will be at least $5.8 trillion by 2030.
Takeaways
SB60 saw Parties defer most of the NCQG negotiations and deliberations to COP29, which will be their last chance to reach an agreement on an NCQG that accords with the Paris Agreement. At the beginning of the NCQG sessions, two co-chairs of the ad hoc work programme compiled an ‘input paper’ intended to operate as a negotiated NCQG text capable of providing clear guidance and direction at COP29 in Baku. By the end of the NCQG sessions, the updated input paper remained largely a reflection of the Parties’ initial views with most contentious issues going unresolved.
Accordingly, SB60 saw Parties defer most of the NCQG negotiations and deliberations to COP29, which will be their last chance to reach an agreement on an NCQG that accords with the Paris Agreement.
SB60 hosted the third and final Glasgow Dialogue on Loss and Damage. At COP28, the LD Fund was established as a mechanism to address and respond to the economic and non-economic impacts of climate change for developing countries particularly vulnerable to the impacts of climate change. The emphasis of the dialogue was on the need for international cooperation, urgent financial support for climate action and consideration of loss and damage as a sub-goal of the NQCG.
The Side Event on Loss and Damage discussed the coordination arrangements for the Fund responding to loss and damage, assessed the progress made and funding received, and discussed further recommendations. Countries were asked to highlight their experiences in dealing with loss and damage and how responses can be improved. Vanuatu and Fiji, both island states at risk from rising sea levels, emphasised the importance of a framework for the relationship between the LD Fund, WIM and Santiago Network for Loss and Damage. In circumstances where the impacts of climate change are more pronounced in developing countries in the Global South, a framework document would enable countries to develop the required response systems and mobilise resources as needed.
The Loss and Damage discussions also unpacked existing challenges, with many countries emphasising that coordination, both at a national and international level, after an extreme weather event is a key challenge. At a national level, this requires coordinating between the government and affected communities, while at an international level, this includes accessing finance and capacity levels. These responses have to be tailored to the unique contexts of each country, suggesting the importance of individual vulnerability and needs assessments. Many nation-states, including the Maldives and Fiji, noted that loss and damage should be a sub-goal under the NCQG on climate finance.
The Parties were able to reach an agreement on the Terms of Reference for the 2024 review of the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts.
During the course of SB60 discussions, the World Bank also confirmed that it will take on the role of secretariat host and trustee of the Loss and Damage Fund. The World Bank will not be responsible for fundraising, allocating funding or implementing and monitoring projects financed by the Fund, only for managing the Loss and Damage Fund in accordance with the Board of the Fund. With the World Bank confirmed as the secretariat host and trustee, the Board of the Fund has indicated that it will select the host nation for the fund in the coming months. Once the host country has been confirmed, the Fund will be able to take up legal responsibility and commence formal arrangements with the World Bank.
Before the Fund can be fully operational, however, the procedural arrangements need to be drafted by the Standing Committee on Finance and adopted at COP29. Furthermore, discussions around the Loss and Damage fund as a part of broader climate financial goals did not provide specific progress details on loss and damage as a sub-goal of the NQCG. The question of loss and damage finance is one of the many NCQG issues that has been deferred until COP29, with Parties unable to find any compromise in Bonn.
Lima Work Programme on Gender
SB60 marked the commencement of the final review of the 5-year enhanced Lima Work Programme on Gender (LWPG) and Gender Action Plan (GAP), adopted at COP25. The LWPG was initially established at COP20 in 2014, to integrate gender considerations into climate policy and action, and the first GAP was created at COP23. The review is ongoing until November 2024, however, significant discussions were had at SB60.
Kicking off the review process, the discussions at SB60 focused on identifying progress, challenges, gaps, and priorities in implementing the GAP. This involved inputs from various stakeholders, including UN entities, constituted bodies under the UNFCCC, and relevant organisations.
