COP29: Trillions Of Dollars To Be Mobilized For Climate Finance

World leaders are gathered in Baku, Azerbaijan, for the United Nations COP 29 on Climate Change. As the conference enters its final day tomorrow, the atmosphere is charged with anticipation. Will the leaders be able to conclude discussions on critical issues?

A document on the new finance goal released by the UN this morning hints at progress in discussions on climate finance: while the exact figure remains undisclosed, it is mentioned that it will be in trillions of dollars. The decision on trillions of dollars is a positive step, as many experts have expressed concerns that a few billion dollars will be insufficient and will fall short of necessary action to address the urgency of climate change.

By the end of COP 29, the world will hopefully get a new number. A lot has already gone into deciding this number: 12 technical consultations and three high-level ministerial meetings. The final leg of the consultations are happening in Baku. It is worthwhile to take a look at the key items that came out of the document on finance today and the capture some discussions that led to those decision items. Much of this document can be expected to feed into the final decisions that comes out of COP 29.

A Decision On Trillions Of Dollars At COP 29 – The Quantum

What is a good number for a finance goal? Should the number be in billions or trillions? The draft text released today mentions that the amount will be in trillions. Although the exact number is unspecified.

One of the key outcomes expected from this year's COP is this exact number which will become the new collective quantified goal, popularly referred to as NCQG. There is a high expectation that countries will be able to reach a consensus on a quantified number, which can be the North star to mobilize funds to address the urgency of climate change. It was during the COP in Copenhagen in 2009 that the earlier goal of mobilizing 100 billion per year was decided– an amount pledged by developed countries to support developing countries in addressing climate change by 2020. There are questions about whether that target was successfully met, with views from some countries that it was not met. The decision that came out today relfects this disagreement.

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A few billion dollars would be unacceptable, according to Illari Aragon, a specialist in UN Climate Negotiations, who has closely followed NCQG negotiations since they started. Many developing countries would be unsatisfied if a number in billions is proposed. In earlier talks, some numbers in billions were also floating around. Most estimations however point towards trillions. A number of at least 5 trillion, was estimated as being needed based on the Standard Committee of Finance of the United Nations as part of an assessment of needs proposed by countries in their Nationally Determined Contribution.

A Decision On The Contributor Base And Mandatory Obligations

Another key topic of discussion has been who contributes to the financial goal that comes out of COP 29. Some developed countries suggested expanding the donor base to also include countries like China and India. However, that was an unacceptable proposition, with media from India, based on interviews with experts, particularly reporting it would be unacceptable.

The new text released today goes away from the mandatory approach and adds flexibility to better reflect needs of developed and developing countries. The text states that it invites developing country Parties willing to contribute to the support mobilized to developing countries to do so voluntarily, with the condition that this voluntary contribution will not be included in the NCQG.

The document released today also states that it has been decided that there will be minimum allocation floors for the Least Developing Countries and Small Island Developing Countries of at least USD 220 billion and at least USD 39 billion, respectively. Deciding such a minimum allocation floor is a big step as these countries are particularly vulnerable to the extreme impacts of climate change. In March 2023, Malawi, in the African continent, was devastated by a tropical cyclone. Africa, according to some estimates, contributes to only 4% of global warming, but is particularly vulnerable to climate change.

Some Decisions On Structure- What should be included?

The question regarding what types of finance will be classified as finance has been a key topic of discussion. The type of finance is crucial because it determines what kind of finance can really be aggregated to reach the big quantum goal.

In the negotiations so far, some countries suggested requiring funds to be channeled from the private sector as well. However, some parties questioned whether the private sector could be obligated to contribute to a goal and be made accountable for this goal. There were also discussion on grants versus loans. Many countries called for more grants and financing with higher concessional rates, reducing the repayment burden.

The document that came out today clarified both the above concerns. It states that the new collective quantified goal on climate finance will be mobilized through various sources, including public, private, innovative and alternative sources, noting the significant role of public funds. The decision to include the private sector is a significant step, as it provides an entry door for the private sector to be more actively involved in climate action. On grants and loans, the decision text states that a reasonable amount will be fixed in grants to developing countries, with significant progression in the provision. The decision on this allocation floor for grants, is also an essential consideration as it helps these countries to avoid being tied up in debt.

The decisions on climate finance published today during COP 29, which will act feed into the final decisions from this climate conference, can add significant momentum to what is available for climate finance and action. They can also help build trust among many vulnerable countries in the power of multilateral decision-making process, showing that the world is indeed united in addressing global warming and meeting net zero.