How effective is the COP system?

This interview was conducted by the illuminem editorial team with Arvea Marieni, entrepreneur and Climate Pact Ambassador for the European Commission. The discussion centers around key topics related to the upcoming COP29 conference in Baku, climate diplomacy, and the global transition towards sustainability.

As COP29 in Baku approaches, the urgency for decisive climate action has never been more apparent. In this context, we are pleased to speak with Arvea Marieni, entrepreneur and Climate Pact Ambassador for the European Commission in Belgium and Italy. Arvea is an innovation expert at the UN Global Climate Change Innovation Hub (UGIH) and a member of the EU’s Team Europe Direct (TED). She also serves on the boards of the Italian company Brainscapital and the French engineering firm Beam Cube, where she co-leads the development of solutions for the ecological transition. This interview stems from her recent essay on the Green Deal and climate diplomacy, published in the Treccani volume "EUROPA." Together, we explore the expectations and potential outcomes of COP29, shedding light on what lies ahead in our global efforts to tackle the climate crisis.

Q: Is the COP system the center of global climate diplomacy?

Essentially, COP sessions are not the venues where decisions are made. At best, they serve as platforms to promote and facilitate ongoing actions and initiatives taken outside the formal process, when international relations allow. Faced with substantial issues, negotiators often (and understandably) respond that such matters are beyond their remit.

The key point I wish to emphasize in this discussion is that in the international community's efforts to preserve the climate niche and habitable conditions of our planet—which have enabled human civilization to thrive—there are two distinct levels of action. The first is the formal process, exemplified by the multilateral negotiations of the Conferences of the Parties (COP) rounds, which began in Rio in 1992. The second involves the economic, social, industrial, and technological transitions towards a sustainable economy that are currently underway on a global scale. This second level has gained significant momentum and has become a matter of industrial competitiveness between global blocs, particularly after the rise of the Chinese economy, now a key player and driver of the global technological transition.

The starting point is that a new economic model is required to allow human societies to operate within “planetary boundaries” and avoid collapse. In response to this “existential crisis,” the European Commission introduced the European Green Deal in 2019. By 2020, after decades of inaction and denial, the international landscape for climate and environmental policies changed dramatically. As we will discuss, the European Union (EU), followed by other world economies, made unilateral and unconditional commitments (2030-2050-2060) to climate neutrality, breaking the thirty-year “prisoner’s dilemma” of the multilateral COP negotiation system, while still embracing the consequences of the commitments made in the 2015 Paris Agreement (COP21). All of this occurred outside the formal multilateral process.

Q: You mentioned that COP sessions are not the place where decisions are made, but we need a recognized global regime. How do we break this deadlock?

This is the status quo, and it’s unlikely to change until the international community decides to empower the UN Secretariat in Bonn with functions that go beyond a mere "notarial" role. Ideally, this body should evolve into an entity capable of effectively governing the process. For those who doubt this possibility, I would point to the transition from the GATT (General Agreement on Tariffs and Trade) to the WTO (World Trade Organization).

A relevant example that illustrates my earlier point about the real economy is well-known: the cost of photovoltaic modules has decreased by 89% over the last decade and is expected to continue falling, primarily due to Chinese production volumes and investment. Today, electricity from renewable sources, particularly solar energy, is cheaper than ever. Consider the potential for transforming energy access and reshaping social structures stemming from this single aspect. Battery costs are also following a similar downward trend.

Q: With that clarified, let’s shift our focus to Baku, Azerbaijan, where the 29th UN Climate Change Conference (COP29) will be held from 11 to 22 November. What are the key points of negotiation, and what can we expect?

The Presidency’s aspiration is to establish a “truce COP,” calling for a global ceasefire during the month of the conference. Military activities worldwide account for 5% to 6% of emissions. This brings us into the realm of noble intentions and symbolic gestures. But what will actually be on the agenda for this COP?

This COP is seen as a transitional phase between the conference held in Dubai and the next one in Brazil. It is part of a “triptych” designed to lay the groundwork for the success of the "new" cycle defined by the rhythm of the Paris Agreement. The first Global Stocktake was completed in Dubai, and next year states will have to submit their new Nationally Determined Contributions (NDCs) - detailed pledges outlining how they intend to meet the Paris targets. The European Union has already confirmed that it will set a new interim target for 2040, aiming for a 90% reduction in emissions (specifically, a 55% reduction by 2030, 90% by 2040, and climate neutrality by 2050).

