Climate Finance: What Can We Expect From COP29 and What Must Happen?

Scheduled to take place in Baku, Azerbaijan, in November, COP29 is shaping up to be a defining conference, particularly for global climate finance. Building on previous negotiations, the UN climate summit is expected to seal and ensure efforts toward climate justice, focusing on the ability of the most vulnerable nations to adapt to and recover from the devastating impacts of climate change. Earth.Org looks at crucial elements of COP29: the changing landscape of climate finance, the development of a new financial target, the Loss and Damage Fund, and the ramifications for global climate justice.

—

This upcoming COP, the latest in a line of annually held COPs since 1995, comes at a time when the situation concerning the impacts of climate change is rapidly worsening – both in intensity and frequency. 

The world temperatures continue to rise with devastating consequences including deadly heatwaves, wildfires, floods and hurricanes. The scientific consensus is clear: time is running out to limit warming to 1.5C above pre-industrial levels, the target set by world leaders in the 2015 Paris Agreement to avoid the worst impacts of climate change.

The core of any discussion at COP29 will be centered around how international cooperation must be ramped up in order to tackle these pressing issues. The Baku summit is expected to be a “finance COP,” sharp in focus on mobilizing the trillions of dollars required for mitigation and adaptation against climate change. Climate finance has been a contentious and critical issue of global climate negotiations, and COP29 offers an opportunity for nations to recalculate their financial commitments and adopt new targets.

In recent years, the pledges of developed countries to assist developing countries in addressing climate change have consecutively failed to materialize. For instance, the promise of US$100 billion a year, made at COP15 in 2009, was supposed to be a down payment toward long-term climate finance. However, estimates show that actual delivery on climate finance remains way below this target. In fact, a report by the Organisation for Economic Co-operation and Development (OECD) published in May indicated that only about US$83 billion had been mobilized in 2020, leaving what has been promised far from what is needed up until 2022​.

COP29 is planned to fill that gap and show the new way by setting a more ambitious and realistic New Collective Quantified Goal (NCQG) regarding climate finance. But the summit also aims to improve the mechanisms through which these funds are dispensed, so that money arrives exactly where it is most needed among countries and communities. This conference will also operationalize the Loss and Damage Fund established at COP27 to grant financial assistance to countries suffering from climate-induced losses.

More on the topic: Climate Justice and Loss and Damage: A Look At What COP28 Meant for Historical Responsibility in Climate Action

Climate Finance in the Context of COP29

Climate finance is a denotation that covers all public and private financial resources channeled towards activities which seek to mitigate climate change and enable countries to adapt to its impacts. This becomes important in view of meeting the objectives of the Paris Agreement because these funds enable both mitigation – meaning reduction of greenhouse gas emissions – and enhancement of climate resilience in the most vulnerable countries.

The two priority areas where climate finance is most needed include mitigation and adaptation. Mitigation involves the attempt to reduce or avoid the emission of certain greenhouse gases. It involves investing in renewable energy technologies, enhancing energy efficiency, and supporting carbon capture and storage projects. Adaptation, on the other hand, is aimed at helping countries deal with the impacts of climate change through, among other things, building flood defenses, better management of water systems, and climate-resilient agricultural practices.

The scale of the challenge is enormous. According to the World Bank, developing countries will need US$4.5 trillion annually by 2030 to meet the Sustainable Development Goals (SDGs) targets. While this is happening, climate-related losses and damages are widening. Economic costs attributed to extreme weather events – most of them worsened by climate change – reached an estimated US$329 billion globally in 2021, according to Aon’s Weather, Climate, and Catastrophe Insight report.

Yet despite the increasing need, the flow of climate finance is well below what is needed. One major obstacle to scaling up climate finance has been a lack of confidence between the developed and developing nations. Several developing countries argue that the inability of rich countries to meet their financial commitments undermines global cooperation on climate. This trust issue is something COP29 will have to face, especially through discussions about NCQG.

A New Climate Finance Target

Of all the anticipated deliverables of COP29, probably the most hotly anticipated has been the development of an NCQG on climate finance. The goal to mobilize $100 billion annually for developing countries, set as long ago as 2009, is widely recognized as insufficient in response to the intensifying climate emergency. 

