The 2024 UN Climate Conference (COP29) in Baku, Azerbaijan, was a pivotal event on the global climate policy calendar. Despite high expectations, the profile of the event was relatively low, partly because heads of government were focused on the G20 Summit in Brazil. Azerbaijan, a major fossil fuel producer contributing less than 1 percent of global oil supplies, faced challenges, given its reliance on fossil fuel revenues.

Nevertheless, the Azerbaijan presidency managed to secure some key outcomes. A "New Collective Quantified Goal" on climate finance was agreed upon, where developed nations committed to mobilizing at least $300 billion annually by 2035 to help developing nations decarbonize and address climate disaster impacts. This represents a threefold increase over current commitments but is less than a quarter of the $1.3 trillion needed annually. Another significant achievement was the agreement on rules for implementing carbon-funded projects, establishing clearer frameworks for collaboration between nations and the private sector.

As we move forward, we must remember that while COPs are crucial global political moments for building consensus and momentum, they are not the sole drivers of climate action. COP29 was no exception. Ultimately, it is the domestic policies of nations and the actions of the private sector that will drive meaningful climate progress. There are at least three positive drivers that are firmly in place:

Growing competitiveness of clean energy: Renewable energy and electric vehicles have become increasingly competitive with fossil fuels due to significant price drops in solar panels, wind turbines, and batteries. Nuclear power is making a comeback, providing baseload power comparable to coal or gas-based power. The role of clean energy is expanding even in challenging sectors. For example, the share of heat pumps for building heating and cooling has started to rise from its earlier 10 percent level.

Commitments from progressive nations: Several countries are making stronger climate commitments. At COP29, the European Union, Canada, and other countries, committed to propose steeper 2035 targets in their revised NDCs than their current commitments. The UK and Brazil have already announced their updated targets. Mexico became the latest major economy to announce a goal to reach net-zero greenhouse gas emissions by 2050. At the G20 Summit, Indonesia unveiled an ambitious plan to retire all coal and fossil fuel-fired plants by 2040. We are not yet seeing any significant commitments to retiring of gas-based power plants, which is a concern.

Growing private sector action: The private sector is increasingly participating in the energy transition, driven both by policy and opportunities. Over 12,400 companies, are now members of the UN’s Race to Zero Campaign. Notable progress includes 1-2 percent of global steel production being low carbon and an 8 percent reduction in cement sector carbon intensity from 2020 levels. 50 carbon capture and storage facilities are now in operation, involving the cement, shipping and oil and gas companies. There is still a long way to go, but progress is rapid.

However, climate action, especially the energy transition, is a complex and unprecedented global capital reallocation. The enablers mentioned above are accompanied by several uncertain factors, that will determine the pace of our collective progress:

Approach of the new US administration: The US, responsible for a quarter of the emission reductions needed by 2030 and a major player in climate finance and innovation, could pose a challenge under the new administration. There are concerns about a potential withdrawal from global climate agreements, such as the Paris Agreement, and threats of protectionist policies that could hinder progress on technology deployment and cost reduction. Much will depend on how local, state, and private sector leaders in the US continue to push forward climate goals.

The global economic outlook: Recent economic data from several economies seems to be confirming the International Monetary Fund’s projection of an underwhelming global economic growth of 3.1 percent for the next few years. The way countries handle the slowdown will determine whether this turns out to be a threat or an opportunity for energy transition. Countries with fiscally comfortable buffers (mostly advanced economies) may make the necessary investments in grids, green clusters or clean energy projects to boost capital spending and offtake for locally manufactured products, emerging economies with fewer resources may face pressures to prioritize social needs over climate investments.

Looking ahead, the challenge is to translate pledges into concrete action and ambitions into tangible results. With rapidly evolving economic and geopolitical factors, global political and business leaders must build on the impetus in the real economy to deliver bold, coordinated efforts to address the climate crisis.