The New Collective Quantified Goal (NCQG) will be a key determinant of COP29 (also touted as a ‘finance COP’) turning out to be successful. The foundation of climate finance actions is unequivocally centred on addressing the “needs and priorities of developing countries”, as mandated in Article 9 of the Paris Agreement. NCQG, and set to be finalised at COP29, will shape the future of climate finance. COP29 is being held in Baku, Azerbaijan, from November 11 to 22, 2024.
Unresolved battles
In the debate over the NCQG, countries with diverse interests are taking sharply differing positions, as highlighted in the recent high-level ministerial dialogue on NCQG ahead of COP29. Key unresolved issues include the structure and the scope of the NCQG, the scale of financial contributions, and time frames, and sources. Developing countries insist that the financial burden must not shift unfairly onto them. They emphasise the responsibility of developed countries to provide support, laying stress on the need for equity in climate finance, with a balance between adaptation and mitigation. Their position favours clear, quantitative targets, with a focus on public finance, grants, and concessional loans, alongside specific, predictable time frames of either five or 10 years.
In contrast, developed countries push to broaden the contributor base, advocating for a more inclusive approach to climate finance. They prioritise outcome-driven strategies, targeting low emissions and climate resilience, while exploring innovative financing and flexible, multilayered finance structures.
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The $100 billion annual climate finance pledge, made in 2009 and extended to 2025, has been a glaring source of distrust. Developed countries missed the original 2020 deadline, only meeting the target in 2022, undermining faith in their commitments and leaving developing countries struggling with the consequences of delayed action. Moreover, the $100 billion target is woefully insufficient. Trillions are needed. The Standing Committee on Finance estimates that for 48% of costed needs from 98 parties, the amount required for climate action ranges between $5.036 trillion and $6.876 trillion.
Although the OECD reports that the $100 billion goal was met for the first time in 2022, with developed countries mobilising $115.9 billion, the reality exposes serious flaws. There are insufficient resources for adaptation, and the over-reliance on loans, instead of grants, is pushing vulnerable countries further into debt.
Grants-based public finance must be the core of climate finance, with concessional loans supplementing but not replacing it. Private investment is useful for clean energy but falls short in adaptation projects, where the returns are less clear. This investment bias towards mitigation leaves crucial adaptation efforts such as infrastructure resilience and disaster management severely underfunded. Accessing funds from entities such as the Green Climate Fund and Global Environment Facility remains a significant hurdle for developing countries, hindering their ability to adapt.
Issue with expanding the contributor base
Discussions on expanding the contributor base for the NCQG raise significant concerns regarding equity and the effectiveness of climate finance negotiations. According to submissions on the new collective quantified goal on climate finance, Switzerland and Canada have proposed expanding the contributor base to include additional countries based on criteria such as emissions and GNI per capita (PPP). The Canadian and Swiss proposals largely seek to target China along with oil-producing countries such as Bahrain, Brunei, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. Considering climate change impacts, aspects such as vulnerability, energy poverty and human development are extremely important.
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The discussions on expanding the contributor base are not new and were pushed during the Paris Agreement talks. Developed countries argued that wealthier nations should step up, citing shifting global economies. The developing countries pushed back, seeing it as an attempt to sidestep the core principles of equity and common but differentiated responsibilities that underpin climate negotiations. This move was seen as a threat to dilute accountability, shifting the burden away from those historically responsible for the climate crisis. The discussion on the contributor base exceeds the intended mandate, risking delays in crucial negotiations. Given the pressing need for climate action, this debate risks stalling progress at COP29.
The foundation of the NCQG and climate finance commitments should be firmly anchored in Article 9 of the Paris Agreement, which mandates a balance between adaptation and mitigation finance, emphasising public and grant-based finance for adaptation to avoid increasing the debt burden on developing countries.
Yet, developed countries are advancing a narrative focused on “low greenhouse gas emissions and climate-resilient development”, which carries significant political implications for their legal obligations under the Paris Agreement and the United Nations Framework Convention on Climate Change.
This narrative shift appears to be an attempt to dilute explicit responsibilities by broadening the scope of interpretation. Such a shift undermines both the spirit and the letter of Article 9 of the Paris Agreement, violating the principle of pacta sunt servanda, which demands that treaties and agreements be upheld in good faith.
The Standing Committee on Finance (SCF) has updated the operational definition of climate finance. The current definition of climate finance is “Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases, aims at reducing vulnerability, increasing adaptive capacity, and mainstreaming and increasing resilience of human and ecological systems to negative climate impacts, and includes financing for actions identified in a country’s nationally determined contribution, adaptation communication, national adaptation plan, long-term low-emission development strategy, or other national plan for implementing and achieving the goals of the Paris Agreement and the objective of the Convention”.
The absence of an explicit reference to additionality in the adopted definition is a critical oversight, as it leaves room for ambiguity on whether climate finance constitutes new and incremental support. Finance refers to the targeted allocation of public funds from developed to developing countries to support climate mitigation and adaptation, while investment involves the allocation of capital with the expectation of profit, which may not align with climate priorities. Counting private investments as part of the NCQG risks diluting the accountability and the responsibility of developed countries to provide clear, targeted, and equitable climate finance, as private capital often lacks the public purpose and oversight essential to meeting international climate objectives, especially adaptation. Having common accounting frameworks continues to be critical.
On the NCQG
Developing countries need not only finance but also technology transfer and capacity building as a means of implementation to support both mitigation and adaptation. However, procedural barriers within multilateral mechanisms, which often prioritise ‘value-for-money’ over ‘need-for-money’, can hinder their access to funds.
As COP29 approaches and the NCQG is set to be finalised, the negotiations will decide if climate finance truly addresses the urgent needs of developing countries burdened by the climate crisis they did not cause.
The NCQG’s success hinges on whether it restores faith in multilateralism and rebuilds the fractured trust between developed and developing countries. If the process fails to account for historical responsibility, the unique challenges of developing countries, and the need for capacity building, it risks widening the divide. As the world heads towards Baku, the critical question remains: will the negotiations on global climate finance deliver just outcomes or just promises?
Vibha Dhawan is Director-General, TERI. Shailly Kedia is Senior Fellow, TERI
Published – November 08, 2024 12:16 am IST
