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Climate Finance and Global Negotiations
Context:
The 29th session of the Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) concluded in Baku, Azerbaijan, in November 2024, with a landmark decision to triple climate finance for developing countries.
Climate Finance
- It constitutes financial resources provided to support mitigation and adaptation efforts aimed at addressing climate change.
- It aims at reducing emissions, and enhancing greenhouse gas sinks.
- It includes funding for renewable energy projects, resilient infrastructure, capacity building initiatives, and other essential actions mandated by international agreements such as the Paris Agreement.
Historical Background:
- Introduction of Climate Finance in UN Climate Negotiations: Finance became a key element in climate negotiations starting in 1991, leading to the UN Framework Convention on Climate Change (UNFCCC) in 1992.
- Article 4(7) of the UNFCCC states that the implementation of climate action commitments by developing countries depends on financial and technological support from developed countries.
- Paris Agreement’s Provisions: Article 9(1) of the Paris Agreement binds developed countries to mobilise finance for developing countries. The IPCC’s Sixth Assessment Report highlights finance, capacity-building, and technology transfer as critical enablers of climate action in developing countries.
Financial Commitments and Shortcomings:
- 2009 $100 Billion Pledge: Developed countries agreed to mobilise $100 billion annually by 2020.
- This target was met only in 2022, falling short of the growing financial needs of developing countries to meet their Nationally Determined Contributions (NDCs).
- Inadequacy of the $100 Billion Mark: It is insufficient for the actions required to limit global temperature rise to 1.5°C by the end of this century. Developing countries demanded a new financial framework at COP29.
- New Collective Quantified Goal (NCQG): The NCQG aims to replace the $100 billion floor with a new framework.
- Developed countries proposed mobilising $300 billion annually by 2035, which is significantly below the UNFCCC’s Standing Committee on Finance (SFC) estimate of $455 billion-$584 billion annually.
- The SFC figures represent only half of the 5,760 financial needs identified by 98 developing countries in their NDCs.
Challenges in Addressing Vulnerable Groups:
- Least Developed Countries (LDCs) and Small Island Developing States (SIDS): The NCQG lacks minimum allocation floors for LDCs and SIDS.
- SIDS demanded $39 billion, while LDCs demanded $220 billion, but these requests were unmet.
- Loss and Damage: The Global Stocktake (GST) in 2023 estimated economic costs of $447 billion-$894 billion annually by 2030, yet these concerns failed to influence the NCQG framework.
India’s Role and Perspective:
- India’s Stance on Climate Finance: India advocates for equity through the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC).
- At COP29, India demanded the NCQG mobilise $1.3 trillion annually by 2030, with $600 billion as grants and concessional resources.
- India’s Objections to NCQG: India expressed disappointment and rejection of the NCQG in its current form.
- Criticised the lack of consultation and transparency by the COP29 presidency.
- Asserted that inadequate funding would undermine the ambition and implementation of its NDCs.
- India’s Historical Contributions: As a signatory of the Montreal Protocol, India benefited from a multilateral fund of $240 million (including $80 million additional support for India, China, and other eligible low-income Parties).
What Developed Countries Must Do?
- Responsibilities of Developed Nations: Scale up the quantum and quality of climate finance.
- Establish a coherent climate finance architecture ensuring adequate, directly accessible, and affordable finance for developing nations.
- Focus on enabling developing countries to meet and enhance their NDCs effectively.
Collaboration and Trust: The developed north must prioritise trust and collaboration in negotiations to ensure just outcomes and address the climate crisis equitably.
