By Arunabha Ghosh & Arjun Dutt

The 20th Conference of the Parties (COP29), billed as the “Finance COP”, turned out to be a damp squib. Against the backdrop of a spiralling climate emergency it adopted a new climate finance mobilisation target, known as the new collective quantified goal or NCQG. Developing countries were asking for $1.3 trillion of annual (external) climate finance from 2025; COP29 offered them $300 billion by 2035. Effectively left to fend for themselves, developing countries, including India, denounced the offer as “unacceptable” and “inadequate”.

Debt and disaster continue to compromise the ability of emerging markets and developing economies to pursue aspirations for development and decarbonisation. More than 60 countries need debt relief; economic losses from climate disasters are not even counted for 84% of the extreme events in small island developing states and least developed countries; and over 600 million people still do not have access to electricity. This is a recipe for unsustainable development, not meeting sustainable development goals. The NCQG text sends a harsh signal to developing countries: No one is coming to help you.

An underwhelming outcome is unsurprising. COP29 was never taken seriously. The heads of state of countries responsible for over 70% of greenhouse gas emissions were absent, and Argentine delegates withdrew three days into the conference.

In 2009, developed countries had promised $100 billion a year by 2020; they reportedly met the goal two years behind schedule. But several developing countries and observers have questioned the accuracy, methodological robustness, and verifiability of the reported figures. CEEW analysis shows no developed country has delivered 100% of its committed climate finance. Given the widespread dissatisfaction, negotiators at COP29 debated several facets of the NCQG, including its quantum, structure, quality, time frame, contributors, recipients, thematic areas, and tracking. The NCQG matters both for quantum and quality of climate finance.

The NCQG text adopted at COP29 is an abdication of a foundational principle of the UN Framework Convention on Climate Change (UNFCCC), namely “common but differentiated responsibilities and respective capabilities”. According to this principle, combating climate change is the shared obligation of all countries but their responsibilities vary because of the historical contributions in causing climate change and their differing capabilities to address the challenge. In the new text, developed countries are tasked with only “taking the lead” in mobilising $300 billion per year by 2035 for developing countries. Neither are they exclusively responsible for climate finance nor do their contributions have to be sourced exclusively from public resources. Earlier draft texts had presented various options for grant-equivalent contributions from developed nations, the least of which was $441 billion a year. With developing countries needing $215-387 billion per year for adaptation finance alone, the NCQG contributions wouldn’t even be able to fund that need.

Further, by specifying that “all actors” are to work towards mobilising $1.3 trillion a year for developing countries by 2035, the text puts considerable onus on developing countries to mobilise funds. Effectively, COP29 has upended “polluter pays” with a perverse principle of “I pollute, you pay”.

Although the total figure is in the ballpark demanded by developing countries, their proposals called for such levels to be achieved much sooner (in some cases from 2025 or 2026 onwards) as they bear a brunt of climate extremes. The NCQG text focuses on mitigation and adaptation, so funds for loss and damage would have to be mobilised separately.

For tracking climate finance, the UNFCCC’s Standing Committee on Finance has to report on progress from the outset. It is a constructive decision given how Organisation for Economic Co-operation and Development (OECD) reporting in the past proved contentious. But the absence of a common definition of climate finance will make it challenging to determine if finance flows are additional, climate-relevant, and actual disbursals or not.

What can be done to make the best of a bad deal?

First, maximise the impact of public contributions from developed countries in mobilising finance. One way is to use public climate finance to de-risk investments in projects in developing countries through mechanisms like guarantees and affordable currency hedging facilities to maximise private capital participation. Mobilisation ratios would need to be much higher than historical ones. According to the OECD, $91.6 billion in public capital in 2022 mobilised less than a quarter in private flows. The ratios must be reversed.

Second, leverage non-debt-creating mechanisms to cater to the least developed countries and small island developing states. Besides outright grants, the new measures could include Article 6 carbon markets (operationalised at COP29), debt-for-nature swaps, and IMF special drawing right-seeded trusts lending directly to projects. Delivering enhanced public finance that is more catalytic and innovative requires continuing reform of multilateral development banks, as suggested by the G20 committee chaired by NK Singh and Lawrence Summers.

Third, a long-term, sustainable resourcing strategy is critical for the Fund for Responding to Loss and Damage, which aims to provide restitution for the damage stemming from climate change impacts. CEEW analysis indicates eight out of 10 Indians reside in districts vulnerable to extreme weather events. Loss and damage holds much relevance for India, not just small countries. Cumulative commitments to the fund (less than $1 billion) is about a quarter of 1% of what is needed (annual economic and non-economic losses exceed $400 billion and are growing). New geography-wide insurance schemes will be needed to protect vulnerable countries and communities.

Fourth, developing countries must get their domestic markets in order. They need to create enabling environments for investors through sectoral policies that curb risk, and financial levers like taxonomies and climate-related disclosures that direct investors towards credible opportunities. Secondly, sustainable finance hubs in large emerging economies — such as GIFT IFSC in India — can play a key role in linking international capital with investment opportunities. These should be developed as conduits of capital to the Global South.

COP29 struck a bad deal on climate finance. As Mahatma Gandhi said in a different context, this is a post-dated cheque drawn on a failing bank. The climate emergency will not wait for negotiators to make amends or leaders from developed countries to realise their folly. The poor and vulnerable must brace for impact.

Authors Arunabha Ghosh and Arjun Dutt are CEO and senior programme lead, Council on Energy, Environment and Water (CEEW).

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