COP29: Disappointing outcome on the new global climate finance goal (NCQG)

At the UN Climate Change Conference COP29 in Baku, developed countries successfully prevented a good outcome on the new global target for financial support to low-income countries to tackle the climate crisis. The new target falls short of what is needed; more than a minimum consensus could not be reached. A roadmap to COP30 is what remains to provide hope.

1.3 trillion US dollars per year – this is what low-income countries had demanded for the new global climate finance target, based on existing needs assessments, to support mitigation, adaptation and, in particular, dealing with unavoidable loss and damage. The previous target was US$100 billion per year, which developed countries had pledged to mobilise for the period 2020-2025 (with moderate success, see here and here).

The applause following the adoption of the NCQG did not hide the disappointment of many low-income countries with the outcome – some, including India, expressed their frustration in statements afterwards. Photo: © IISD/ENB | Mike Muzurakis

Not 1.3 trillion but 300 billion US dollars – far short of what is needed.

This new collective quantified goal (NCQG) was adopted at COP29 in Baku. It calls for climate finance to increase to at least US$300 billion per year by 2035. At first glance, this may sound like an ambitious tripling of the previous target of US$100 billion. Many representatives of developed countries have also tried to sell the outcome of COP29 as a success. However, for German Foreign Minister Annalena Baerbock, the 300 billion is “just a starting point“, and German Chancellor Olaf Scholz (who did not even travel to Baku despite being invited due to election campaigning) also called the outcome “not perfect“.

That is probably a very euphemistic way of putting it. The needs of countries in the Global South are significantly higher. These countries face annual costs of $215-387 billion just to adapt to climate change. The cost of unavoidable losses and damages could rise to $580 billion per year by 2030. Hundreds of billions of US dollars in external public support will also be needed each year for mitigation programmes, e.g., to restructure energy systems (see here).

In this respect, the target agreed in Baku does not meet the needs of low-income countries. In other words, there will continue to be woefully inadequate support for the development and expansion of renewable energy, for safeguarding harvests, or for protecting people from future weather disasters. The fact that the now agreed target is preceded by an ‘at least’ can only be described as cosmetic.

Loans and private investment

What’s more, the multilateral development banks appear set to shoulder much of the effort. They plan to increase their climate finance to $185 billion a year by 2030, of which $120 billion will come as public finance. This will be largely in the form of loans (as is usual for development banks), a significant proportion of which will be at market rates. Under the right circumstances, loans can be an adequate instrument if the programmes they finance, such as the expansion of renewable energy, are so economically viable that not only can they be designed in a socially balanced manner but at the same time generate income from which the loans can be repaid. Often, however, this is not the case. Loans can then add to the already high debt burden in many countries. What’s more, loans are usually much less (if at all) suitable for adaptation to climate change, such as food security and livelihoods, or for many of the mitigation actions needed in less developed countries.

All actors in the donor landscape are also hoping for increased mobilisation of private investment to contribute to the new $300 billion target. By 2030, the multilateral development banks plan to mobilise significantly more private investment per dollar in public fiannce than before, aiming for an annual level of USD 65 billion by 2030. Developed countries are also aiming for an increase in the amount of private money mobilised through their bilateral cooperation. There is nothing wrong with private investment in principle. But it is simply inappropriate for many of the measures needed, particularly for adapting to climate change, especially if investors expect a return that cannot be achieved through socially balanced programmes. The call in the decision for ‘enabling environments’, i.e. investment-friendly environments in developing countries, could be a cause for concern. In the past, this has often meant new pressure on deregulation, privatisation and the dismantling of social standards in order to meet investors’ return expectations.

New contributors – diluted responsibilities

Developed countries see it as a milestone that they are no longer solely responsible for meeting the goal, but are now merely required to take a lead. In line with this, it was decided that climate finance via the multilateral development banks would now be counted in their entirety towards the goal, and no longer (as was the case with the 100 billion goal) only the share attributable to developed countries. This is not wrong per se, but of course it does not lead to an increase in support but merely a change in accounting, which ultimately reduces the value of the ‘300’.

It remains to be seen who will actually join the group of contributors. In principle, all countries are asked to do so on a voluntary basis (as already provided for in the Paris Agreement). There is no reason why countries whose economic and financial capacities and whose responsibility for the climate crisis is comparable to that of developed countries should not act in a similar way – including with regard to supporting low-income countries. With the outcome of Baku, however, devleoped countries have succeeded in watering down their responsibilities in climate finance: If everyone is responsible for the new goal, ultimately no one is really responsible anymore. Developed countries will know how to exploit this, for example if it becomes apparent in a few years’ time that the new goal could be missed.

