COP28: What progress can be made on climate finance?

When the UN Climate Change Conference COP28 opens its doors in Dubai tomorrow, climate finance could be one of the keys to success. What specific issues are on the agenda and what results are possible? An overview.

Like COP27 in Sharm el-Sheikh, this year’s UN Climate Change Conference COP28 in Dubai (November 30 to December 12) is taking place at a time of major crises. The war in Ukraine and the Gaza Strip have significantly changed the geopolitical context, but the growing debt crisis and shrinking financial scope in many low-income countries are also changing the conditions for progress in global climate policy, which remains dangerously inadequate. Shortly before COP28, the UN Climate Change Secretariat analyzed that with the current climate protection efforts of countries, global emissions will still increase by around 9% (compared to 2010) by 2030, although they would actually have to fall by around 45% in order to stay within the 1.5°C limit of the Paris Agreement. Progress is conceivable, for example with regard to the resolutions on the first formal review of the implementation of the Paris Agreement (Global Stocktake). It may even be possible to find a reasonably robust language for phasing out fossil fuels. Overall, however, the gap between the goals of the Paris Agreement and the political reality in many countries remains large – including in Germany.

Climate finance can play a key role here – the support of rich industrialized countries is integral to the ability of poorer countries to adapt to climate change, protect themselves against future climate risks, promote climate-compatible development and deal with unavoidable loss and damage. In this respect, strong impetus for climate finance from COP28 would be desirable.

100 billion and a doubling of funds for adaptation

However, there is still a problem here. The OECD has just reported that the industrialized countries have provided or mobilized a total of almost 90 billion US dollars in climate finance in 2021 – although this is an increase compared to 2020, it still does not reach the level of 100 billion US dollars per year that the rich industrialized countries had promised from 2020 for the period up to 2025. The donor countries are confident that they will reach the level of 100 billion US dollars by 2023 at the latest or even by 2022 – but would actually have to present reliable figures for this at COP28. In addition, they are stubbornly refusing to pledge a further increase in funding in order to restore the prospect of underfunding in previous years in later years, so that USD 100 billion per year, i.e. a total of USD 600 billion, will be available over the period 2020-2025 – as the pledge actually suggests.

In addition, more than two thirds of the funds will arrive in recipient countries in the form of loans (many of which are not even at reduced interest rates), meaning that they will have to take on more debt to overcome a crisis that they have often done little or nothing to cause. It is also worrying that the funds for adaptation have decreased in 2021 compared to 2020 – a further indication, among others, that the donor countries are currently not approaching the goal of doubling the funds for adaptation by 2025. This target was already set at COP26. However, experience with the 100 billion target shows that there should also be reliable implementation plans in order to create sufficient certainty that targets and commitments will be achieved and adhered to. At COP28, the industrialized countries would be well advised to present reliable information on whether and how the promised doubling will be achieved. Interesting fact: Germany could manage to double its funding for adaptation – if climate financing were to continue to increase as it has recently.

Review of the Paris Agreement

The first formal review of the implementation of the Paris Agreement is also planned for COP28. This global stocktake is to touch on all key areas, including climate finance. Criticism of the 100 billion pledge (or its non-fulfilment) was addressed several times in the working meetings for the technical preparation of the review. It will now be interesting to see whether this global stocktake will also include constructive proposals in the conclusions on how to proceed with climate finance. In addition to recognizing future needs, this could also include topics such as mobilizing or redirecting private investment or reducing the cost of capital for the expansion of renewable energies in low-income countries or removing existing barriers to accessing existing financing channels. It will not be possible to avoid emphasizing the importance of continued financial support from rich industrialized countries for low-income countries in the implementation of the Paris Agreement, as clearly stated in Article 4.5.

New global climate finance target

The UN Climate Change Conference COP29 in 2024 is to set a new global target (New Collective Quantified Goal) for climate finance for the period after 2025, which is to build on the 100 billion target but take greater account of the actual needs of poorer countries. Between now and COP29, governments will discuss the various aspects of this new target, such as the structure of the target or the future needs of low-income countries, in Technical Expert Dialogues set up specifically for this purpose. The eighth of these dialog events takes place shortly before COP28 and is a kind of stocktaking of what has been achieved so far – which will then be discussed politically in a ministerial roundtable. However, it is questionable whether concrete negotiations will be held at COP28 to decide on some fundamental aspects of the goal. The distinction between a component for direct support for poorer countries by industrialized countries and a component for mobilizing or redirecting global investment flows will be particularly important for the new goal. In addition, it would probably make sense to set up a separate sub-goal for the area of adaptation and one for the area of climate induced loss and damage. Finally, the cyclical intervals at which the target is readjusted must be regulated in order to take account of future developments and changes in the needs of poorer countries.

After all: Loss & Damage fund will probably be set up

One possible success is on the horizon: COP28 is expected to adopt the recommendations for the establishment of a new multilateral fund to deal with unavoidable loss and damage caused by climate change, which were drawn up over the past year by a specially established Transitional Committee. This fund is now to be set up under the umbrella of the World Bank and could later support programs in vulnerable countries, e.g. for reconstruction after disasters or to compensate for people’s gradual loss of income, for example in agriculture. It will be interesting to see which countries will make initial pledges or at least declarations of intent to the fund. Apparently, some EU countries are preparing such a pledge. Germany also has an obligation here.

Outside the formal agenda

In addition to the formal points on the negotiating agenda, climate finance is also likely to be discussed elsewhere. For example, a number of pledges are expected from individual industrialized countries for the various multilateral climate funds – such as the Adaptation Fund or the Least Developed Countries Fund. In addition, some countries are still expected to pledge to the Green Climate Fund (GCF), as not all countries made pledges at the replenishment conference in October.

The process of reforming the multilateral development banks is also likely to become an issue again, at least in the margins of COP28. Although there are no official negotiations on this, COP27 called on the multilateral development banks to step up their commitment. The key challenge here will be how the development banks can provide significantly more funds without further increasing the debt of the recipient countries, as called for in the Bridgetown Agenda, for example. At the same time, the banks must also change their own business model. The World Bank, for example, continues to provide billions for fossil fuels – and is thus counteracting the Paris Agreement.

Another interesting question for COP28 is how the German government will continue to deal with its pledge to increase climate finance to at least six billion euros by 2025. The pledge was already achieved on paper in 2022, but forecasts for 2023 and 2024 now envisage lower funding, and the budget of the Federal Ministry for Development and Economic Cooperation (BMZ) is also set to fall further in 2025 – which is where the majority of the money comes from. The German pledge is therefore still not secure.

Jan Kowalzig, Oxfam
Sabine Minninger, Brot für die Welt
Sven Harmelng, CARE
David Eckstein, Germanwatch