UNFCCC COP29 Baku

The 29th Conference of the Parties (COP29) was held in Baku, Azerbaijan. This year’s conference is branded as the “Finance COP,” emphasizing the crucial role of financing in climate action, particularly for developing countries.

United Nations Framework Convention on Climate Change (UNFCCC)

• It establishes the legal framework for international cooperation on climate change.
• It was signed in 1992.
• Conference of the Parties (COP) is the main decision-making body of the UNFCCC.
  • Its meeting is held every year.

Need for Finance in Climate Action

• Transition to Cleaner Technologies: High upfront costs for renewable and green technologies require substantial financial support to ensure affordability for consumers.
  • Evolving technologies, such as advanced green solutions, carry risks of failure, necessitating financial backing to incentivize early adopters.
• Support for Developing Countries: Developing nations need additional financing to integrate modern energy and infrastructure improvements while prioritizing development goals.
  • Governments in these regions often face resource constraints, underscoring the importance of external financial assistance.
• Affordable Lending: Developing countries often face high costs of capital compared to developed nations, limiting their ability to fund climate initiatives.
  • Addressing these disparities is essential for unlocking domestic private investments and accelerating climate action.
• Debt-Free Instruments: Public grants from developed countries are preferred over loans to prevent adding to the debt burden of developing nations.
  • Strengthening fiscal capacities through affordable financing mechanisms is vital for long-term sustainability.
• Meeting Global Climate Goals: The Second Needs Determination Report by the Standing Committee on Finance under the United Nations Framework Convention on Climate Change (UNFCCC) estimated that between $5 trillion to $7 trillion would be needed by 2030 to meet half the needs of 98 countries.

Concerns Over Financing Structures

• High debt burdens in developing nations limit their ability to leverage domestic private capital for climate action.
• Lending rates for developing countries are significantly higher compared to developed nations.
• Growing emphasis on public grants instead of loans from developed nations to address fiscal stress and ensure affordable financial flows.

Role of the New Collective Quantified Goal (NCQG)

• At Cancun (2010): Developed countries pledged $100 billion annually until 2020.
• At COP21 (Paris): Nations agreed to establish the NCQG before 2025.
• The NCQG aims to create specific targets that nations can strive towards while ensuring transparency and accountability.
• Progress and Outcomes at COP29: Developed countries pledged $300 billion annually till 2035, a significant increase from the $100 billion target but falling short of the $1.3 trillion annual request from developing nations.
  • Triple the flow of public resources through adaptation funds and climate mechanisms by 2035 was promised, though progress may remain slow.

Drawbacks of COP29

• Insufficient Climate Finance Commitment: Despite the central theme of catalyzing finance to address climate change, the deal reached at COP29 falls short of expectations.
  • The agreement of $300 billion per year by 2035 is far less than the $1.3 trillion per year needed by developing countries to adapt to climate change and reduce emissions.
  • The commitment is not entirely from public finance, but includes funds from private finance, Multilateral Development Banks, and carbon markets, which raises concerns about the reliability and sustainability of these sources.
  • Private finance tends to flow to economically attractive markets, which may limit its impact on emerging economies like India, where climate adaptation needs are pressing.
• Uncertainty Around Carbon Markets: While progress was made on carbon markets, with agreements on carbon credit procedures and the global carbon market under Article 6.4, there are still concerns about their effectiveness.
  • There is uncertainty about how well these markets will function and whether emerging economies will truly benefit from them.
  • The lack of clarity on how carbon credits will be allocated and how environmental integrity will be maintained leaves open questions on the long-term reliability of these mechanisms.
• Limited Progress on Fossil Fuel Phase-Out: One of the major disappointments was the lack of progress on the “phase-out” of all fossil fuels.
  • Despite various countries pushing for stronger commitments, both COP29 and the G20 Summit failed to secure agreements for a comprehensive phase-out of fossil fuels, a key issue that remains unresolved.
• Shift in Global Climate Target Realism: The goal of limiting global temperature rise to 1.5°C is increasingly seen as unrealistic, with studies suggesting the world was already 1.49°C warmer than pre-industrial levels by the end of 2023.
  • Although there are still pathways to achieve this target, it would require untested carbon removal technologies, and large-scale investments in such technologies are not being seriously pursued.
  • The ongoing pursuit of the 1.5°C goal could be seen as increasingly less achievable, raising the question of whether a more realistic target should be adopted.
    • However, this is also a critical leverage point for developing countries, and abandoning it may undermine their bargaining position for financial support and emission cuts.

COP29: Criticism by Developing Countries

• Inadequate Financial Commitments: Developing nations criticised the $300 billion base target as insufficient to address their climate mitigation and adaptation needs.
  • India called the package “too little and too distant”, stressing that it falls short of the $1.3 trillion annual funding required.
• Failure to Meet Past Promises: Developed countries have not fulfilled the earlier promise of mobilising $100 billion annually by 2020. This undermines trust in the new commitments.
• Exclusion: India alleged that its request to speak before the adoption of the climate finance package was ignored, accusing the process of being “stage-managed”.
  • Also Nigeria and Bolivia argued that the NCQG was shaped by the geopolitical interests of developed nations.
• Delayed Action: The financial mobilisation goal is set for 2035, which developing countries see as too distant given the urgency of the climate crisis.
• Limited Progress on Trust and Collaboration: India and others emphasised that trust and collaboration—key to addressing climate change—were lacking in the negotiations.

The Road Ahead

• Commitment to Dialogue: The NCQG outcome underscores the need for continued negotiations and international cooperation to address climate challenges effectively.
• Principles for Action: Uphold Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC).
  • Ensure climate justice and equitable transitions.
• Focus on Collective Goals: Strengthen fiscal capacities of developing nations.
  • Enhance affordable climate finance flows while prioritizing public grants over loans.
• Need for Technology Transfer: Developing countries require not only financial support but also technology transfer and capacity building.
• Trust and Accountability: The success of NCQG negotiations will depend on restoring trust between developed and developing nations while addressing historical responsibilities.

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