Category: Trade Policy

What Happened at COP29 in Baku?

Having recently returned from the 29th Conference of the Parties (COP29) of the U.N. Framework Convention on Climate Change (UNFCCC), held in Baku, Azerbaijan, I want to offer my personal summary and assessment of the major takeaways from COP29, briefly summarize Harvard’s participation, and offer some thoughts about the path ahead to COP30.

Why Azerbaijan?

You probably won’t be surprised to learn that the setting for this COP in the oil-rich, authoritarian state of Azerbaijan was not conducive to a productive let alone an enjoyable Conference of the Parties.  Azerbaijan feels like exactly what it is – a former Soviet republic – the Azerbaijan Soviet Socialist Republic – from 1920 until 1991, when the Soviet Union was dissolved, and now an “independent” country that remains firmly within the Russian sphere of influence.  So, why was it held in Azerbaijan?  The reason is simple:  Vladimir Putin said it could be held there.  Let me explain.

The COPs rotate among five regional groups of United Nations member states to ensure geographical diversity and equity in hosting the conferences. These regions, in alphabetical order, are: (1) Africa; (2) Asia-Pacific; (3) Eastern Europe; (4) Latin America and the Caribbean; and (5) Western Europe and Others.  This was the turn of Eastern Europe.  The specific location of the COP within a given region depends on which country from the region volunteers, as long as no country from the region objects.  Poland volunteered (they have held three remarkably successful COPs in the past), but Russia objected to any (Eastern European) country that supported Ukraine in the current war being the host.  The result was Azerbaijan volunteering to host, and Russia approving.  This was not an auspicious beginning to the process of Baku following Dubai.

Five Major Takeaways from COP29

      I can identify five significant takeaways – important phenomena or negotiating outcomes – from the two-week Conference in Baku:  (1) the counter-productive leadership of COP29 by Azerbaijan’s president; (2) the lame duck status of the U.S. delegation; (3) the outcome of negotiations on “finance;” (4) the evolution of language about the future role of fossil fuels; and (5) the completion of the “carbon-market article” in the Paris Agreement.  I take these in turn.

  • (1)  COP29 Leadership by Azerbaijan

As the President of COP29, Azerbaijan President Ilham Aliyev sought to position his country and his leadership at COP29 as a bridge-builder between the Global North and the Global South.  In practice, it did not turn out that way.  Indeed, I would say that geopolitical tensions at COP29 between rich and poor countries were greater than ever before.

Aliyev started things off with a defiant opening presentation at the beginning of COP29, in which he characterized his country’s oil and gas reserves as “a gift of God,” maintained that it is “not fair” to call his country a petrostate, and then accused Western countries of “double standards” and “political hypocrisy.”  Then, the next day, he attacked France and the Netherlands for their overseas territories, which he described as “colonies” which don’t have seats in the climate negotiations.  In addition, the Azerbaijani government and its state company, SOCAR (the State Oil Company of the Azerbaijan Republic, the national oil and gas company), finalized several natural gas deals at COP29 to increase natural gas exports to Europe.

This perspective on fossil fuel use from an autocratic ruler made it challenging, to say the least, for Azerbaijan to preside over the talks and find compromise on some very delicate climate topics.  I cannot say exactly how Aliyev’s leadership resulted in the COP29 outcomes, but in the hallways, delegates from a diverse set of countries complained vociferously about the host country’s leadership of the Conference.

  • (2) The Lame Duck Status of the United States

Donald Trump’s election as the next U.S. president pervaded everyone’s thinking, at least during the first week in Baku.  In particular, expectations that Trump will follow through on his promise to pull the USA out of the Paris Climate Agreement, as he did in 2017 during his first term in office, fueled concern that this would have profound, negative impacts on multilateral climate action.  (See my previous blog essay, Looking Back, Looking Forward:  Implications of Trump 2.0.)