A synthesis report was prepared, compiling submissions on the progress and challenges of the GAP's implementation. This report also included proposals for future work on gender and climate change, offering insights into potential new structures and priority areas for the next phase of the work programme.
The SBI agreed to continue consideration of the enhanced LWPG at SBI 61 in November on the basis of a draft text on Gender and Climate Change prepared with a view to recommending a draft decision for consideration and adoption at COP29 in Baku.
The draft text on Gender and Climate Change highlights the ongoing need for gender mainstreaming across UNFCCC activities as well as the disproportionate impacts of climate change on women and marginalised groups. The draft text also proposes a ten-year extension of the enhanced LWPG and its GAP, an intermediate review of the progress of implementation of the activities contained in the GAP and to establish an implementation support initiative for gender to support developing country Parties in implementing the enhanced LWPG and its GAP. The draft text also encourages Parties and relevant non-party stakeholders to enhance the collection and use of gender-disaggregated data in order to facilitate gender-responsive climate action.
If the draft text on Gender and Climate Change is agreed upon at COP29 substantially in its current form, this could see new regulations and increased expectations related to gender equality and climate action. For example, businesses may be expected to report on gender-disaggregated data and their efforts to integrate gender perspectives into their climate policies and action plans.
COP29 will also likely see a heightened emphasis on gender equality and climate change. This could include more sessions, discussions, and side events dedicated to exploring gender-responsive climate policies and initiatives.
In order for Parties to adapt to, and mitigate, climate change impacts, it is recognised that technological solutions must be implemented to strengthen developing countries’ responses and that better financial support should be provided to achieve that.
At SB60, Parties came together to consider how to improve linkages between the Financial Mechanism, which was established to support technology implementation, and the Technology Mechanism (consisting of the Technology Executive Committee and the Climate Technology Centre and Network (CTCN)), tasked with accelerating climate technology development and transfer.
The linkages between the Technical Mechanism and the Financial Mechanism were considered early on in SB60, focusing on how financial flows can aid the dissemination of technology to developing nations. In particular, Parties considered how to implement the outcomes of the technology needs assessments (TNA) process, which allows Parties to identify adaptation and mitigation technologies required for climate change impacts, as well as the CTCN technical assistance, through which climate technology experts can be mobilised to aid Parties in customising technical solutions to address local requirements.
Key ideas raised to enhance linkages included:
increasing the efficiency of implementing outcomes, particularly in driving outcomes towards bankable projects, through 'plug and play' solutions that can be implemented by Parties;
allowing National Designated Authorities to implement multi-year programmes rather than proceeding on a project basis; and
providing adequate funding for the implementation of outcomes from the TNAs and CTCN technical assistance.
The Technology Mechanism was called upon to better promote TNAs and provide customised support to address Parties’ specific requirements.
A draft text on enhancing the linkages between the Finance Mechanism and Technology Mechanism was prepared and the SBI has agreed to continue considering that text, and the issue more broadly, at SBI61 at COP29.
Currently, the draft decision contemplates the following key items:
the urgent need to consolidate information and data on the linkages between the Technology Mechanism and the Finance Mechanism, which information is to be collated and included in a joint annual report;
the lack of implementation of TNA outcomes, coupled with a request for the two mechanisms to consider the technology priorities and actions to enhance linkages to ensure outcomes are implemented; and
the secretariat is to prepare a report consolidating information on funding provided and gaps remaining, as well as progress on linking the two mechanisms and potential opportunities to enhance those linkages, with the report to be considered at SBI62 (June 2025).
The draft also recognises the importance of engaging with a broad range of stakeholders, including the private sector. As such, developments that enhance linkages between the mechanisms could lay the groundwork for investment opportunities if finance flows are opened up for technology implementation.
Conclusion
In light of the above, we expect there will be ongoing engagement with Parties and non-government stakeholders in the coming months across all five focus areas in particular with respect to the NCQG. We will continue to closely track these developments in the lead-up to COP29 and will publish our expectations for COP29 in advance of the Baku meetings.