Looking beyond COP29: How to create a roadmap for sustainable climate finance

After two long weeks of deliberation and negotiation, the 29th Conference of Parties (COP29) ended on 24 November 2024 in Baku, Azerbaijan. Many are calling it a failure or missed opportunity as the outcome has fallen way short of the requirement to achieve the climate goal. The Global North and South are fragmented again, and there is a lack of trust among them. It will take some time to heal the wounds. 

Developed countries first agreed to jointly mobilise funds, US$100 billion a year by 2020, to address the climate needs of developing countries at Copenhagen during COP15 in 2009. It has taken 15 years for them to revise the target with a New Collective Quantified Goal (NCQG), although the commitment has grown by a mere US$200 billion a year to US$300 billion annually till 2035. 

While the COP Presidency rejoiced about the agreement between the richest countries, Emerging Market and Developing Economies (EMDEs) have criticised this commitment as their voice has been ignored.  

Ask vs Agreement

EMDEs are projected to need between US$5.8-5.9 trillion to implement their stated Nationally Determined Contributions (NDCs), while adaptation finance needs were estimated to be US$215-387 billion per year until 2030.

G77 countries plus China demanded that the NCQG be US$1.3 trillion, with US$600 billion coming through grants and grant-equivalent resources by 2030. There was also an ask that most of these funds should come in the form of grants as in the earlier commitment of US$100 billion, around 70% of the funds came in the form of loans.

There is mention of the US$1.3 trillion, but it calls on “all actors”, including public and private, to “work together” to reach this level by 2035. Thus, developed countries have no obligation or moral responsibility in terms of concrete, actionable steps, while developing countries are left to fend for themselves. 

The key question is whether it is fair and just as, historically, developing countries are not responsible for the current crisis but are bearing the brunt of climate change’s devastating effects in the form of increased incidences of floods, heatwaves, etc. The amity with common but differentiated responsibility appears to be missing. This has led to developing countries feeling that their ask of countries historically contributing to emissions should pay most to support the global climate goal. 

Something to Rejoice

While the mood at the end of COP29 was not ideal, some key decisions were also announced that point to a brighter future. Nations reached a pivotal agreement to establish a global carbon market under Article 6.4 of the Paris Agreement. This framework sets standardised rules for creating, trading and registering carbon credits, aiming to enhance international cooperation in reducing greenhouse gas emissions. This will boost climate finance by mobilising substantial investments into emission reduction projects worldwide.

Further, the United Kingdom, Brazil and the United Arab Emirates announced revised ambitious Nationally Determined Contributions (NDCs) targets, putting countries on an accelerated path to net zero. However, with the failure to mobilise funds for developing countries, there is a big question of whether they will submit more ambitious NDCs next year.

The Road Ahead

There is a big gap in the scale that is needed versus what is committed for effective climate adaptation and mitigation. All eyes are already on COP30 in Brazil to decide on the mechanics of the flow of these funds to developing countries. There is also a need to discuss and include new innovative sources of finance from global solidarity levies, more ambition from multilateral development banks, financial transaction taxes and taxes on the most wealthy fortunes, as mentioned by the G20. 

Further, agreement on activities eligible for climate finance needs to be prioritised, and legitimate institutions for climate finance data collection need to be formed to build more transparency. Finally, cumbersome bureaucratic processes, often in the guise of borrowers not following certain governance practices, should be abandoned to accelerate the disbursement of climate finance to developing countries.

Developed nations must deliver on their promises, and the timelines need to shift. Further, the concessional finance element is critical, and its absence will push the EMDEs further into a debt trap. 

The world cannot afford another missed opportunity. It took almost three years for countries to come up with what is required to achieve the climate target in the Global South, but the outcome feels like a betrayal to many. However, time is of the essence here, and we hope for more collaboration globally in the sharing of technology and provision of concessional capital for enhanced ambition to limit global temperature to 1.5°C.

This article was first published in Outlook Planet.