The UN Climate Change Conference (COP29) at Baku, Azerbaijan, concluded on November 22, 2024, on a disappointing note as countries failed to take decisive action to address the escalating climate crisis.
One of the most critical aspects of the conference was the New Collective Quantified Goal target for climate finance, which was to be revised after 15 years. Developing nations had sought a significant increase in climate finance to $1.3 trillion per year. However, the final agreement settled on a paltry $300 billion per year till 2035.
India was quick to reject the new target, calling out developed nations for proposing an abysmally poor amount.
The climate finance target of $100 billion per year, set in 2009, was met for the first time in 2022 (see figure below).
Figure: Climate finance mobilised in recent years
Source: OECD
A closer look at the sources of funds for the target reveals several issues, including lack of transparency, inconsistent reporting, and unclear country contributions. Moreover, the target failed to account for inflation and gross national income growth, which implied that its value had been eroded over time.
Had the target kept pace with inflation and economic growth, the obligation should have been around $150 billion by 2024 and $220 billion by 2035, leaving $80 billion as the actual additional funding required to meet the new target.
Historically, one-third of the target was achieved by simply rebranding and redirecting the existing financial support, rather than providing new or additional funding. In 2022, less than a third of climate finance funding was provided in grants, with the majority consisting of loans, equity, guarantees, export credits, and other financing vehicles, a situation that remains unchanged to date.
In the new agreement, there is lack of emphasis on new funding, which again risks diversion of existing development funding from other critical programmes devoid of climate components.
To be sure, a significant breakthrough was achieved with the issuance of guidelines and standards for the carbon market for bilateral and multilateral trading.
However, several critical issues remain unresolved, including the lack of uniformity in carbon trading frameworks across countries and the unconditional continuation of Clean Development Mechanism credits under the Paris Agreement’s Carbon Market without additional scrutiny.
Also, the issue of ensuring additionality in projects, which is essential to prevent double counting and ensure environmental integrity, was not addressed.
Climate negotiations have fallen into a familiar pattern of discord and compromise, leaving many countries feeling disillusioned and frustrated. Further, the leadership of Trump in the US, a significant emitter, could have a chilling effect on global climate action.
The persistent lack of support for climate finance has undermined the ambition of nations, with India, for instance, warning that its emission reduction plans will be scaled back due to inadequate funding, as it prepares to revise its Nationally Determined Contributions next year.
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