Finance is in focus at the COP29 climate summit in Baku this month. Government representatives from all UN member states, as well as the State of Palestine, the Holy See, Niue, the Cook Islands, and the European Union, will gather in the Azerbaijani capital from 11 to 22 November to discuss measures to combat climate change, including a mechanism for how high-income countries can support lower-income ones in decarbonising their economies.
The current financial goal, agreed upon in 2009 in Copenhagen, will expire next year. It requires richer countries to raise $100bn annually to help Global South nations fund their green transitions.
There are calls for new requirements to go much further, reflecting both the economic advantages gained by rich countries during decades of unrestricted industrialisation and their disproportionate contribution to global emissions.
“Developing countries, which haven't contributed for the longest time to the issue of global warming but are suffering the impacts of it, agreed to make their contribution to cutting emissions,” Alexandra Scott, a climate diplomacy researcher at the Italian climate think tank, ECCO, told The Parliament.
High-income countries agree to the principle of providing funding to help poorer ones implement new technologies. But the amounts in question, and the structure of the financial instruments – whether loans, grants or investments, public or private – are still up for debate.
Tough negotiations ahead
African negotiators are pushing for a substantial increase in aid, seeking $1.3tn annually from the rich world by 2030. Similarly, the Climate Action Network, an umbrella group of civil society organisations, has called for a minimum public finance provision target of $1tn per year from high-income countries.
In 2022, an independent expert group estimated that poorer states, excluding China, will require even more than that: an annual investment of $2.4tn to address renewable energy, adaptation, and other climate-related challenges.
Nevertheless, the absence of any pre-agreement suggests that this year’s negotiations will be challenging and may even fail – unlike the funding arrangements for loss and damage for the countries most vulnerable to climate change, which were established on the first day of COP28 last year.
“We can expect there to be a lot of disagreement and acrimony around it because hardly anything has been agreed ahead of time,” Ruth Townend, a researcher at London-based think tank, Chatham House, told The Parliament. “Often, presidencies are able to get their ducks in a row before the actual COP itself. But that has not happened.”
A failure to reach an agreement would be disastrous, she says, because the outcome of this year’s finance negotiations will inform next year’s COP in Brazil, where the parties are expected to submit their updated national climate plans.
However, even an agreement does not guarantee success. While any final deal will be legally binding, it will lack an enforcement mechanism. “The binding is about citizens calling on their governments to deliver on commitments that they made at the international level,” Scott says.
Meanwhile, the climate continues to deteriorate, according to the latest UN data. The deadly flash floods in Valencia at the end of last month serve as a reminder of the tangible, and increasingly severe and frequent, consequences of inaction.
According to the UN, current policies are projected to result in up to 3.1C of global warming by 2100 – more than double the 1.5C target set by the Paris Agreement. This level of warming would severely deteriorate the climate and could lead to the submersion of some small island states due to rising sea levels.
“Halving global emissions is what needs to happen in the next few years in order to then hit that 1.5 goal,” Townend says. “The difference between 1.5 and 3 degrees sounds very small, but for small island developing states, it's literally existential.”
European role
It’s no surprise that those small island states have been among the most vocal advocates calling for ambitious climate policies, while large, rich countries, fearing economic disruption, have applied the brakes.
Scott believes that the EU’s natural role is to act as a “bridge builder between the really climate progressive small island states, for example, and China and US positions.”
The EU should have a strong negotiating position this year. Its Green Deal, set out in 2019, is one of the most ambitious and comprehensive pieces of climate legislation globally, particularly among major economies.
Europe should also present a relatively united bargaining position. Commissioner for Climate Action Wopke Hoekstra will represent the European Commission as its lead negotiator and, even if the EU’s 27 member states travel to Baku under their own flags, they will share the Commission’s general negotiating framework.
Nevertheless, the EU’s general negotiating position for COP29, approved by national governments in the Council of the EU last month, does not specify how much money it is willing to contribute to supporting lower-income countries.
The Council did stipulate that private investment should make up the larger share of investment to assist with the green transition, alongside public money. Beyond financing, the Council also called for further action, particularly from large economies, to limit global warming to 1.5C and reiterates the need to transition away from fossil fuels to achieve climate neutrality by 2050.
Michael Bloss, a German Green MEP, wants EU negotiators to put a substantial sum on the table to encourage action from other major powers. “We need to have a new financial goal that will be more than in the trillions. And here, the European Union is really not playing the game well,” Bloss said during a press briefing on 30 October.
His colleague Isabella Lövin warned that too much funding is currently provided through loans. “There’s a huge risk of developing countries being in a new situation of a debt trap. So, this must be avoided, and we must see [many] more concessional loans and grants to developing countries,” the Green MEP told reporters at the same briefing.
Bloss said that MEPs will keep a close eye on closed-door negotiations. “We have, as the Parliament, the obligation and the role to check on the Commission, on the Council, and we will do that in [these] important negotiations,” he said.