Going beyond $300 billion, to reach the $1.3 trillion needed
The needs of developing countries to address the climate crisis are in the trillions of dollars per year. While some countries may be able to make some of these investments through their domestic resources, both public and private, many will need significant international support. The $300 billion per year mobilization goal was extremely disappointing to many developing countries, since it represents less than a quarter of the overall international climate finance they have said they needed, at least $1.3 trillion annually. This larger amount was recognized as an aspirational goal to be met from all actors and all public and private sources, but there are understandable concerns about whether such sums will materialize.
While $300 billion per year by 2035 is what rich countries committed to in a tough geopolitical and domestic political and budgetary environment, it cannot and must not be the end of the story. Our analysis in advance of COP showed that it is possible to reach higher levels of international climate finance. There are two opportunities in the NCQG decision to deliver greater finance ambition:
- First, the NCQG decision mandated the Presidencies of COP29 and COP30, Azerbaijan and Brazil, to produce a “Baku to Belem Roadmap to $1.3T” to look at how to scale up climate finance to developing countries (paragraph 27). including through grants, concessional and non-debt-creating instruments, and measures to create fiscal space. This roadmap process can bring together the multiple actors to look at fair ways to scale up international climate finance beyond the $300 billion, including further reforms to the international financial architecture to unlock more finance and deliver debt relief, raising innovative sources of finance such as through levies on highly polluting sectors, and better use of fiscal policy carrots and regulatory sticks to direct private finance away from where it’s doing harm and towards places where it can help meet climate investment needs.
- Second, the implementation of the NCQG will now be part of the global stocktake of the Paris Agreement that takes place every five years, and the decision will be reviewed in 2030 (paragraph 36). This provides an opportunity to revise the mobilization goal upwards, especially if the political outlook towards international cooperation in rich countries has improved, and if there has been progress in further reforming international financial institutions and tapping innovative sources of finance.
Going beyond the $300 billion is within reach if countries step-up in the coming years. This is the floor, not a ceiling so it is incumbent upon countries to roll-up their sleeves and increase this financing. Our analysis finds that there are various pathways to increase this financing in the coming years.
“When the elephants fight, the grass gets trampled”
Amidst the fights among major powers in Baku, the most vulnerable countries lost out. Countries failed to agree to the Least Developed Countries (LDCs) and Small Island Developing States (SIDS) ask for strong provisions to ensure they could more easily access a fair share of climate finance. This was important for them since so far only 2.8% of current international climate finance reaches SIDS and 18% goes to LDCs, despite them being particularly vulnerable to climate impacts they have done little to cause. The decision does push climate finance providers to increase funding for LDCs and SIDS, especially as concessional and grant financing, and to improve access (paragraphs 21, 22, 23 and 24). It will be important to build on these provisions in future years.
Vulnerable countries have particularly focused on the need for more funding to address the loss and damage caused by climate change, securing the creation of a new Fund for Responding to Loss and Damage in the last two years. The NCQG decision recognized the need for urgent and enhanced action and support for loss and damage arising from climate impacts, and that this would need public and grant-based resources and highly concessional finance (paragraphs 14 and 19). But the goal did not include any targets or policy measures specifically for loss and damage. With climate impacts rising, the issue of loss and damage will not go away, and countries will need to find a place to discuss these.
The NCQG also lacked a specific goal on finance for adaptation, the measures taken to prepare for and adjust to climate impacts, which can help avoid much more expensive loss and damage. At COP26 in Glasgow in 2021, developed countries agreed to at least double their collective provision of adaptation finance from 2019 levels ($18.8 billion) by 2025, i.e. at least $37.6 billion. This is the only time developed countries have agreed to a specific public finance goal, and there were signs at COP29 that developed countries were open to a new adaptation finance goal. This did not ultimately happen, but with the current doubling goal only running to 2025 there will certainly be questions at COP30 about whether a new adaptation finance goal is needed. MDBs have already announced that their collective provision of adaptation finance for low- and middle-income countries will rise from $24.7 billion in 2023 to $42 billion by 2030, showing that a higher goal is possible. A new adaptation finance goal could include an emphasis on scaling up provision for countries that are particularly vulnerable, such as SIDS and LDCs, linking to Article 9.4 of the Paris Agreement that recognizes their special needs.
Getting More and Better International Climate Finance
With the COP29 outcome as the floor, it is important that countries implement pathways to scale-up international climate finance in the coming years – going well beyond $300 billion by 2035 and ensuring we are on an upward trajectory in intermediate years. And, it is essential that developed countries better respond to the requests of the LDCs and SIDS to ensure that they have easier access to more of this critical funding.
It won’t be easy, but it is essential that rich countries don’t declare job done and move on. Success in curbing greenhouse gas emissions and dealing with climate impacts, in line with the Paris Agreement’s goals, will depend in large part on how well the global community mobilizes the trillions in climate finance needed. The moral, economic, and security rationale for delivering more international climate funding is clear: it is an investment to safeguard future prosperity and prevent the far greater costs of unchecked climate change. It is time to get to work.