Civil society’s expectations for the new global climate finance target have not been met. Developed countries, on the other hand, are hailing the COP29 outcome as a success, as their key ideas are reflected in the text, including the prospect of not having to significantly increase existing funds from tight budgets, the broadening of the contributor base and the exclusion of loss and damage from the new finance goal. Photo: © IISD/ENB | Mike Muzurakis

Loss and damage: blockade by developed countries

The new goal only covers support for mitigation and adaptation. Addressing and responding to unavoidable loss and damage is not included in the goal due to resistance from developed countries; the decision merely recognises that more support is needed in principle. Throughout the negotiations on the new collective quantified goal over the past few years, developed countries have put forward formal arguments against the inclusion of loss and damage, but in reality the blockade has been purely political, as it is clear also to developed countries that loss and damage in vulnerable countries will increase significantly in the coming years. This means that these countries are now essentially left to their own devices (even the new UN fund on loss and damage, set up two years ago contains only a tiny fraction of the money needed).

This is a bitter pill to swallow for countries already struggling with climate change and with little prospect of future support, for example to rebuild after disasters, when crops wither or are washed away from the fields, salt water infiltrates the soil or coastal areas, or entire islands sink in rising sea levels.

No growth in support from developed countries?

Indeed, there are scenarios in which the 300 billion target could be reached without significant additional efforts by the developed countries – and various statements (e.g. here and here) suggest that developed countries had done exactly such scenarios before presenting the 300 billion as the maximum possible just hours before the end of COP29. Assuming that the multilateral development banks expand their credit lines as planned and that the mobilisation of private funds is increased, there is not much left to do for bilateral cooperation and the multilateral climate funds. The necessary (nominal) growth through these channels would barely compensate for the expected inflation up to 2035, making it impossible to finance more mitigation and more adaptation than today, especially where low-income countries are dependent on public finance grants.

If, in addition, some emerging economies (e.g. China or South Korea) count their existing support towards the $300bn target (without necessarily increasing their contriutions), the change in accounting could even lead to a decrease in support (adjusted for inflation) from developed countries.

A $1.3 trillion roadmap to Belém

And then this: The USD 1.3 trillion per year originally asked for by developing countries appears in the Baku decision – albeit in completely altered form, as it is not framed as a goal for support. Instead, all ‘actors’ are now called upon to contribute to enabling more comprehensive financial flows to developing countries, reaching at least USD 1.3 trillion per year by 2035 (including the $300 billion per year goal of course). Note this is not a target, but rather a vague call to action that no one is responsible for answering.

To address the lack of substance in this call, a paragraph was added in the final hours of COP29 to establish a ‘Baku to Belém Roadmap to 1.3T’. This roadmap, under the joint leadership of the COP29 (Azerbaijan) and COP30 (Brazil) presidencies, should now clarify how the call can be brought to life. It is unlikely that this would mean additional support from developed countries, as their contributions are already included in the US$300 billion. What remains is the rather vague idea to generate the remaining trillion in the form of private investment, or to tap entirely new sources, such as possible levies on international shipping and aviation that have been discussed repeatedly (and always unsuccessfully) for more than a decade. This can work, so that this roadmap offers a at least a chance for some progress next year. But if it goes badly, this roadmap process may well end with a thick report that will quickly gather dust.

Otherwise: Smaller building blocks

The decision calls on relevant climate finance actors to improve access to climate finance – so that countries with low institutional capacity can more easily access existing funds. It also calls for a tripling of the resources disbursed through some of the multilateral climate funds under the Paris Agreement and the UN Framework Convention on Climate Change (which is only a tiny step given the current resources of these funds). In addition, the Standing Committee on Climate Finance (SCF) will be tasked with monitoring progress towards the targets. Otherwise, the decision reaffirms some existing provisions and makes some correct statements (e.g. on overcoming existing barriers to climate finance), but without any operational force. This is of little concrete benefit, but it can certainly do no harm.

Overall, the outcome of COP29 on climate finance is hugely disappointing. It is unlikely that there will be much of an increase in funding for direct support in the form of grants; despite the debt crisis in low-income countries, donor countries are focusing primarily on loans, while private investors may be asked to provide much of the rest (if low-income countries povide contexts for them to make returns). Inflation over the coming years could reduce the COP29 outcome for future support from developed countries to littel growth and mostly ‘business as usual’, adjusted for inflation. It is uncertain whether the review of the NCQG for 2030 will change much. There is certainly no sign of a shift towards greater climate justice, and future support is likely to fall far short of what is needed for many countries to pursue low-carbon development and adaptation with the necessary ambition – not to mention the increasingly urgent need to deal with unavoidable loss and damage.

Jan Kowalzig, Oxfam