COP29 Ekes Out Deal for Wealthy Nations to Lead $300B a Year in Financing

The annual United Nations climate talks have ended with an agreement for high-income countries to lead efforts in mobilizing at least $300 billion a year by 2035 to aid climate action in developing nations.

“This represents a $50bn increase on the previous draft text, and is the product of 48 hours of intensive diplomacy by the COP29 Presidency”, host Azerbaijan said in a statement.

Combining all public and private sources, the aim is to reach $1.3 trillion per year by 2035. The draft statement of agreement counts “a wide variety of sources, public and private, bilateral and multilateral, including alternative sources” toward the $300 billion that is expected to come mostly from developed countries.

Countries may “count all climate-related outflows from and climate-related finance mobilized by multilateral development banks towards achievement” of the $300 billion, according to the draft statement published on the COP29 website. The agreement is called “New Collective Quantified Goal on Climate Finance”.

Developing countries themselves are encouraged to contribute including through “South-South cooperation”.

The “collective quantified goal” declaration calls for but does not commit any concessional financing. As per the text, the governments gathered in Baku “reiterates the importance of reforming the multilateral financial architecture and underscores the need to remove barriers and address disenablers faced by developing country Parties in financing climate action, including high costs of capital, limited fiscal space, unsustainable debt levels, high transaction costs and conditionalities for accessing climate finance”.

The collective quantified goal aims to help developing countries achieve their Nationally Determined Contributions (NDCs), or their decarbonization goals toward the Paris Agreement target of limiting global temperature increase to 1.5 degrees Celsius relative to pre-industrial levels.

Lower-income countries and climate campaigners blasted what they see as a vague and scanty pledge. However, some welcomed the increase in developed countries-led financing to $300 billion from the $100 billion agreed at COP21.

“This is not just a failure; it is a betrayal”, the Least Developed Countries (LDC) Group said of the new quantified goal.

“It ignores the needs of LDCs and SIDS [Small Island Developing States], offering no minimum allocation for our groups”, it said in a statement online.

“A lack of clear definitions undermines transparency, leaving the door open for manipulation and inaction”, the LDC Group added.

The Alliance for Small Island States also said the goal falls short of meeting needed financing, saying calls for more ambitious net-zero goals for countries should be met with “more financing to ensure that NDCs are implemented in a timely manner”.

The $300 billion “is less than a quarter of the minimum amount demanded by many lower-income countries and activists”, Amnesty International said in a statement.

“Many lower-income countries had called for at least USD1.3 trillion in annual public grant-equivalent finance, to help them adapt to climate change and recover from loss and damage”, it said. “The deal reached at COP29 will do neither. Instead, it risks trapping lower-income countries in a cycle of indebtedness at a time when they are seeking to take urgent climate action”.

The new goal “is simply not enough in speed or scale”, Conservation International chief strategy officer Patricia Zurita said in a statement.

“The facts are undeniable, the targets of $300 billion by 2035 and the planned $1.3 trillion roadmap don’t address the urgent demands economic forecasts indicate”, said Juan Pablo Hoffmaister, associate vice president for global engagement and partnerships at the Environmental Defense Fund. “The new finance framework is an engine for climate action, but lacks sufficient fuel to achieve its goals”.

Citing UN estimates, the statement of agreement said that “costed needs reported in nationally determined contributions of developing country Parties are estimated at USD 5.1–6.8 trillion for up until 2030 or USD 455–584 billion per year and adaptation finance needs are estimated at USD 215–387 billion annually for up until 2030”.

At Egypt-hosted COP27 in 2022, countries put needed investment to transition to a low-carbon economy at $4 trillion to $6 trillion per year.

The latest data from the UN Framework Convention on Climate Change (UNFCCC), the COP convenor, shows that global climate finance flows in 2021 and 2022 rose 63 percent compared to 2019 and 2020 to reach an annual average of $1.3 trillion. The growth was driven by “key mitigation sectors” including sustainable transport, clean energy systems, and buildings and infrastructure, the UNFCCC said in the “Sixth Biennial Assessment and Overview of Climate Finance Flows”.

However, only 2.6 percent of the total climate finance flows went to LDCs and one percent to SIDS. Developing countries excluding China received 15 percent, according to the report.

“Eastern Asia, Northern and Western Europe, and North America continue to account for the majority of global climate finance by region, with 42, 22 and 12 percent of commitments in 2021–2022 respectively, primarily driven by domestic commitments in China, the United States of America and the European Union; while other regions, covering Africa, Asia, Europe, Latin America and the Caribbean, and Oceania, accounted for the remaining less than 25 percent”, the UNFCCC said.

“More than half of global climate finance was provided in the form of debt instruments, while grant finance more than doubled in absolute terms but still accounted for 6 percent of the total flows”, the report stated.

Outgoing United States President Joe Biden welcomed the Baku agreement as “ambitious” while the European Union, through a statement issued by the European Commission, boasted of taking “the lead in brokering a deal to align global financial flows with the objectives of the Paris Agreement”.

The Commission statement noted, “There is no assigned share of this contribution [$300 billion] for the EU or Member States, and decisions about how to meet these targets will lie with Member State Governments and the EU, through national budgets and the MFF [Multiannual Financial Framework — the EU’s long-term budget]”.

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