The chief U.S. climate envoy, John Podesta, tried in vain to reassure his various audiences – other countries’ negotiators, climate activists, and the press – that the U.S. remains on track at the U.N. climate talks.  I will note that there is merit to his claim that the global energy-transition trend will not be stopped by a change in U.S. administration, because much of it, in my view, is driven by markets and exogenous technological change.  After a few days, the significance of the U.S. election may have faded somewhat in the negotiators’ minds, but it remained the starting point for discussion in every meeting in which I engaged – with a diverse set of people from governments, NGOs, industry, and the press.

The key question, of course, is whether Trump’s election and the anticipated withdrawal of the United States from the Paris Agreement – or more broadly, the election results and the promise of Trump 2.0 – has on other countries’ climate stances, pledges, and policies.  It was clear that the U.S. delegation was more muted than usual, and that there would be no effective pressure from the USA (as there was during the Obama years) for China to become more ambitious in its pledges.

It was striking that during the first week of COP29, right-wing populist leader Javier Milei threatened to withdraw Argentina from the talks altogether, which led some delegates to fear that Trump’s win might precipitate a global chain reaction of far-right governments withdrawing from the Paris Agreement.  But the Argentinian government subsequently clarified that it was not leaving Paris Agreement, and those fears dissipated.

It may be that Trump’s election need not derail global climate action, but it is too soon to make firm predictions.  For one thing, it does appear that Trump’s victory emboldened Saudi Arabia to be much more strident in its defense of fossil fuels at COP29, even more aggressive than it has been in previous COPs.

  • (3) The Center-Stage Outcome:  Finance

COP29 was labeled the “Finance COP,” because it was intended that the focus would be on augmenting developed countries’ commitment made in 2009 (at COP15 in Copenhagen) to mobilize $100 billion per year by 2020 to support developing countries in addressing climate change, both for mitigation and for adaptation (that target appears to have been met about two years late). 

The debates on this continued for the entire two weeks of COP29 (and then some), ranging from heated discussions to acrimonious arguments, with developed countries on one side, and, on the other side, developing countries plus China, which insists it is a “developing country” under UN rules from 1990.  China’s position remains that it supports developing country demands for very high levels of financial transfers, but as a developing country itself, it will not contribute, despite the fact that it has been the world’s largest emitter since 2006, and is now second only to the United States as a contributor to the stock of atmospheric greenhouse gases (GHGs).

The developing countries at COP29 insisted on $1.3 trillion/year as the new level of commitment, but the rich countries offered a new goal to deliver to poor countries $300 billion/year by 2035, with developed countries taking the lead and some developing countries (that is, China) encouraged to contribute on a voluntary basis.  The developing world wanted all of the funds to come from public sources (that is, foreign aid), but the final deal allows some money to come from private sources, such as foreign direct investment, which (in my opinion) makes abundant sense.

Although the new $300 billion/year target is three times the size of the previous target (see above), it is less than 25% of the $1.3 trillion/year sought by developing countries.  So, not surprisingly, developing countries were not happy, with the complaints led vocally by India’s lead negotiator, Chandni Raina, who called it “a paltry sum” and a “travesty of justice.”

  •  (4) The Future of Fossil Fuels

One year earlier, at the 28th Conference of the Parties (COP28) in Dubai, the closing statement (officially the “Decision of the First Global Stocktake”) endorsed “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner …”.  That statement received more attention than any other outcome of COP28, although I wrote at the time that it was not of great significance (What Really Happened at COP28 in Dubai).  However, many governments, NGOs, and the press hailed that compromise statement as making COP28 a success.

So, when it came to the conclusion of COP29 in Baku, all eyes were turned to the question of whether COP29 would endorse, indeed strengthen that language about transitioning away from fossil fuels.  The result, largely due to Saudi Arabia fighting aggressively and effectively against any negative comments about fossil fuels in the final text, was that the COP29 text simply references the Dubai outcome, but does not repeat the call for a transition away from fossil fuels, let alone offer something stronger. The European Union (EU) and the U.S. negotiators wanted something to be included about actions to achieve any goal, but that was likewise rejected.

  • (5)  What About Article 6 of the Paris Agreement?

