The climate crisis is demanding a hefty financial response, particularly from developed nations. A new report by the United Nations Conference on Trade and Development (UNCTAD) reveals the stark reality of the climate financing gap, warning that developing nations will need a staggering $1.1 trillion annually by 2025, a figure projected to escalate to $1.8 trillion by 2030.
The report underscores the urgency of increased financial commitments from developed nations to support global climate goals. Under the New Collective Quantified Goal (NCQG), developed countries are expected to contribute a minimum of $0.89 trillion in 2025, rising to $1.46 trillion by 2030. These targets, based on the United Nations Global Policy Model (UN GPM), represent a yearly commitment of approximately 1.4% of developed nations’ GDP, or roughly 2% of developing countries’ GDP.
The report emphasizes the critical need for high-quality, effective climate financing that doesn’t saddle developing economies with unsustainable debt. This means prioritizing transparent, adaptable, and readily accessible funding mechanisms that bolster their fiscal capacity rather than increasing their debt burdens. The report also advocates for an equitable approach, aligned with the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC), to ensure fair effort-sharing among developed countries.
The upcoming COP 29 in Baku presents a critical opportunity for parties to negotiate an NCQG that transcends the current floor of $100 billion per year, taking into account the unique climate needs of developing nations.
UNCTAD highlights the crucial role of a strong international financial architecture (IFA) in maximizing the effectiveness of climate finance flows and fostering sustainable development. While the NCQG cannot address all financial obstacles facing developing countries, it can serve as a catalyst for greater collaboration on reforming the IFA, making the path toward the Paris Agreement more achievable and cost-effective.
Manuj Bhardwaj, a Geneva-based climate policy advisor, advocates for a regional finance infrastructure modeled after the European Union’s (EU) successful economic framework. He proposes a regional finance infrastructure that groups countries with similar needs and regional characteristics under multilateral bodies, enabling more tailored and responsive climate financing solutions, particularly in the Global South. While organizations like the South Asian Association for Regional Cooperation (SAARC) could spearhead these initiatives, geopolitical challenges have hindered progress. Bhardwaj argues that strengthening these entities is pivotal for cultivating resilient climate finance systems within a global framework.
The NCQG, established by the United Nations Framework Convention on Climate Change (UNFCCC), aims to channel at least $100 billion per year in climate finance to developing countries by 2025. This funding is vital to support global efforts to limit greenhouse gas emissions and drive sustainable development across vulnerable regions. However, the UNCTAD report underscores the need for a significant increase in these commitments to effectively address the escalating climate financing gap and ensure a sustainable future for all.
