The COP29 summit at Baku is ending, yet a draft text with a proposed figure for climate finance and emission reductions goals is elusive. The key goal of COP29 is to agree on how much money should be provided by developed countries to developing countries to help them deal with climate-induced weather disasters and changeover to cleaner energy systems.
An earlier pledge to provide $100 billion per year expires in 2025. At the Baku summit, delegates were to decide on a 10-fold increase in financial flows to at least $1 trillion annually from 2026.
The proposed figures on finance, called NCQG (New Collective Quantified Goal), will sum up cooperation on three issues - quantity, quality, and contributors.
Sticking Points
According to developing countries including India, developed countries are pushing for higher reduction goals without a financial commitment.
One of the major disagreements between developed and developing nations is over the balance between emission reduction and climate finance. The argument from developing countries is that they should not be forced to commit stringent mitigation goals without enough money on the table to address climate change.
The developed countries are keen to expand their contributor base to include emerging economies, which has been opposed by the developing countries as a violation of the 2015 Paris Agreement.
Developing countries, including India and China, have repeatedly demanded $1.3 trillion from the national budgets of the rich developed countries. They have maintained that this money is a legal obligation under the Paris Agreement, and not charity.
The $1.3 trillion amount is based on cost estimates by the Independent High-Level Expert Group on Climate Finance, a new body appointed by the United Nations, for developing and deploying technology that would keep the global temperature increase below 2 degrees Celsius (3.6 degrees Fahrenheit), compared to the pre-industrial average.
The source of the hundreds of billions, if not trillions, of funds that developing countries say they require to adapt to a fast-changing climate, is also a subject of contention. Whether the money will come from governments, multilateral banks, or the private sector has become a flashpoint in the summit.
Developed nations have been silent on the amount so far, but have been vocal in supporting a multi-layered approach to financing climate action, including support from public and private funds.
Tussle Over Source Of Funding
The developing countries, particularly those facing debt crises, have called for prioritising public finance over private finance, raising concerns about accessibility and adequacy of market-based mechanisms.
Until now, a major portion of previous climate fundings have been in the form of high interest loans where the receiver country has had to then pay interest on the principal amount. This type of funding places the burden on the financial health of the recipients, who are mostly the least developed countries.
At COP29, the least developed countries, especially from Africa, have highlighted their vulnerabilities to climate-induced disasters like drought, food shortage, water scarcity, and displacement, and the high cost their countries are paying to meet the challenges year-on-year.
This year, the delegates from developing and least developed countries have voiced apprehensions about relying on market-based fundings for meeting their climate challenges. They have also flagged the need for clear and transparent mechanisms that can track and account flow of climate finance.
Bolivian representative Diego Pacheco, speaking on behalf of Like-Minded Developing Countries, said developed countries are trying to shift their own responsibility on to developing countries, which is in violation of the Paris Agreement and not acceptable. India and China are part of this group.
What's Worrying Developed Countries
Also complicating the talks is the demand by developed nations to include China and Saudi Arabia among their ranks, thus becoming donor countries liable for financial contributions. Developed countries are upset about China being bracketed in the developing country category.
The financing question has become even more tricky with Donald Trump's election victory in the US. The world's biggest economy and history's biggest emitter, is expected to withdraw from the Paris Agreement when Trump takes office, which means the country would very likely default on whatever financial commitments the final agreement sets out. This will hugely impact climate funding.
The Way Out
With little progress in the first week of COP29, the Azerbaijani presidency gave the responsibility to a pair of ministers from developed and developing countries to take the negotiations further. Egypt and Australia were told to hold discussions on the structure, contributors, and overall "quantum" of the new finance goal.
Ministers from Norway and South Africa were tasked with shaping the outcome on emission reduction goals. These two factors - the basic formulation of a reduction plan (how countries would make climate commitment to meet Paris Agreement goals) and the new finance goal - are the main reasons for the near-collapse of talks in Baku.
The only significant takeaway until now has been the inclusion of tourism in the action agenda of the UN Climate Change Conference, with more than 50 governments endorsing the COP29 Declaration. The aim is to support the tourism sector, a key economic driver, in adopting sustainable practices to reduce its environmental impact.
