Talks on global climate finance virtually ground to a halt last week at COP29, the annual United Nations (UN) Climate Change event in Baku, Azerbaijan, as the developed world, led by the European Union (EU), and developing countries including India, Brazil, South Africa, and a clutch of island nations and African countries faced a wide chasm between their expectations.
IMAGE: Global environmental activists protest against the gas industry during the United Nations Climate Change Conference (COP29), in Baku, Azerbaijan November 15, 2024. Photograph: Murad Sezer/Reuters
This has raised doubts about whether an agreement can be reached this week or whether talks will spill over to COP30, to be held next year in Benem, Brazil.
Any deferment of the talks hurts countries like India, which are counting on a global corpus of grants and soft loans to make the energy transition to cleaner forms.
India’s annual requirement may be as high as $1 trillion, based on its current nationally determined contributions (NDCs), a former UN official involved with COP talks said.
A new NDC, which forms the basis of climate finance, must be submitted by next February, according to the UN Framework Convention on Climate Change (UNFCCC).
The funding gap has turned out to be wider than previously expected, participants in Baku said over the weekend, as talks enter the concluding week of COP29.
Developing nations like India are staring at a 13-fold gap between their fiscal demands and what the Global North, led by the EU, is willing to offer.
Climate activists and participants close to the talks pegged the annual requirement at $1.3 trillion, mainly in the form of grants to be disbursed for loss and damage to the environment and for adapting to climate change.
After including private sector finance and investments, the number increases to $5–6 trillion, which includes climate mitigation, where countries invest in renewables and sustainable fuels to keep global warming below a 2 degrees Celsius rise from pre-industrial levels.
Rich nations, led by the EU, are offering a floor of $100 billion annually to start talks.
Jacob Werksman, principal advisor to the directorate-general for climate action in the European Commission, said on the sidelines of COP29 that the EU has fixed a floor of $100 billion as a starting number for the new collective quantified goal on climate finance (NCQG).
That number was what was offered by the Global North to poor nations at the 2009 Copenhagen COP and was finally paid out only in 2022, according to a report by the Organisation for Economic Co-operation and Development (OECD) nations.
In 2022, of the $115.9 billion disbursed, around $22 billion was mobilised as private finance attributed to developed countries, according to a UNFCCC document.
The rest comprised bilateral public finance, multilateral public finance attributed to developed countries, and export credits.
“The big outcome is of course the delivery of the new collective quantified goal, that would indicate in quantitative terms what it is that developed countries and other parties are prepared to contribute in the form of private finance, but also by mobilising and catalysing those essential private sector forces,” Werksman said.
“How much beyond the $100 billion for the private sector goal and the private sector money that that immediately mobilises?”
The amount would also depend on the donor list. Werksman also clarified that NCQG is not a single fund but just a collectively agreed financing number.
The EU said that NCQG will not have sub-level targets like allocating funds for issues like adaptation, loss and damage, or mitigation.
New UN report
Contradicting Werksman, an Indian official in Baku said that the $1.3 trillion demand has a scientific basis, supported by reports from UNFCCC.
A UN-backed report released last Thursday in Baku agreed with G77 countries that the needs for climate finance are in trillions of dollars, not billions.
The report said that $1.3 trillion a year needs to be given as public finance to developing countries by the 2030s to address climate problems.
Funds from the budgets of rich OECD nations will cover adaptation and resilience, while private sector funds can be used for clean energy projects, said the report authored by Amar Bhattacharya, Vera Songwe, and Nicholas Stern.
The global projected investment requirement for climate action is around $6.3–6.7 trillion per year by 2030, of which $2.7–2.8 trillion is in advanced economies, $1.3–1.4 trillion in China, and $2.3–2.5 trillion in emerging markets and developing countries — like India, Brazil, South Africa — other than China, according to the independent high-level expert group on climate finance.
These needs are estimations of what is required for delivery of the Paris Agreement, the authors said.
The investment is huge because, in many countries of Africa and Asia, such as India, the lack of adequate grid infrastructure and storage is limiting the generation of renewables to hardly 10-12 per cent of the total power demand compared to an installed capacity of over 25 per cent.
Eventually, rich nations may agree to around $300 billion in public financing for climate needs, said R R Rashmi, Distinguished Fellow at TERI and a former Indian negotiator at COPs. Some participants at COP 29 also said that a $300 billion climate aid number was more achievable.