The deadline for the next round of Nationally Determined Contributions (NDCs) is set for February 2025, with the first round of Biennial Transparency Reports (BTRs) due by 31 December 2024. However, countries are encouraged to submit their pledges, including National Adaptation Plans (NAPs), before the next COP to guide the international community towards achieving the Paris Agreement.

Q: There’s a strong focus on transition financing and what is being referred to as the New Collective Quantified Goal (NCQG).

In 2009, developed countries committed to mobilizing $100 billion a year by 2020 for climate action in developing nations, a commitment later extended to 2025, which, according to the OECD, has just been reached. A subsequent climate finance goal is expected to be formalized at COP29 in Baku for the post-2025 period. The New Collective Quantified Goal (NCQG) will build on the initial $100 billion, taking into account the needs and priorities of developing countries. This new target should be structured to address some of the challenges that hindered the achievement of the previous $100 billion goal, which developed nations failed to meet in 2020 and 2021.

But do we really need to frame the discussion around $100 billion a year when the global transition requires investments ranging from $5.9 trillion to $9 trillion annually? The central issue lies at the heart of global politics and mechanisms for resolving financial dilemmas, which have always focused on the need for a fossil fuel taxation system.

Q: Certainly an interesting point, but is it realistic? There has never been true consensus for a global emissions tax.

At the top of the climate agenda should be the introduction of a global emissions tax (on carbon and other climate-altering gases). However, this outcome has proved elusive due to the lack of consensus among the parties. The other side of the coin—carbon pricing—is the need to eliminate fossil fuel subsidies, which still represent very significant sums (around $7 trillion annually in direct and indirect subsidies, according to the International Monetary Fund). After more than thirty years, however, we are beginning to see movement in this area.

In my essay last year, I argued that the ETS (Emission Trading System)—essentially a carbon pricing mechanism within the EU’s internal market—is at the heart of the Green Deal system. Commissioner Hoekstra, an economist, recently described it as the “crown jewel” of our climate policy during a European Parliament hearing. The EU is approaching COP in Baku with a pragmatic strategy focused on the economy. This is why it is intensifying bilateral dialogue with international partners to advance discussions on implementing Nationally Determined Contributions (NDCs), which are closely tied to carbon pricing strategies and the enhancement of low-carbon value chains.

Last week, the Carbon Pricing Diplomacy Working Group was in Tokyo, working with the Japanese government to design ambitious carbon pricing policies. Japan plans to upgrade its current voluntary emissions trading system, introduced in 2023, to a mandatory one by 2026 and implement a carbon tax on fossil fuel imports by 2028.

Q: An important development. The ETS is both a possible solution to the issue of transition financing and a mechanism to accelerate global economies.

From the perspective of transition financing, imagine how much revenue could be generated from a small tax on each barrel of oil sold—this could be redirected to fund the transition and cover the remediation costs associated with the impacts of climate change. The economic rationale for a carbon tax is clear. If a $50 tax were applied to every tonne of crude oil sold, for example, in the United States alone, it would generate additional revenues of at least $300 billion annually—funds that are desperately needed to support the decarbonization costs of global industrial systems. In the absence of a carbon tax—given the political challenges of passing such a measure—other forms of carbon pricing have been developed. Various jurisdictions have begun acting autonomously, while still coordinating efforts. This is exemplified by the European ETS (Emission Trading System) and China’s ETS. China now has the largest carbon market globally and has recently announced plans to expand the scope of its ETS. Similarly, the EU, along with the introduction of “import duties” on high-emission products through the CBAM (Carbon Border Adjustment Mechanism), is applying the ETS to the transport and building sectors.

The European Union arrives in Baku with a strong focus on carbon pricing, as well as a targeted position on eliminating inefficient fossil fuel subsidies. These amount to €112 billion annually in the main European countries alone, with nearly €50 billion in Germany. Italy spends around €20 billion annually on fossil fuel subsidies.

Q: This mechanism was originally in the Kyoto Protocol. Why did it not succeed?

Exactly. And in fact, we are still dealing with issues that could have been resolved by the Kyoto Protocol, particularly regarding effective pricing levels and economic competitiveness. Unfortunately, the insufficient integration of economic and industrial competitiveness was a major factor in the failure of the protocol, marked by the decision of the United States not to ratify it.

The mechanisms of Kyoto had limited effectiveness because the world’s largest economy, the United States, did not implement it.

On the other hand, Patrick Pouyanné, CEO of Total, recently stated that "the energy transition will proceed at the pace set by the United States." I believe there is a chance to accelerate, given the industrial lag that the United States is accumulating in transition technologies.

