Countries are expected to make a new commitment to financing the fight against climate change at the UN climate conference in November this year.
The negotiations on the financing the fight against climate change in the Climate Conference held in Bonn ended on Tuesday in a stalemate, as the countries They did not achieve any concrete progress on this issue.
The issue has been at the center of debates in Germany, as countries need to reach an agreement on the New Collective Quantified Objective (NCGQ) in COP29 in Baku next November. This is the amount of money that developed countries must mobilize each year from 2025 to support climate action in developing countries.
But there has been serious disagreements about how much it should bewho should be given priority in funding, what form this money takes and What is considered a “developed” country?
“There is an urgent need for progress in the UNFCCC climate negotiations this week, as with each passing day the talks are turning into a cesspool of inaction,” the Climate Action Network said on Monday. Countries on both sides of the negotiations expressed their disappointment midway through COP29.
Which countries should contribute?
Securing contributions to climate funds has long been a friction point in this type of negotiations.
Some, like Norway, argue that countries with high emissions and economic capacity like China or petrostates should be part of the contributing group. Currently, they define themselves as developing nations under the Paris Agreement, which means that They do not have to contribute money to the funds.
The United States is also among the countries that have argued that the pool of donors should be expanded to include emerging economies. On the other side of this debate, the issue of who should receive the funds is another sticking point. Many developed countries, such as the United States, believe that they should end up the most vulnerable to the effects of climate change: Least Developed Countries (LDCs) and Small Island Developing States. But developing countries claim that all of them should be eligible for funding.
Should climate change financing take the form of funds or loans?
Developing countries have also questioned what really constitutes financing the fight against climate change. They say loans should not be included in developed countries’ contributions.
According to a recent report by the Organization for Economic Cooperation and Development (OECD)developed countries fulfilled their promise of 100 billion dollars (93.2 billion euros) per year in 2022 with the “largest year-on-year increase observed to date.”
However, 69% of these funds were provided in the form of loans. Groups like the Alliance of Small Island States (AOSIS) and the LDCs say this only increases the debt burden of the most vulnerable nations.
“From our point of view, it is justice, it is reparation, it is the responsibility of rich countries,” Harjeet Singh, climate activist and observer at the Bonn conference, declared at a press conference. “Whereas they see it as another opportunity to make money. In fact, the OECD report tells that story.”
Figures recently published by the Center for Global Development (CGD) and shared with ‘Carbon Brief’ suggest that the $100 billion goal is also could have been achieved by relabeling existing aid.
Developed countries are supposed to have provided “new and additional” funds to what they already provide. But the CGD claims that at least $6.5 billion (€6.4 billion) of the record increase in climate aid in 2022 diverted from other development aid programs. They claim that this may have allowed rich nations achieve their climate goals despite cutting overall foreign aid budgets.
World Bank agrees to host loss and damage fund
After years of debate, the creation of a loss and damage fund was agreed at COP27 in 2022, a financial mechanism designed to provide crucial support to vulnerable nations who face the brunt of climate-related challenges. Last year, countries like Italy and the Netherlands began pledging money for this fund.
As the talks took place in Bonn, the board of directors of the World Bank approved a plan on Tuesday to act as temporary host of loss and damage funds. He has said he will maintain the intermediary fund for four years with a board independent of the bank and with its own governance structure and control over funding decisions.
The World Bank said this was an “important milestone on the path to operationalizing the fund, in collaboration with the board of the loss and damage response fund.”
“This is an important step forward in fulfilling the commitments made at COP28,” added the COP28 presidency in a post on social networks.
But this has also been a point of contention for developing countrieswho fear that developed countries, including the United States, which appoints the president of the World Bank, may have too much influence.
ADVERTISINGWhat does this mean for COP29?
The COP29, to be held in Azerbaijan next November, has already been baptized as the “COP of finances”. Countries will continue to debate on achieving a new climate finance deal after having finally reached the promised 100 billion dollars.
The NCGQ is expected to go beyond the original target, with $100 billion as the minimum amount, and to be based on the real needs of countries affected by climate change. It will not be surprising if many of these arguments resurface again in Baku.
“In Bonn, the delegates made good progress in reduction of the negotiation text of the new financing target for the fight against climate changebut all that talk didn’t help us reach a consensus on the most contentious issues,” says Gaia Larsen, director of access to climate finance at the World Resources Institute.
“Although negotiators sometimes appeared willing to work toward an agreement, in most cases they continued to reiterate opposing views on the most important issues, such as who pays, how much money the goal is intended to achieve, and what the right balance between different types of financing”. Larsen adds that the large number of unresolved issues prepares us for “tense two weeks in Baku” at the end of this year.