The NCQG should intend to surpass that figure and align climate finance with the real needs of countries at the forefront of climate impacts. Therefore, it is expected that COP29 will result in a more ambitious, realistic, and achievable financial target that truly reflects the scale of the global challenge. According to estimates, if this new goal is to adequately support the world’s transition to a low-carbon, climate-resilient future, it needs to be in the trillions of dollars, not billions.

A key issue to be addressed at COP29 is who contributes to this new goal. The burden for climate finance has traditionally fallen to a large extent on the developed world, reflecting the fact that developed countries bear the lion’s share of the responsibility for global greenhouse gas emissions. But over the past two decades, a number of countries that would normally fall under the heading of developing have become large emitters in their own right, notably China. As a result, increasing pressure is placed on these countries in terms of responsibilities for global climate financing.

Another point of contention is the tracking and disbursal mechanisms. Many developing nations have criticized the system as non-transparent and incomprehensible, hence inaccessible. For this reason, COP29 offers a platform for discussing such systems to better mobilize and distribute funds.

Support for Vulnerable Nations

The formal establishment of the Loss and Damage Fund for financial assistance to countries suffering from losses and damages due to climate-related disasters was undoubtedly a historic outcome of COP28. It marked an important milestone toward climate justice since these vulnerable nations – particularly Small Island Developing States and Least Developed Countries – have called for compensation for the damage they suffer at the hands of climate change when their contribution toward global emissions has been very minimal.

However, the Loss and Damage Fund is a recent creation, and this year’s COP will prioritize establishing functional specifics, laying the groundwork for it to become one of the core components of international climate finance. It is supposed to help countries recover from destructive events such as hurricanes, floods, droughts, and rising sea levels. 

The current pledged amounts are, however, below the estimated needs. The Heinrich Böll Foundation estimated that the cost of loss and damage could reach a high of $580 billion annually by 2030, far over current financial commitments​.

In response, COP29 will likely closely consider innovative finance mechanisms that leverage private investments and tax fossil fuel companies to ensure the fund receives the resources needed to support vulnerable nations.

You might also like: Loss and Damage Fund Contributions at COP28 Cover Less Than 0.2% Of Climate-Related Losses in Developing Countries 

Implications of Global Action on Climate Justice

Beyond the technical discussions of climate finance and the Loss and Damage Fund, COP29 will potentially have broader implications for global climate justice. At its core, climate justice addresses the disproportional impacts of climate change on the most marginalized and vulnerable people. It is, in essence, recognition that those who have contributed least to the problem often suffer the most from its effects.

Strengthening national commitments to climate change is one important way COP29 can advance global climate justice. Countries are expected to send updated Nationally Determined Contributions (NDCs) prior to the conference articulating their plans for emission reduction and adaptation to climate change.

Identifying how to enhance national commitments, considering their fairness and equity, remains one of the essential challenges COP29 will have to address. Developed economies like the US and the European Union will increasingly face pressure to adopt more ambitious climate goals, partly due to historical responsibility and partly because they are superior in the financial and technological resources to provide leadership in the transition toward a low-carbon economy. In turn, developing countries are likely to demand more in terms of climate finance, technology transfers, and capacity building as the quid pro quo for being able to strive toward their own climate objectives without compromising on development priorities.

Whereas much of the climate negotiations fall under the Paris Accord, which commits countries to submit increasing ambition through NDCs over time, COP29 will be an important checkpoint in terms of progress assessment and efforts toward calling for an increase in countries’ climate ambitions.

The Path Forward

As COP29 approaches, the stakes could not be higher. Many countries – particularly in the Global South – are already suffering from the disastrous impact of climate change, and the window for proper climate action is closing. COP29 represents one of the remaining opportunities to put the world on a path toward climate justice.

If the Baku summit is to succeed, it needs to front the whole gamut of complexities arising from the climate crisis: mitigation, adaptation, loss and damage, and financing issues. More than that, it must take on the core issues of justice and equity that have often been pushed to the margins of the climate negotiations. However, climate change is not an issue of concern for the environment alone; it is a human rights issue that disproportionately affects the most helpless in society.

Follow our independent, trusted coverage of COP29.