Q: Can you explain the Emission Trading System (ETS) mechanism more clearly?

The ETS (Emission Trading System) compensates for the failure of the international community to agree on a global carbon emissions tax, which would be a key tool for effective climate policies. There are two main instruments for carbon pricing: emissions trading systems (ETS) and carbon taxes. An ETS, also known as a cap-and-trade system, sets a cap on the total level of greenhouse gas emissions and allows low-emission industries to sell their excess allowances to high-emission industries. By creating a market for the supply and demand of emission allowances, the ETS lets the market mechanisms determine the price of these allowances. The cap ensures that emission reductions keep the emitting sectors (as a whole) below their carbon budget. A carbon tax, on the other hand, directly sets a price on carbon by establishing a tax rate on greenhouse gas emissions or, more commonly, on the carbon content of fossil fuels. Carbon taxes can also be extended to other emission sources, such as methane emissions from extractive industries (fossil energy) and, in some cases, from agriculture.

Other fiscal tools that influence prices include fuel taxes, the elimination of fossil fuel subsidies, and regulations that can incorporate a “social cost” of carbon. Greenhouse gas emissions can also be addressed through the purchase of carbon offsets. Private entities or sovereign states can buy certificates to offset their own emissions or to support mitigation activities through results-based financing. From a climate policy perspective, however, the carbon tax is the most efficient and effective mechanism, as it would ensure a level playing field and competitiveness for major economies. A global carbon tax, though politically difficult to implement so far, remains a top priority on the global climate agenda. The economic resources generated should be reinvested in the development and improvement of the clean technologies and infrastructure needed for the transition and reconversion of social, industrial, and economic systems.

Q: Back to Baku. On carbon markets, there’s been much discussion about the negotiations related to Article 6 of the Paris Agreement, which is meant to regulate them. This is one of the negotiation topics on the table.

Article 6 of the Paris Agreement on carbon markets aimed to provide a viable "alternative" to a carbon tax, which would have been the simplest solution to the problem. Since states are reluctant to implement a carbon tax, they have opted for the complex world of emissions trading and carbon markets. In Paris, back in 2015, it was established that these markets must be regulated, and Article 6 of the Paris Agreement outlines the necessary conditions. However, ten years later, the parties are still negotiating!

Finalizing the operational rules for carbon markets is the second major achievement that COP29 should deliver. This would be important because the volume of "business" in carbon markets is currently valued at between $2.2 and $2.5 billion. If the mechanism were fully operational, as envisioned in Paris, this amount could significantly increase, providing further contributions to funding global climate policies and aligning with the realities of countries’ transition needs.

However, the fact that we still haven’t managed to complete the work from Paris is a glaring example of the limits of the COP system. How can we rely on such meticulously negotiated texts, only to be engaged in discussions lasting over a decade, while the world keeps changing? Ironically, each COP reminds us of the urgency and severity of the threat, now defined as existential. Yet, the parties and negotiators continue to debate the fine points of the texts.

Q: Can we question whether the COP negotiation mechanism is effective?

Yes. At this point, after more than thirty years and with the climate crisis accelerating with catastrophic effects, it is crucial to reflect on the criteria by which we assess the success of the COP system. Is this success? What are the metrics? Meanwhile, fortunately, several carbon pricing mechanisms have been established globally in the real world, starting with the European ETS and the Chinese ETS (developed in collaboration with the European Union). As mentioned earlier, China is expanding the industrial sectors covered by its ETS. This highlights the cognitive dissonance between the formal COP process and the results achieved independently of COP.

I can imagine that the COP in Baku will be effective when and where it aligns with the economic, structural, and technological needs of the transition. Beyond supporting a global truce, the COP29 Presidency aims to launch several initiatives. These include green energy corridors and zones, clean hydrogen, clean energy storage, and accelerating climate action in tourism. These initiatives are promising as they address both industrial and economic needs.

Another ambition is to establish a Climate Investment Fund for the Future, aimed at increasing private sector involvement in financing climate action and the transition in the developing world.

Q: Is this an effective path for the future?

I’m not convinced. In recent years, we’ve seen the creation of numerous new funds, including the well-known Loss and Damage fund from Sharm (COP27). However, one must ask: what are these funds really for? There is a growing sense that they are not only relatively ineffective, but that they also serve as distractions from the pressing realities we face.

