The 29th UN Climate Summit (COP29) in Azerbaijan will be a defining moment for global climate action, with the issue of climate finance taking center stage. The world is on the precipice of a major decision: agreeing on a new collective quantified goal (NCQG) for climate finance. This goal will determine how much funding developed countries will provide to developing nations to combat climate change, a task that has become increasingly urgent and costly.
The urgency stems from the escalating costs associated with climate change. Developing countries are on the frontlines of this crisis, facing devastating consequences like extreme weather events, rising sea levels, and agricultural disruptions. They require trillions of euros to adapt to these changes and build resilience against future impacts.
However, the road to reaching a consensus on the NCQG is fraught with challenges. Countries are at odds over virtually every aspect of climate finance, from the total amount of funding to the types of financial instruments used and the roles of donors and recipients.
Under the UN climate convention, developed countries have a responsibility to provide financial support to developing countries to mitigate and adapt to climate change. The Paris Agreement, signed by nearly 200 nations in 2015, stipulates that a new target must be decided by 2025. This target would build upon the previous commitment, made in 2009, to mobilize $100 billion (€91.4 bn) of climate finance annually by 2020 and maintain this level until 2025. While developed nations delivered on this pledge, albeit two years late in 2022, the current needs of developing countries far exceed this figure.
One major point of contention is the expansion of the donor base. Currently, the list of contributors is based on membership of the Organisation for Economic Co-operation and Development (OECD) in 1992, when the UN climate convention was forged. This means only 23 countries, including Western Europe, the US, Australia, Canada, and New Zealand, along with the EU, are obligated to provide climate finance. This “Annex II” division is rooted in the principle of climate justice, recognizing that developed countries are historically responsible for a larger share of greenhouse gas emissions. However, the global landscape has significantly changed since 1992, and there are calls for newer, high-emitting nations, like China and Gulf states, to join the ranks of contributors.
Another contentious issue is the definition of climate finance. Developing countries are advocating for a larger share of funding to be provided in the form of grants, which they perceive as a more reliable source of money that won’t burden them with debt. Conversely, developed countries argue that private investment will be essential to meet the trillions of dollars needed. However, private entities often prioritize mitigation projects, such as clean energy, over adaptation projects, such as building seawalls, which are less attractive for private investment due to their potential for profit.
The debate over climate finance underscores the complexities and challenges of global cooperation on climate change. With significant disparities in needs, capabilities, and responsibilities, finding a consensus on a new climate finance goal will require a delicate balancing act. The outcome of COP29 will have profound implications for the future of climate action, shaping the trajectory of global efforts to avert a climate catastrophe.