As some of you may know, I’ve worked on and written about Article 6 (more specifically, Article 6.2) of the Paris Agreement, which deals with “international cooperation,” since long before the Paris Agreement and Article 6 were even developed, via my extensive work on international linkage of heterogeneous policy instruments (Jaffe and Stavins 2008; Ranson and Stavins 2013; Ranson and Stavins 2015). And once the Paris Agreement began to take shape, I turned to examining how international policy linkage could be facilitated by its Article 6.2 (Bodansky, Hoedl, Metcalf, and Stavins 2015; Mehling, Metcalf, and Stavins 2019), as well as numerous essays at this blog.

            So, what happened in this regard at COP29?  Remarkably, despite the very contentious debates on finance and the future of fossil fuels, there was finally (eight years after the Paris Agreement came into force) agreement on the adoption of Article 6, which can facilitate international GHG trading.  Unfortunately, as I will write about in some future essay at this blog, the ways in which countries are interpreting Article 6.2 and exploiting it do not bode well for it living up to its great promise.

So, that’s my summary and assessment of five meaningful takeaways – significant phenomena and negotiating outcomes – from the two-week Conference in Baku.  I leave it to readers to decide whether this indicates that COP29 was a success or not.

I now turn to a very brief summary of the work our Harvard delegation was doing at COP-29, and then conclude with some thoughts about the path ahead to COP30.

Harvard Participation

            Once again, I led our Harvard delegation, which was severely limited in size at COP29 due to the low allocation of badges we were awarded by the host country.  Nevertheless, we held a couple of dozen meetings over three days with governments, industry representatives, NGOs, and the press, largely focused on the work of the Harvard Salata Initiative on Reducing Global Methane Emissions, which I’m directing. 

In addition, we hosted two official side events.  The first was on New Horizons in Methane-Emissions Abatement, co-sponsored by the Harvard Project on Climate Agreements and the Institute for Governance and Sustainable Development (IGSD), on Tuesday, November 12, 2024.

Speakers included:  Zerin Osho, Director, India Program, Institute for Governance & Sustainable Development (IGSD); Sarah Smith, Program Director – Energy, Global Methane Hub; Ole Sander, Senior Scientist for Climate Change, International Rice Research Institute; and myself, as moderator and presenter.

Our second side event was on Industrial Policy, Trade, and the Political Economy of Decarbonization, co-sponsored by the Harvard Project on Climate Agreements, the Enel Foundation, the Massachusetts Institute of Technology, and the Foundation Environment – Law Society, on Thursday, November 14, 2024.

This second panel, which I moderated, featured:  Daniele Agostini, Head of Energy and Climate Policies, Enel Group; Chantal Line Carpentier, Head of the Trade, Environment, Climate Change, and Sustainable Development Branch at UNCTAD; Michael Mehling, Deputy Director, Center for Energy and Environmental Policy Research, MIT; and Joyashree Roy, Distinguished Professor and Director SMARTS Center, Asian Institute of Technology.  A background paper, “Good Spillover, Bad Spillover? Industrial Policy, Trade, and the Political Economy of Decarbonization,” and its 2-page summary can be downloaded here.

The Path Ahead

There is some consistency between COP28 (Dubai), COP29 (Baku), and next year’s COP30 in Brazil, as that country is Latin America’s largest oil producer (Petrobras now surpasses the production of Mexico and Venezuela).  But expectations are very high for COP-30, which will take place November 10-21, 2025, in Belém do Pará in the Amazon region of Brazil, because that is where countries’ updated targets under the Paris Agreement are scheduled to be finalized.  Those revised Nationally Determined Contributions are due to be submitted by February 2025.  Stay tuned.

Whether I will maintain my streak next year in Brazil of annual COP participation is, as always, an open question, particularly after having spent several days this year in Baku, Azerbaijan.

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Looking Back, Looking Forward: Implications of Trump 2.0

            This is a blog essay I have been dreading having to write, because I knew that writing it would be painful, if not downright depressing.  However, I also felt that it is a blog essay that I am obliged to write. 

Why Am I Obliged to Write This Essay?

