Climate Finance Billions At Stake at COP29

AFP/APP

Paris: As the UN COP29 conference approaches, rich countries are under increasing pressure to significantly enhance their climate finance commitments to poorer nations.

The conference, taking place from November 11-22 in Baku, is set to focus on climate finance a term that has become central to the discussions, yet lacks a universally accepted definition.

Climate finance generally refers to funds allocated for projects that promote low greenhouse gas emissions and support climate-resilient development, as outlined in the Paris Agreement. This can include investments in renewable energy, clean technology, and adaptation measures like flood defenses.

However, the specifics of what qualifies as climate finance remain contentious, with questions about whether certain subsidies—such as those for water-efficient hotels—should be included.

Since a 1992 UN accord, wealthier nations, which historically have contributed the most to global warming, have been obligated to provide financial support to developing countries.

In 2009, a commitment was made to deliver $100 billion annually by 2020, but this target was only met in 2022, undermining trust among nations and leading to accusations that wealthier countries are evading their responsibilities.

At COP29, nearly 200 nations are expected to negotiate a new climate finance goal extending beyond 2025. India has proposed an ambitious target of $1 trillion per year, with other suggestions exceeding that figure.

However, many of the nations facing pressure for contributions argue that other major economies, particularly China and Gulf states, should also bear some responsibility.

Experts estimate that developing countries (excluding China) will require approximately $2.4 trillion annually by 2030 to effectively address climate change.

However, the distinction between climate finance, foreign aid, and private investment is often muddled, leading campaigners to call for clearer definitions and accountability regarding funding sources.

A coalition of activist and environmental organizations recently urged wealthy nations to commit $1 trillion annually, broken down into three categories: $300 billion for emission reduction, $300 billion for adaptation, and $400 billion for “loss and damage” disaster relief.

They advocate for this funding to be provided as grants rather than loans, which many poorer nations view as exacerbating their debt crises.

Developed countries are resistant to including “loss and damage” financing in any new climate finance agreements at COP29. Currently, most climate finance flows through development banks or funds like the Green Climate Fund, and campaigners criticize the previous $100 billion pledge, noting that two-thirds was offered as loans rather than grants.

Despite potential shortcomings in new commitments, these pledges are seen as symbolic and vital for mobilizing additional funding, particularly from private investors.

Financial discussions are also taking place within the World Bank, the International Monetary Fund, and the G20, with Brazil advocating for a global tax on billionaires.

Support for innovative funding solutions, such as new global taxes on aviation and maritime transport, is also growing, with backing from France, Kenya, and Barbados. Meanwhile, COP29 host Azerbaijan has proposed that fossil fuel producers contribute to a new fund designed to support developing countries in their climate efforts.