The 29th Conference of Parties (COP29) convened in Baku Azerbaijan, in November 2024, agreed to a USD 300 billion annual climate finance goal by 2035 to help poorer countries fight climate change. However, it was far short of the trillion-dollar figure demanded by developing countries like India. The question is, who will bell the bill? This article understands the Climate Finance Divide, worsening climate crises, and COP29 highlights and the stage set for COP30 in Belém, Brazil, to address critical climate finance gaps.
Aditi. Environmental Engineer from Delhi Technological University with M.Tech & PG Diploma in Renewable Energy for The News Analytics Journal
a 4 mins read.
The 29th Conference of Parties (COP29) convened in Baku Azerbaijan, in November 2024, agreed to a USD 300 billion annual climate finance goal by 2035 to help poorer countries fight climate change. However, it was far short of the trillion-dollar figure demanded by developing countries like India. The question is, who will bell the bill?
CLIMATE EXTREMES
According to the State of the Climate Update of the World Meteorological Organization, the year 2024 is on track to be the hottest on record and temporarily hit 1.5°C above the pre-industrial level. Greenhouse gas levels are also at record observed levels. The stronger national climate plans (Nationally Determined Contributions, or NDCs), become due for all countries in 2025. Furthermore, the existing finance goal of USD 100 billion which was extended under the Paris Agreement in 2015, is due to expire in 2025. Against this backdrop, the “Finance COP29” was convened in Baku Azerbaijan, in November 2024 to set the new global climate finance goal that will provide finance flows to developing countries consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
The COP29 as part of the United Nations Framework Convention on Climate Change (UNFCCC) was attended by nearly 200 countries. The primary focus was to improve the financial support for developing countries and set strong climate goals. The new finance goal, known formally as the New Collective Quantified Goal (NCQG) on Climate Finance, aims to empower the countries to build the resilience of their peoples and economies against climate exigencies and share in the vast benefits of the clean energy boom.
The NCQG aims to triple funds for developing countries, but annual adaptation needs remain unmet, ranging from USD 215-387 billion through 2030.
CLIMATE FINANCE GAP
Countries reached the Baku breakthrough agreement at COP29 as the existing USD 100 billion per year goal is set to expire in 2025. The NCQG promises to triple the finance to the developing countries, from the previous goal of USD 100 billion annually, to USD 300 billion annually by 2035. However, the Indian delegation called the figure USD 300 billion figure “a paltry sum” as it falls short of the needs of developing countries for climate finance, particularly for meaningful and ambitious adaptation and mitigation actions.
Another decision at COP29 included securing efforts of all actors to work together to enable the scaling up of finance to develop countries, from public and private sources to at least reach USD 1.3 trillion per year by 2035. The Sixth Biennial Assessment and Overview of Climate Finance Flows highlights that the needs reported in nationally determined contributions of developing country parties are estimated at USD 5.1 to 6.8 trillion for up until 2030 or USD 455 to 584 billion per year and adaptation finance needs are estimated at USD 215 to 387 billion annually for up until 2030. The COP29 noted with concern the gap between climate finance flows and needs, particularly for adaptation in developing countries.
Equitable outcomes for all nations have to be ensured by adhering to the integrity and spirit of the Paris Agreement. Article 2, paragraph 2 states that the Paris Agreement will be implemented to reflect equity and the principle of common but differentiated responsibilities and respective capabilities, in the light of different national circumstances. With the deadline for submitting updated national NDCs in 2025, nations were encouraged to update their climate commitments to be more ambitious, investable and equitable as part of the five-year update cycle. Furthermore, developed nations must adopt a proactive stance in fulfilling their climate finance commitments under the NCQG in order to instill trust in the climate finance process.
INDIA’S CONCERN
According to India’s submission on the NCQG, the fund flow under the new goal should be affordable, accessible, new, and additional. In consonance with Article 9 of the Paris Agreement, there is a need for public and grant-based resources for adaptation since grants are less financially burdensome. The NCQG calls for deploying a range of instruments, in
Finalising Article 6 mechanisms enables carbon markets to unlock USD 1 trillion yearly by 2050, offering significant cost reductions for implementing national climate plans.
particular non-debt-inducing instruments to urgently address global climate change and poverty. Highly concessional finance must be made easily accessible, especially to developing countries that are particularly vulnerable and have significant capacity constraints, such as the least developed countries and small island developing States. India’s concern was to address the ability to adapt to and foster resilience against the adverse impacts of climate change.
The NCQG could not fully achieve its intended goal of aligning climate finance contributions from developed countries with the needs and priorities of developing countries in order to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. According to some developing countries, the climate finance contributions were not aligned with the needs and priorities of developing countries.
WHO BELLS THE BILL?
The answer lies in the climate market. Financial flows from compliant carbon markets are estimated to reach USD 1 trillion per year by 2050. They also have the potential to reduce the cost of implementing national climate plans by USD 250 billion per year. With regards to new finance flows, COP29 ended the decade-long wait for the conclusion of Article 6 (Paris Agreement) negotiations on high-integrity carbon markets and the countries agreed on standards for a centralised carbon market under the United Nations (Article 6.4 mechanism). COP29 underscored the importance of additional contributions by developing countries for climate action, including through South-South cooperation. South-South climate finance flows remain significantly underreported, are increasing, with 22% to 27% of all climate finance provided through Multilateral Development Banks attributed to the developing countries, amounting to USD 13.3 to 19.89 billion.
The NCQG along with Article 6 and additional climate fund flows will forever change the global climate finance architecture by redirecting investment to the developing world. Even though COP29 failed to make any progress on fossil fuel phaseout, it marked a key milestone for operationalizing carbon markets. The forthcoming World Economic Forum meeting in Davos in January 2025 will be the first major public-private forum post-COP29. It should provide impetus to actionable initiatives and provide planners and policymakers with a way to set the agenda for COP30, being convened in November 2025 in Belém, Brazil.
(Ms Aditi is an Environmental Engineer from Delhi Technological University. She has accomplished her M.Tech. from BITS Pilani and Advance PG Diploma (Renewable Energy) from TERI University. She also has diverse experience of working with NITI Aayog, Ministry of Housing & Urban Affairs and Ministry of Environment, Forest & Climate Change. The views expressed are of the author and do not necessarily reflect the views of The News Analytics Journal.)
