COP29 to spotlight divided global energy transitions amid U.S. climate setbacks

The upcoming COP29 summit in Baku, Azerbaijan, will feature a stark illustration of the widening energy transition chasm between the U.S. and the rest of the world, after Donald Trump won the U.S. presidency and climate policy shifted under his mandate. The event, which is referred to as the "Finance COP," has become ambitious in terms of climate finance goals but is coming under scrutiny as major private sector players, like Canada’s Brookfield Asset Management, choose to participate in a limited way.

COP29 highlights the New Collective Quantified Goal (NCQG), a mission on track to mobilise USD 1 trillion per year by 2030 to support developing countries with decarbonisation and resilience against climate impacts. To hit this target, half of the money would need to come from private sources—a staggering challenge given it took more than a decade to meet a previous USD 100 billion annual target.

But Trump's administration is also set to ramp up fossil fuel production, barring green energy investments that are part of the Inflation Reduction Act, the cornerstone of recent U.S. climate policy. These policies, they warn, could contribute an extra 4 billion tons of carbon emissions by 2030, about 10% of the world's emissions today. The setback serves as a booster as the temperature is predicted to rise by 2.9 degrees Celsius, far beyond the maximum 1.5 degrees Celsius that experts believe can be achieved without serious harm to the planet.

Meanwhile, other major economies such as China and India continue to depend heavily on coal and other fossil fuels, though they are making progress in renewable energy. Take, for instance, China, which has catapulted to the frontline of clean energy deployment, achieving 163 GW of solar power capacity in 2023, more than the combined installed capacity of leading European nations. The auto sector has also seen it become a master of its transition without resistance, as electric and hybrid vehicles have passed 50 percent of new sales versus 20 percent in the U.S.

The Global South, including India, is also making green advances, spurred by cost-effective renewable energy from China's surplus production. The region has seen an annual 23% growth in solar and wind energy over the past five years, with the Rocky Mountain Institute estimating that 87% of energy investment in these countries is flowing into clean power.

The progress in the Global South supports economists Nick Stern and Vera Songwe’s framework, suggesting that these nations could mobilise USD 1.4 trillion annually for green transitions independently. By demonstrating effective deployment of their resources, these countries could strengthen the case for increased Western financing toward a sustainable future.