Living in the COVID-19 World ... and Beyond #56: Climate Finance Update - COP29

Summary

COP29 in Baku, Azerbaijan had the overarching objective of setting a new goal for climate financing for developing countries.  This goal setting process is known as the New Collective Quantified Goal on Climate Finance (or NCQG).  The intention of the goal is to address the vast, unmet needs of global south countries as they tackle climate adaptation and emissions reduction.  Below is a brief history leading up to the COP29 discussions and the results coming out of COP29.

Brief History of Climate Financing

At COP15 in 2009, developed countries committed to a collective goal of mobilizing USD $100 billion per year by 2020 for climate action in developing countries.    The goal was formalized at COP16 in 2010, and at COP21 in 2015 it was reiterated and extended until 2025.

The United Nations Office of Economic and Community Development (OECD) has the official responsibility for tracking progress against the achievement of this goal.   According to the OECD, this goal had been missed and then finally met for the first time in 2022.

However, although not stated in the goal, it is also important to look at what methods were used to achieve the goal.   Loans were by far the greatest source of climate financing, accounting for approximately 70% of the climate financing provided by the developed countries.    This is important because loans add to the debt burden of developing countries, already substantial in most of these countries, as opposed to outright grants of funds.

Also, at COP21 in 2015, the parties (countries) decided to set a New Collective Quantified Goal on Climate Finance (NCQG) prior to 2025.  The OECD produced a paper in May 2024 on considerations for climate financing that provided the academic background for the COP29 discussions around setting new climate financing goals.

COP29 Climate Financing Outcomes

In addition to the official OECD input into the COP 29 discussions of climate financing, various civil society groups generated analyses and proposals.

The global south-led campaign #PayUp for climate finance demanded that the global north governments provide at least USD$5 trillion per year to the global south in public finance.   This demand was at least partly based on an historical analysis in 2023 that projected that the global north countries would owe the global south an estimated USD$192 trillion in reparations by 2050.

The OECD input was generated by the High-Level Expert Group on Climate Finance and their analysis, based on an assessment of the annual needs of the global south, was USD$1.3 trillion per year of funding from the global north.

With these inputs, the discussions at COP29 ensued.   The developed countries, including the U.S., U.K., and EU, proposed USD$250 billion per year.   There was a walkout from the meeting by representatives of many of the world’s economically poorest countries.   The agreement reached was ultimately for USD$300 billion per year from the global north to the global south which included using private sources of funding.   Private companies and international lenders like the World Bank will be expected to play a large role in meeting this New Collective Quantified Goal on Climate Finance.

While the United Nations executive in charge of climate change policy extolled this agreement, civil society campaigners were distraught.   Chiara Martinelli, director at Climate Action Network Europe, said: “Rich countries own the responsibility for the failed outcome at COP29. The talk of tripling from the $100 billion goal might sound impressive, but in reality, it falls far short, barely increasing from the previous commitment when adjusted for inflation and considering the bulk of this money will come in the form of unsustainable loans. This is not solidarity. It’s smoke and mirrors that betray the needs of those on the frontlines of the climate crisis.”   Also stressing that “it’s not even real ‘money,’ by and large,” but rather “a motley mix of loans and privatized investment,” Oxfam International’s climate change policy lead, Nafkote Dabi, called the agreement “a global Ponzi scheme that the private equity vultures and public relations people will now exploit.”

What’s Next for Climate Finance

For now, it is important that we understand what has been done and what was recently decided regarding climate finance.   In future blogs, we will be discussing public campaigns being initiated for 2025 and reasonable strategies that we can advocate for to address climate financing.