Is This The Death Bell for Climate Finance Goals before COP 29?

United Nations Framework Convention on Climate Change released a pre-session report on October 15. The report outlines the efforts undertaken by the co-chairs of the ad hoc work programme concerning the new collective quantified goal (NCQG) for climate finance in 2024. Collective quantified goal refers to financial support that can support developing countries in their climate actions after 2025. This is set to be one of the key discussions at COP29 this year. The NCQG succeeds the earlier goal set in 2009 at the Copenhagen Climate Summit where developed countries committed to mobilize $100 billion per year by 2020 to assist the developing countries with their climate change needs. The funding target was however, met only as recently as 2022.

A Recipe for Mistrust

UK for instance had pledged to spend £11.6 billion on international climate finance between 2021-22 and 2025-26 but lagged behind its goal by almost 40 per cent. UK had re-classified and counted £1.7 billion aids as climate finance.  ICAI, UK’s international assistance monitoring body found that 55 per cent of UK’s commitment to climate finance will not be disbursed until 2025-2026.  US has also contributed much less than what it should have as the second largest emitter of greenhouse gases. US accounts for 15 per cent of global emissions. A large portion of climate fund provided in 2022 was provided at market rates.  Reuter’s data analysis found that wealthy nations have loaned at least $18billion at market-rate interest for climate related and aid. Another $11 billion in loans required recipient countries to purchase materials from companies in the lending countries. This is not the equation that the developing countries were looking at when they hoped to get financial aid from their developed counterparts. It has only added to their share of burden.

Climate Aid as Loans

India has taken a $1.5 billion loan from the World Bank to support its low carbon energy transition. At COP29 India has called for developed countries to provide at least USD 1 trillion per year from 2025. This India has asked for as grants and concessional finance.

A recent report by International Monetary Fund states that there could be a shortfall in liquidity in many emerging economies setting them back in development- stunting climate change mitigation and fuelling mistrust in governments and western institutions.  Reuters has reported that countries are avoiding expenditures on education, health and infrastructure in order to service their debts. In 2023 net flow finance to developing countries was negative. This means that repayments for debts outdid the amount that they received as loans in that financial year.  

Simultaneously, there is the rising trend of public debt crisis among the developing nations amounting to nearly $92 trillion might put 136 out of 152 countries in a critical debt situation. France plans to cut back 1.3 billion euros of foreign aid as it is debt laden. Similarly UK has a shortfall of $29bn in its annual budget and has a difficult fiscal environment.

In such a scenario the developed nations have advocated for broadening the base of contributors to climate finance.  Developed nations have also argued that in formulating the NCQG countries that have developed and have become bigger emitters over the past decade must also play their part in sharing the burden of climate finance.

Commenting on the report by co-chairs on the status of New Climate Finance Goal negotiations, Harjeet Singh, climate activist and global engagement director for the Fossil Fuel Non-Proliferation Treaty Initiative says, “Three years of technical sessions and high-level meetings around key finance issues – such as scale, quality, sources and fairness of contribution have remained unresolved”. The negotiations around NCQG have been on since 2022.

Divided Opinions

The report also points out that parties discussed options such as an annual goal of $1-$2 trillion for NCQG. This is quite a wide range and the fact that the different country blocs have a vastly different target in mind is evident. Developed countries have agreed that the financial goal must include provision of public climate finance to developing countries and private finance just as it had done previously for the $100 billion. However, they remain divided on whether contributions to thematic area such as mitigation, adaptation and loss and damage should be clearly distinguished? “Some Parties called for a grant-equivalent quantitative target in order to respond to the need for more grant-based and highly concessional finance,” the summary of the third meeting of the ad hoc committee said. The need for a framework that is transparent and accountable is highlighted in the report. This is to ensure an effective use of climate financial assistance.