The real question can be framed as follows: who provides the funding, how is it governed, and for what specific projects? Is it really beneficial to create new financial instruments? I believe the key question we should be asking is which institutions currently have the capacity to finance projects at an international level. In my view, the answer lies with the multilateral development banks. The best approach would be to optimize the functioning of existing institutions rather than setting up a series of new funds or instruments.

Q: And what could be a better or more effective alternative?

We should focus on institutions like the World Bank, the Asian Development Bank, and the Asian Infrastructure Investment Bank (AIIB). These entities have substantial experience in managing projects and are skilled at handling this type of financial activity, particularly in Asia. It is also essential to involve the regional development banks affiliated with the World Bank. Specifically, China’s infrastructure bank has both the necessary funding and the implementing agencies. Collaborating with these agencies offers the opportunity to deliver tangible projects.

In 2023, these banks collectively mobilized $125 billion in climate finance, and they could potentially mobilize even more—more than double the amount in 2019—if the funds were managed according to genuine climate priority criteria. Of this total, $74.7 billion was directed to low- and middle-income economies, while $50.3 billion went to high-income countries, accompanied by significant mobilization of private funds.

Q: Wouldn't that be difficult for the most vulnerable countries to accept?

The outcome I mentioned earlier in terms of financing comes just before COP29 in Baku, and it’s important to demonstrate that these institutions play a key role. In Baku, one of the main objectives will be to increase global climate financing and reach an agreement on new collective targets. If we don’t focus on proven solutions and instead chase after new ideas, we risk wasting precious time. In Europe, developed countries must look for internal solutions. As for less developed countries, I suggest we listen to them directly. Recently, there was an interesting Africa Climate Summit that highlighted this issue. The President of the African Development Bank stressed that while funds are available, they must be managed carefully, consistently, and with specific goals in mind. This resonates with the remarks made by Mario Draghi, former Italian Prime Minister, during the COP in Glasgow (2021), who stated that the problem is not the money. We actually have plenty of money: the key is that it needs to be used coherently with the goals and directed effectively—“earmarked,” as we might say using Brussels jargon, reminiscent of the strategy behind the European recovery plan, under NextGenerationEU.

In practice, revenue from carbon taxes could be used to fund transition and adaptation investments in lower-income countries.

Other approaches seem far less effective. If I reflect on this at the national level, one might note that the new Italian Climate Fund currently seems to lack bankable projects in its pipeline. On the other hand, creating a structure that requires significant technical, financial, and project management expertise in a short time—and ensuring both the economic and climatic sustainability of the projects—is not something that can be improvised.

Q: In your essay, you refer to the professionalization of climate diplomacy, which has created a multilateralism bureaucracy, involving also national ministries of the parties.

Looking through the agendas and documents of the different COP summits, it becomes clear that they largely repeat themes from a decade ago without translating discussions into concrete actions. Instead, these documents often reinforce the role of the bureaucratic “climate diplomacy” among ministries and international organizations. The reality is that the COP system has fostered the development of a group of professional negotiators. But is this system effective? If we analyze the evolution of the COP rounds from 2015 to today, what tangible results have emerged? While there has been progress within the texts, actual implementation remains significantly lacking.

In fact, a technological, industrial, and economic revolution has largely occurred outside and beyond the formal multilateral COP process. It is crucial to simplify the agendas and prioritize key issues, giving the Secretariat the authority and capacity to act effectively. For negotiators, success is measured by convergence towards a common text. But what are the effects outside the COP venues?

Q: And what would you consider the main priorities?

Co-financing climate resilience and transition, involving businesses and financial institutions, and setting clear targets is essential. Each COP document tends to be full of articles, sub-articles, and conditions that either facilitate or hinder the implementation of decisions. Reviews of previously agreed decisions—both formal and informal—highlight a multitude of emerging initiatives on the sidelines of the COP system in various formats. These gained visibility, especially during the Glasgow conference, often led by private foundations. Some of these inject new energy into the process. Many simply fizzle out.

Q: Any final hopes to conclude?

I repeat, we must question the real impact of these announcements and their coherence. Perhaps the most significant example in Baku, within the formal process, is the mechanism to regulate carbon markets under Article 6 of the Paris Agreement. Among the informal initiatives, I would mention the one announced at Sharm el-Sheikh for forest regeneration and protection of the Amazon. This is, of course, a crucial goal for the planet. But what has happened since the announcement? Discussions continue, and it has produced no results. Unfortunately, many initiatives often fade into obscurity, disappearing as quickly as they appear, except in the COP documents.