Climate finance to take center stage at COP29

Close to 200 countries are scheduled to negotiate a new climate finance target for the Global South at the U.N. Climate Change Conference, or COP29, in Baku, Azerbaijan, in November.

Dubbed the “Finance COP,” next month’s conference is expected to see focused discussions on a New Collective Quantified Goal on Climate Finance, or NCQG. It defines a new target for monetary support from historic emitters – mostly countries in the Global North – to address climate needs in poorer countries.

Surging climate needs

In 2009, countries including the United States and the European Union agreed to contribute $100 billion collectively each year by 2020, but an OECD report showed that they struggled to meet that goal over the years. Worse still, much of the climate finance came in the form of loans, which critics say have piled more pressure on developing countries already drowning in debt.

The new negotiations come after a spate of extreme weather conditions intensified by human-caused climate change. July, for instance, witnessed the three hottest days ever recorded. Scientists said in an article on BioScience that as fossil fuel emissions reached an all-time high, the Earth is on track for 2.7 degrees Celsius warming by 2100, far above the 1.5 degrees Celsius target established in the 2015 Paris Agreement.

To combat the burgeoning crisis, developing countries will now need more than $100 billion a year, with estimates ranging up to $6 trillion by 2030. Even that does not sufficiently cover measures to adapt to already inevitable climate change, according to a 2021 U.N. report.

Conference host Azerbaijan in July launched the Climate Finance Action Fund with an initial goal of raising $1 billion from fossil-fuel producing countries and companies.

Nations are likely to reach a compromise at the lower end of a NCQG goal, according to Irene Monasterolo, professor of climate finance at the Utrecht University.

“These results of the negotiations may not be able to address the current need for climate finance in low-income countries, which are massively affected already now by climate risk,” Monasterolo told VOA. “The focus so far has been mostly on mitigation [reducing emissions] projects and measures, while adaptation investments are lagging behind.”

Adaptation finance

While adaptation finance has gone up over the years, mitigation still accounts for the majority of current climate finance, the OECD report revealed. Monasterolo said the scale of adaptation finance ultimately depends on mitigation efforts.

“We don’t see bold plans for mitigation that would be needed to achieve the 1.5 degrees Celsius target, including the Global North. We have instead some issues of policy reversal and some major economies and polluting countries like the U.S. stepping back and in Europe,” she added.

“The science is clear. To limit global warming to below 2 degrees Celsius compared to pre-industrial times, we need to drop production, extraction, use of fossil fuels and related carbon activities and focus on renewables, and low-carbon activities should go up. But that’s not happening. In the latest geopolitical crisis, we increased our dependency on fossil fuels.”

The wars in the Middle East and Russia have put energy security at risk, according to the International Energy Agency. While a record high level of clean energy came online last year, emissions from the energy sector also broke records.

Another reason for low adaptation finance, Monasterolo said, is the complexity of assessing climate risks. “We need to work on how to integrate forward-looking climate risk into investors and financial authorities’ models. Market-based approaches based on past data are a poor proxy of what could happen in the near future with ongoing climate change.”

Loss and damage fund

At COP28 in Dubai last year, countries agreed to set up a voluntary fund for historic emitters to pay for the damage caused by climate disasters in vulnerable developing countries. Western countries also called for large emitters like China to contribute. Negotiators are expected to continue the discussion at COP29.

For now, it remains unclear whether the loss and damage fund will be included in the new NCQG, according to Karoliina Hurri, researcher at the Center on Climate Politics and Security at the Finnish Institute of International Affairs.

The fund “is defined as voluntary, so it’s not based on the same categorization of developed and developing countries. … Some developed countries argue that the loss and damage fund is not part of the mandate and should be negotiated separately from this.”

Looming NDCs

As countries are slated to declare new and more ambitious national green goals by February 2025, COP29 is expected to be a big push.

“I am afraid we won’t see ambitious enough NDCs [national determined contributions], but I think this is really important at this COP, especially the discussion of how to ensure the [recommended] outcomes of last year’s Global Stocktake, and the discussion about transitioning away from fossil fuels,” Hurri explained.

Hurri said many countries said they would lead by example to announce goals aligned with the 1.5 degrees Celsius warming goal. “But at the same time, nations can decide for themselves what the alignment means. This clarifies how difficult it is to reach the NDC.”

At COP28, countries signed a historic deal to start transitioning away from polluting fossil fuels. Hurri said, however, it remains to be seen how the phases translate into actions. “Do we see, for example, schedules of roadmaps on how this process is planned on the national level?”

Pivotal US election

The U.S. election results could have a large impact on the implementation of potential negotiation results, including cooperation measures with the world’s biggest emitting nation, China, according to Hurri.

“I have not seen very detailed climate policy arguments from either of the candidates, although we know that they have very different views on climate change. … We know what happened last time during President [Donald] Trump’s term that the U.S. decreased financial contribution for climate,” she said.

COP29 will also mark the first cooperation talks between the new envoys from the United States and China — John Podesta and Liu Zhenmin. They had a working group meeting in Beijing in early September, in which they agreed to host a summit on methane and non-carbon greenhouse gases during the climate conference.

“While the U.S. election might not influence the cooperation at this year’s COP, the election outcome can have an influence on the credibility of their cooperation in the long term on a high level,” Hurri said.