Three reasons.  First, back in October 2016, as that year’s Election Day approached, I came out of my political closet (as a long-time bipartisan and moderate independent), and revealed my great concerns, indeed fears, of what a Trump presidency would mean – not just for environmental and climate change policy, but for a much larger set of issues with profound consequences domestically and internationally (This is Not a Time for Political Neutrality).  I wrote about “what a Trump presidency would mean for my country and for the world in realms ranging from economic progress to national security to personal liberty,” based on Trump’s “own words in a [2016] campaign in which he substituted impulse and pandering for thoughtful politics” … and “built his populist campaign on false allegations about others, personal insults of anyone who disagreed with him, and displays of breathtaking xenophobia, veiled racism, and unapologetic sexism.”

Second, just a week after Trump’s surprising win over Hilary Clinton, I turned my focus in this blog to considering carefully the implications of the (first) Trump administration for environmental, energy, and climate change policy and action (What Does the Trump Victory Mean for Climate Change Policy?).  I’m pleased to say that much (but not all) of what I feared that first Trump administration would bring did not occur, for four reasons, among others:  (a) the incompetence of the administration, particularly in regard to producing regulatory changes that would withstand legal challenges (Reflecting on Trump’s Record); (b) some Trump appointees provided guardrails protecting the country from the President’s worse instincts; (c) the (Democratic) Congress provided significant checks; and (d) dedicated, expert staff in the various departments and agencies (and even in the Executive Office of the President) were determined to resist the undoing of decades of sound public policy.

Third, in January 2021, just days before the inauguration of President Biden, I wrote in some detail about what I expected the consequences to be for domestic and international climate change policy of the then forthcoming Biden administration.  For better or for worse, much of what I anticipated, did indeed subsequently come to pass (Climate Change Policy & Action in the Biden Administration).

            So, now with Trump 2.0 two months away, I feel obliged to offer my thoughts about the forthcoming administration’s implications for climate change policy and action.  I need not point out that none of the four reasons I listed above to explain why much of what I feared from the first Trump administration did not occur, apply for the second Trump administration.

A Very Important Caveat Before Turning to Climate Change Policy

            I want to acknowledge that my major reactions to the Trump victory and my major concerns about the forthcoming Trump administration are not about climate change policy or even environmental policy more broadly, but about: the future of American democracy; global security (the future of NATO and the stability of the European Union); the real economic consequences of across-the-board tariffs (consumer costs, inflation); tax cuts for the rich; mass deportations; and leadership by uninformed demagogues – Matt Gaetz as Attorney General, RFK Jr as Secretary of Health and Human Services, Peter Hegseth as Secretary of Defense, Elon Musk on economic policy and business regulation, and so many others.  The four I name are not just bad appointments, but absolutely appalling ones, who share the one characteristic that apparently matters – blind loyalty to the authoritarian who has been elected President.

            But my expertise is not in the study of democratic institutions, international affairs, macroeconomics, or immigration policy, but in the study of environmental and climate change economics and policy.  So, I will turn to this now, and I will be brief, partly because we will learn much over the coming two months, as more cabinet-level and then lower-level nominations are announced.  My other reason for being brief is that, as I suggested at the outset, it is painful to write this essay, and so I want to finish writing as quickly as I can.  I apologize for that.

International Climate Change Policy

            In terms of the international dimensions of climate change policy, that is, cooperation with other countries in addressing a fundamentally global commons problem of massive magnitude, the focus needs to be on the United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement, and the annual Conferences of the Parties.  Having just returned from COP29 in Baku, Azerbaijan, my next blog essay will focus on that and will appear in a week or so, after COP29 has adjourned and the outcome has become clear.  So, for now, I will stick to some broad observations about the consequences of Trump 2.0 for the international domain.

            In short, it is 2016 all over again, when Trump stated during the campaign that he would withdraw the United States from the Paris Agreement, and then announced the “withdrawal” on June 1, 2017.  As I wrote at the time (Trump’s Paris Withdrawal: The Nail in the Coffin of U.S. Global Leadership?), the Paris Agreement itself specifies that the soonest any Party to the Agreement can initiate withdrawal is three years after the Agreement comes into force, followed by a one-year delay before withdrawal takes effect.  Hence, Trump’s announcement did not take effect until November of 2020!  For almost the entirety of Trump 1.0, the United States remained a Party to the Paris Agreement, and dedicated staff from the U.S. State Department continued to participate in the ongoing negotiations in meaningful ways.

