One day before COP29 closure, climate finance deal still ‘glaringly incomplete’

COP29 will officially end tomorrow, but after nearly two weeks of negotiations, countries still can’t agree on the details – and amount – of a new climate finance deal.

The latest draft of the New Collective Quantified Goal (NCQG) on climate finance, published in the early morning hours of November 21, has been received with concern by climate experts – as the 10-page document still does not specify the amount of funding rich countries will be expected to mobilise to help poorer economies deal with climate change. 

“The latest draft NCQG text remains glaringly incomplete without the concrete numbers for the finance goal – the very cornerstone of any agreement at COP29 and the unwavering demand of developing countries throughout this summit,” commented Tasneem Essop, Executive Director at Climate Action Network International.

The text, however, uses the word ‘trillion’ next to the ‘X’ left as a placeholder for the exact number to be provided every year between 2025 and 2035 – signalling that negotiators are taking the recommendation of the High Level Expert Group on Climate Finance (ie. US$1 trillion a year by 2030 and US$1.3 trillion by 2035) into consideration.

Two ‘vastly different’ options for NCQG mechanism

In addition to the uncertainty around the amount of climate finance to be mobilised, the text offers “two vastly different options for the design of the NCQG”, according to Stephen Cornelius, Deputy Global Climate and Energy Lead at WWF.

The first option states that the financing will be provided by developed countries only – with the exact amount for each country to be calculated according to historical emissions per capita – and invites voluntary contributions from developing countries but specifies that these would not count towards meeting the NCQG.

Additionally, it states that the financing must be provided in the form of “grants or grant-equivalent terms of new, additional, affordable, predictable, non-debt inducing and adequate climate finance”, preventing the new financing from creating more debt burden for developing countries.

Focus on grants necessary for developing countries

“For the poorest, most vulnerable countries, the proportion of finance provided as grants and highly concessional loans (with delayed repayments and low interest rates) is just as important as the overall amount,” explained Melanie Robinson, Global Climate Programme Director at the World Resources Institute. 

“There can be a trade-off here: The current US$100 billion goal was reported at ‘face value,’ counting a US$100 million loan for renewables in Mexico or Indonesia that needs to be repaid the same as a US$100 million grant for adaptation in Malawi or Tuvalu. The grant is much more valuable to the recipient and costs donors far more. So while a larger goal may look better at face value, it may not be as good for meeting the needs of poorer and more vulnerable countries,” she added.

Concern over the possibility of opening NCQG to ‘all sources of finance’

The second option, however, opens the door to “all sources of finance” to meet the new goal, including public, private and “innovative sources, from bilateral and multilateral channels” – and sets a floor of US$100 billion per annum by 2035, essentially maintaining the current level of ambition.

This version is seen as the most problematic by climate organisations: “The presidency proposal draft text offers a range of options and it lacks specific numerical targets to establish a quantified goal, the VERY purpose of COP29!  Where is the number? This is the finance COP: it is about a clear and ambitious commitment that would enable vulnerable communities to address the impacts of climate change. We need developed countries’ concrete quantum proposals that show leadership and ambition, with a high percentage to provision of grant based climate finance as opposed to mobilisation and channelling climate finance through MDBs that increase the debt status of developing countries,” warned Marlene Achoki, Global Policy Lead at CARE International.

Financial sector calls for definition of ‘transformational finance for climate’

Last week, a coalition of financial organisations and initiatives, including the International Development Finance Club (IDFC), the Principles for Responsible Investment, the Mainstreaming Climate in Financial Institutions initiative and UNEP Finance Initiative – which together represent more than 5,600 investors – also laid out their expectations for the new climate finance framework.

As part of their recommendations for the outcome of COP29, they believe a new type of climate-related finance should be defined, going beyond the existing frameworks of ‘climate finance’ and ‘Paris-aligned finance’

They call it “transformational finance for climate”, i.e. finance aiming at the sustainable transformation of entire systems and/or catalytic effects on mobilising and reorienting larger financial flows (e.g. from the private but also the public sector), in line with country climate priorities and longer-term pathways”.