Topline Messages

  • COP30 could make or break the credibility of UN-backed collective action on climate and nature action.
  • The new round of NDCs will be pivotal to the direction and speed of travel.
  • Some policy pillars, like investor coalitions, need to stay in place.
  • There are opportunities in strengthening climate and nature synergies to address the triple planetary crisis
  • Those who wish to drive change should understand and engage through the lens of the 1) US/China/EU triangle; 2) rise of the BRICS and the Global South.

As we look ahead for this year, the geo-political headwinds for international climate and nature policy are all too clear. But, like never before – as scientists report that 2024 was probably the hottest year on record[i] – strong and urgent action is essential if we are to arrest the triple planetary crisis. This is why 2025, culminating in UNFCCC COP30[ii] in Belem, Brazil, is viewed as pivotal, and possibly even make or break for the multilateral processes on the environment.

We therefore look ahead to the key issues and themes likely to determine the prospects for success or failure this year, assessing where progress will be critical, where it will be important to hold the line, and areas where climate and nature policymaking can be beneficially joined-up.

 

The Crucial Role of the New NDCs

The ratchet mechanism – the provision for more ambitious national climate plans (the NDCs, i.e. Nationally Determined Contributions) every five years which has been described as the “beating heart” of the Paris Agreement – means that each country should submit by this spring, and certainly in advance of Belem, its plan for reducing emissions and adapting to climate change. What is absolutely clear, as the science becomes more pressing, is that this round of NDCs must go beyond broad commitments. Ambition and detail will be necessary if we are to see the step-change required. But what sort of detail do the decision-makers in policy, business and finance, as well as the climate scientists, need to see to make the transition real?

  1. Fossil Fuel Phase-out: UNFCCC COP29 in Baku, Azerbaijan, signalled backwards momentum on transitioning away from oil, gas and coal as energy sources. NDCs will therefore need explicitly to cover production and consumption as part of a comprehensive approach to fossil fuel phase-out. The IEA and some other analysts are speculating whether global emissions will peak soon. However, without an accelerated phase-out, achieving net-zero goals will remain out of reach.
  2. Nature-Based Solutions: Will countries further incorporate nature into their climate strategies? Forests, wetlands, and other ecosystems are essential carbon sinks and offer cost-effective mitigation pathways. Yet, nature-based solutions have been under-represented in past NDCs. This year must mark a turning point.
  3. Alignment to National Biodiversity Strategies and Action Plans (NBSAPs)[iii]: Will countries work on aligning NBSAPs and NDCs? This shouldn’t just be a mere technical exercise, but a strategic imperative for tackling the twin crises of climate change and biodiversity loss to ensure coherent and impactful strategies. For example, this would mean the adoption of conservation and restoration targets which can support greenhouse gas emissions reduction.
  4. Addressing Fossil Fuel and Nature Subsidies: Despite repeated calls and pledges to reform harmful subsidies, governments—particularly in the Global North—continue to funnel billions of dollars into fossil fuels[iv] and activities that degrade nature[v]. Redirecting these funds to the low-carbon transition could unlock transformative climate finance.
  5. Such is the importance of the new NDC round, 2025 won’t see the same focus on climate finance as in 2024. However, despite the disappointing progress on finance at COP29, the Baku to Belem roadmap[vi] was agreed there as the strategic vehicle for scaling up climate finance. This roadmap emphasises innovative funding mechanisms, public-private partnerships, and the urgent need to mobilize resources for the Global South. If developing countries are to have some degree of assurance that the developed world is serious about helping them, the 2025 NDCs will need to show they are aligning with this framework. The innovation of “country platforms” – mobilising, coordinating and channelling public and private investments into nature and climate solutions – ought to be of assistance here.

 

Three Vital Pillars

The NDC process requires this step-change. But in other areas, a more defensive strategy may be required to keep some key pillars of climate and nature policy in place. This is not an exhaustive list, but we have identified three critical pillars:

  • Multilateralism. Last year – as shown by the outcomes of the climate COP29[vii], the biodiversity COP16[viii]and the failure to adopt a Global Plastics Treaty text[ix] in South Korea – did not go well for environmental multilateralism. The new Trump Administration is unlikely to be a friend of the United Nations system, and some other national governments may also see political advantage to weakening environmental multilateral regimes. Most recently, Baku’s failure to deliver a satisfactory outcome for climate finance and the collapse of the CBD[x] negotiations at COP16 very publicly exposed the limitations of the COP process. However, just as country coalitions on climate (a fossil fuel treaty) and nature (the High Ambition Coalition to end Plastic Pollution), and can advance significant progress, there still must be a role for UN-backed fora where all countries can come together and have a voice to tackle these global challenges. UN processes therefore remain critical; although, if multilateralism is on the slide, it increasingly need to be complemented by coalitions of the willing and regional/localised grassroots movements.
  • Investor Coalitions. While ESG frameworks were intended to integrate sustainability into corporate and financial institution business practices and reporting, they have faced growing criticism for being over-bearing, costly and not fit-for-purpose. Despite the efforts by regulatory and standard-setting bodies to improve transparency and inter-operability, the backlash (especially in the US) threatens to dilute their effectiveness. This could at least partly explain why some banks and insurance companies have decided to leave GFANZ.[xi] Those on the progressive side of the argument need to be making their case and cutting through the political noise and misinformation about why climate and nature are financially material and have real-world as well as financial impacts. State-level actions in the US can also help to mobilise behind what some hope will be ”the backlash against the backlash”. Globally, progress on international sustainability standard, viz the ISSB, would also be a positive signal.
  • EU Leadership. The right-wing draft in Europe has heightened anxiety that the European Commission and EU member states will dilute their approach towards decarbonisation and the environment this year and beyond, and that it might become conflated with EU/US tariff negotiations. Clearly, as the Draghi Report emphasised last autumn, EU policymakers need to be making the pro-competitiveness case for the green economy. But this should also ensure that existing EU legislation – the most advanced in the world – is preserved, targets are increased (most obviously in the EU’s new NDC), and there is a greater focus on delivering benefits for European citizens. An early test case for the new Commission will be its newly announced “Omnibus Simplification Package”, composed of the mesh of related regulation – EU Taxonomy, Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive.

 

Climate and Nature Policy in Tandem

If 2025 is to be a year that takes ambition on climate and nature forward, synergies for strategies and actions need to be developed and maximised. Areas which provide such opportunity include: tackling deforestation and viewing the sector as a source of nature-based solutions for climate; water management and co-operation; the potential development of a voluntary carbon and biodiversity credits market grounded in integrity; and (finally) an international agreement to act on reducing plastics production, with major benefits for climate and nature.

This is another reason why COP30 in Belem matters so much; where no region on Earth symbolises the twin crises so demonstrably as the Amazon rainforest.

 

The Geo-political Landscape: Headwinds and Dynamics

The global climate agenda is inevitably deeply intertwined with geo-politics, and major headwinds generated by a steadily changing and more transactional world order won’t help (even if the backdrop may not be all bad). Two key dynamics stand out:

  1. The US-China-Europe Triangle: With Donald Trump returning to the Presidency, the US will adopt a more transactional approach to international relations which may be part of a wider assault on the post-war multilateral consensus. Meanwhile, China’s strategic focus on green technology leadership may lead to increased competition and tension with Europe – complicating efforts to build co-operation on climate action – while it is likely to increase its leadership on green tech over the US. Attention will be on whether Trump takes the US out of Paris (again), and his threats of a tariff war; but America’s bigger mistake long-term may be to surrender the global clean energy race to China.
  2. BRICS and the Global South: The BRICS group is on the rise globally. Brazil’s leadership role as COP30 host and South Africa’s G20 presidency may well, as part of this, position the BRICS countries as pivotal players in 2025 in shaping the climate and nature agenda. Brazil’s Amazon protection policies (and possibly its contradictory expansionist oil and gas production) and South Africa’s stance on a just energy transition will be important influences on the direction of global negotiations.

 

A Year of Real Progress or of Alarming Retreat?

In the final analysis, it will come down to the outcomes of COP30, which will be an enormous test of the diplomatic skills of President Lula, his ministers and officials. The stakes in 2025 could not be higher. This is why the next new round of NDCs – offering the chance to correct course and inject the climate action with fresh momentum, grounded in emissions reduction and grasping the clean energy opportunity – matter so much. But a game-changing round will depend on some key factors which will be relevant for financial institutions and for other stakeholders; whether countries can rise above political divisions; deliver detailed and ambitious plans that cover nature as well as climate; and tackle entrenched issues like fossil fuel subsidies. Governments also need to keep uppermost in mind that finance and investments will not flow without clear and consistent policy targets and plans.

In the meantime, there could be no more shocking and graphic depiction of the impacts of climate change and rising temperatures than the Los Angeles wildfires. Before it gets too late, 2025 can still provide the opportunity to turn things around.

 

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[i] Confirmed: 2024 was the hottest year on record, says UN weather agency, UN News, January 2025.

[ii] United Nations Framework Convention on Climate Change, 30th Conference of the Parties.

[iii] National biodiversity strategies and action plans by the Parties to the United Nation Convention on Biological Diversity (UN CBD) were due by COP16 in Cali, Colombia 2024. [link to PT COP16 Blog]

[iv] Fossil Fuel Subsidies, IMF, 2024.

[v] State of Finance for Nature 2023 UNEP

[vi] COP29: Key takeaways from Baku on the Road to Belem, E3G, December 2024

[vii] Statement on COP29, Carbon Tracker Initiative, November 2024.

[viii] The UN Biodiversity Conference (COP16): Takeaways from Planet Tracker, Planet Tracker, November 2024.

[ix] A Financial Market’s Perspective of INC-5 for a Global Plastics Treaty, Planet Tracker, December 2024.

[x] United Nations Convention on Biological Diversity.

[xi] The GFANZ Umbrella, Swedish Identity and the documentation overload, Responsible Investor, 10 January 2025