Hence, the United States was out of the Paris Agreement for just a few months – from November 2020 until a month after Inauguration Day, January 20, 2021, when President Biden filed the paperwork for the U.S. to rejoin 30 days later.

            Now, however, the statutory three-year delay period has long since passed, and so assuming that Trump files the withdrawal papers on January 20, 2025 (which is likely, given the much more careful preparations his supporters have been making for the past year), one year later the U.S. will be alone among the community of nations as a non-Party of this fundamental and path-breaking Agreement (after some delay, Iran and Algeria ratified the Agreement).  Furthermore, it is much less likely that Civil Service staffers at the State Department, EPA, or the Department of Energy will be able to continue their work, as Trump 2.0 seems determined to purge the upper ranks of the Civil Service of anyone other than Trump loyalists (by making these positions require political appointment).

            A more drastic action would be to withdraw the United States not just from the Paris Agreement of 2015, but from the umbrella agreement, the United Nations Framework Convention on Climate Change (UNFCCC, 1992).  Ironically, this requires only a one-year delay to become effective after filing paperwork.  During Trump 1.0, serious consideration was never given to this more significant move, perhaps because the UNFCCC was ratified (by voice vote with apparent unanimity) by the U.S. Senate in 1992 and signed by Republican President George H.W. Bush.

Now, some of the most passionate climate skeptics in Trump’s orbit want the U.S. to pull out of the UNFCCC as well.  A key question, which legal scholars will debate, is whether withdrawal requires Senate action, including a super-majority vote, which Democrats in the chamber could easily defeat.  There seems to be some uncertainty.  While Senate action is required to ratify treaties, Senate involvement in withdrawal is not mandated nor even mentioned in the U.S. Constitution.  But Presidents have previously withdrawn from treaties unilaterally.  That said, this apparently remains a debated issue in U.S. constitutional law.

In the meantime, a key question is what will the effect of U.S. withdrawal from the Paris Agreement – or more broadly, the election results and the promise of Trump 2.0 – have on other countries’ climate stances and policies.  As of now, it seems that Trump’s election need not derail global climate action, but it is too soon to make firm predictions.  It does appear that Trump’s victory may have emboldened Saudi Arabia to be much more strident in its defense of fossil fuels at COP29 (more about this in my next blog essay).

Domestic U.S. Climate Change Policy

            It is already evident that the key appointments in the energy, environment, and climate change space in the new administration will be held by individuals with histories of strident opposition to climate policies and equally strong support for fossil fuels.  Examples include Trump’s choice for Secretary of Energy – Chris Wright, a fracking booster and climate skeptic, Lee Zeldin as Administrator of the Environmental Protection Agency, and a number of others.

            It also seems clear that the new administration will try to roll back many provisions of the Inflation Reduction Act (IRA), and perhaps some provisions of the Bipartisan Infrastructure Act.  Actual repeal of the statutes is unlikely, due to Senate filibuster rules (i.e., the necessity of 60 votes, more than Republicans will control).  In the face of this, the Biden administration is rushing to finalize regulations, and to get IRA money (explicit subsidies) out the door.  Beyond this, the White House has considerable latitude to defund elements of the IRA, since nearly all are explicit or implicit subsidies.  The methane fee will be a particular target.

On the other hand, the protectionist elements of the IRA, including domestic content standards, will be harder to roll back, because of bipartisan support.  Furthermore, fully 80% of investments in the first two years of IRA implementation went to Republican Congressional districts, whether locations for electric vehicle plants in Georgia, battery factories in South Carolina, or others.

