The pivotal issue of climate finance is expected to dominate discussions when countries meet at the 29th Conference of the Parties in Baku, Azerbaijan.
Overall, countries need to invest trillions of dollars to build clean energy systems, prepare for an increasingly hotter world, and address the consequences of climate change-induced disasters.
The United Nations Framework Convention on Climate Change specifically requires developed countries to provide financial resources, often referred to as "climate finance," to help developing countries achieve these goals, according to a new report by Carbon Brief.
Under the Paris Agreement, governments agreed to set a new climate finance goal by 2025, which would direct funds to these countries and aid them in addressing climate change.
However, recent negotiations over the "new collective quantified goal" for climate finance have revealed deep divides within the UN climate process.
Countries disagree on nearly every element of the new collective quantified goal, including the amount of money to be raised, who should contribute, what types of financing should fund it, what it should finance, and the time period it should cover.
Developing countries look to high-income parties, like the United States and the European Union, to provide the funds.
Meanwhile, developed countries want a comprehensive target that includes contributions from private companies and large emerging economies, such as China.
In this report, Carbon Brief explores the issues countries have clashed over, which will need to be resolved to reach a conclusion in Baku.
Why Are Countries Discussing a New Climate Finance Goal? Climate finance is at the core of international climate policy, and it is widely understood that developing countries need to invest large sums of money if they wish to reduce their emissions and prepare for a hotter world, in line with their climate plans.
The nature of climate finance, although contentious, currently mostly comes from aid budgets in developed countries and contributions from multilateral funds and development banks, such as the World Bank, with smaller amounts coming from the private sector.
When countries negotiated the United Nations Framework Convention on Climate Change in 1992, the treaty stated that developed countries should provide financial resources to help developing countries address climate change.
In 2009, developed countries agreed to “mobilize” $100 billion in climate finance annually by 2020, a yearly target that was supposed to continue until 2025.
This target has become fraught with issues, as developed countries missed the 2020 deadline, only reaching it two years later in 2022.
The 2015 Paris Agreement reaffirmed in Article 9 that developed-country parties should provide financial resources to assist developing-country parties. Countries also decided that before 2025, they should “set a new collective quantified goal from a floor of $100 billion per year, taking into account the needs and priorities of developing countries.”
Carbon Brief states that the “new collective quantified goal” is the focus of negotiations at COP29, and as the 2025 deadline approaches, this will be the last chance to set a new goal.
What Amount Will Replace the $100 Billion in the New Goal? Unlike the $100 billion amount proposed by leaders of the Global North, the national climate finance group must consider the needs and priorities of developing countries.
Numerous assessments have shown that investment needs in these countries will amount to trillions of dollars to address climate change in the coming years.
However, setting a quantitative target for climate finance is not straightforward, as many future demands to address climate change are difficult to pinpoint.
The closest attempt is the needs assessment report by the UN’s Standing Committee on Finance, based on a compilation of different reports where developing countries assessed their own needs.
However, the committee notes that its estimate, ranging from $5 to $6.9 trillion over the next five years, contains significant gaps, and thus does not fully reflect actual needs.
Despite this lack of clarity, negotiators agree on the need for trillions of dollars to address climate change.
However, arriving at a more precise figure for the national working group has proven to be highly challenging, partly because countries do not agree on what it should include.
Developing countries favor a goal largely comprising public funds from developed countries, while developed countries have proposed goals covering a wider range that includes global investment flows rather than just public funds provided by developed countries to developing countries.