It is also important to recognize that the tremendous reductions that have been experienced over recent years in U.S. carbon dioxide (CO2) emissions were not due to government policies, but largely a result of exogenous technological change and market forces, namely the development of horizontal drilling and hydraulic fracturing (fracking), which resulted in opening up new, low-cost, unconventional sources of both natural gas and oil.  This is what led to the massive substitution in U.S. electricity generation from major reliance on coal to major reliance on gas.  Added to this are the very significant decreases experienced over the past few years in the costs of renewable sources – both solar and wind.  None of this will go away.

Finally, the November election brought a small, but meaningful bit of positive climate policy news when Washington State voters decided not to repeal the state’s Cap-and-Invest (cap-and-trade) program.  Linkage discussions with California and Quebec will soon commence, if they have not already.  Overall, this is a reminder of the fact that the next four years (at least) will again be a period when sub-national climate policy is increasingly important in the USA.  For the time being, this is the best I can do at trying to offer a somewhat positive end to this essay.  I wish I could do better.

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A Leading Expert on International Trade Talks About Climate Change

In my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the opportunity of engaging in interesting conversations over the past five years with a significant number of outstanding academic economists who have carried out work that is relevant for environmental, energy, and resource policy, including by serving in important government positions.  My most recent guest is no exception.  Robert Lawrence, the Albert Williams Professor of International Trade and Investment at the John F. Kennedy School of Government at Harvard University, served as a Member of President Clinton’s Council of Economic Advisers from 1999 to 2001.  A prominent theme of our conversation is that the rise of political populism and economic protectionism are serious barriers impeding efforts to combat global climate change.  You can listen to our complete conversation here.

Robert Lawrence notes that public policies designed to protect the U.S. economy and labor force often have deleterious impacts on the economy and on climate policy, particularly in the case of tariffs initially imposed on China by the Trump administration and more recently by the Biden administration.

“As part of our trade war with China, Trump imposed a 25 percent tariff on electric vehicles. We already had a two and a half percent tariff on automobiles. So, that’s a 27 and a half percent tariff on electric vehicles. And that was before Biden has now raised those tariffs even further to 50 percent. So, in effect, we’ve closed the US market for electric vehicles, and have taken similar measures when it comes to solar panels,” he argues.

“We also have broad tariffs on steel and aluminum, which are key inputs if you want to make wind turbines. So, what we’ve done is in the name of … national security and also to achieve and protect our own domestic production of these products, but [an impact] is to severely, in my view, slow down the pace of decarbonization.”

Lawrence acknowledges that the Inflation Reduction Act (IRA), passed by Congress and signed into law in 2022, was a fairly successful attempt to address climate change in a bipartisan way.

“The IRA, in using subsidies, is essentially dealing with a political reality that the first best, in the minds of most economists, [which is] raising the price of CO2 emissions, proved to be impractical within the American political system. And so, we got what I think of as a second-best approach, but nonetheless, it is an approach moving us in the right direction,” he explaines. “And so, I think we see the constraints of politics leading us to do what’s feasible.”

Robert goes on to say that the recent domestic shift toward protectionist trade policies has coincided with the decline of American manufacturing, but it has not had the effect of restoring the sector to the significant stature it once held.

“I think both the Biden Administration and the Trump Administration for that matter, got it wrong because they don’t understand the reality … They think you can restore the middle class by restoring manufacturing’s role in the economy, and I think basically we’re way past the peak where this is feasible,” he says. “It’s not that manufacturing isn’t important. It has a role to play in providing us with the hardware for de-carbonization, for the digital economy, but it’s not a driver of the opportunity that it once was for people who are relatively less skilled.”

The author of several books on trade policy, including the soon-to-be-published Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?, Lawrence explains that while he is a proponent of free trade, he believes such policies must be crafted carefully.

“There is a very strong argument for an open trading economy and an open trading system. At the same time, I also think, and increasingly we’re aware, that there are different kinds of risks,” he says. “There’s an optimal pace of change from a political standpoint. Even if eventually a country would be better off putting its workers in areas where it can compete, the transition requires paying attention to some of the political consequences of doing that. And so, a lot of my work has been devoted to thinking about how you can move towards freer trade, but also deal with the labor market consequences of doing that.”

For this and much more, please listen to my podcast conversation with Robert Lawrence, the 61st episode over the past five years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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