COP 29: The ‘Finance COP’- Paving the way for a more equitable future in the fight against climate change

Written by Laxsumi Ananthakumaraswamy, Research and Development Officer

COP29 is well and truly underway in Baku, Azerbaijan. Between the 11^th and 22^nd of November, more than 65000 delegates from all 193 UN member states are attending to discuss and shape the future of global climate policy. Now more than ever, there is an urgent need for climate action with the increasing magnitude and frequency of climate change impacts being felt worldwide, especially in developing countries. COP29 will focus on deliberating climate finance commitments and exploring support for the fund for responding to Loss and Damage by enhancing ambition and enabling action.

COP 29 The ‘Finance COP

What is COP 29?

COP 29 is the 29^th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). COP is the main decision-making body for the UNFCCC. This annual conference brings together government representatives, UN officials, indigenous leaders, climate scientists, policy experts, NGOs and many more stakeholders to negotiate new actions, evaluate progress on climate commitments, and work towards the common goal of limiting climate change. The process aims to unite members and promote climate action in an inclusive, accountable, and equitable manner.

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The ‘Finance COP’

COP 29 has been dubbed the ‘Finance COP,’ with climate finance at the forefront of discussions. Climate finance is crucial in supporting mitigation and adaptation strategies to combat climate change. Significant investments are necessary to reduce greenhouse gas (GHG) emissions by transitioning to renewable energy sources. Effective mitigation strategies will help achieve the Paris Agreement’s goal of limiting temperature rise to below 1.5 °C. Additionally, adaptation strategies, such as investing in climate-smart infrastructure and technology, are vital in minimising socioeconomic and ecological impacts.

Establishing a ‘New Collective Quantified Goal’ (NCQG) has taken precedence in discussions during week one of COP 29, especially since this is the final COP before the fast-approaching deadline in February 2025. Unfortunately, during the first week of COP 29, minimal progress has been made in setting a new target for NCQG. Major disputes remain regarding which countries should contribute to funds, the overall amount of finance to be raised, how the funds should be allocated, and the duration NCQG should cover. Establishing these targets promptly is critical in minimising climate change effects and building more resilient communities that can withstand its impacts. A report from the Independent High-Level Expert Group on Climate Finance has suggested a minimum target of USD 1.3 trillion per year by 2035 in climate finance must be raised for developing countries to mitigate and adapt to climate change effectively. COP 29 has seen some success with multilateral development banks sharing they will collectively contribute USD 120 billion in climate financing for low and middle-income countries by 2030, this is a landmark achievement compared to the previous target of $75 billion.

In 1992, negotiations under the UNFCCC led to commitments from 23 developed countries to provide USD 100 billion per year until 2025. However, funding began in 2022, two years later than originally anticipated, and developed countries have since been reluctant to commit any additional climate finance, contending that emerging economies, like China, should also contribute. However, developing nations believe that the responsibility lies primarily with developed countries. The US repeatedly fails to meet its pledged climate finance contributions, despite assessments indicating that the US should be the largest donor, given that the US was historically the biggest contributor to GHG emissions and its current position as the world’s largest economy. These issues arise amid the US presidential elections, with the return of the Trump administration having the potential to have major consequences for international climate finance. Trump’s first term saw a withdrawal from the Paris Agreement, which President Biden later ratified. Trump’s current campaign has promised to withdraw from the Paris Agreement again and has even threatened to withdraw as a member of the UNFCCC, although the latter would be legally complicated. This is highly contentious and unprecedented, as no country has ever left the UNFCCC, and would have vast implications for global climate policy causing major disruption to the provision of climate finance. Additionally, Argentina’s sudden departure from COP 29 ordered by President Milei, further adds to the division, with South America’s second-largest economy no longer contributing to NCQG discussions.

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Funds for Loss and Damage

The Loss and Damage (L&D) Fund provides urgent support to countries particularly vulnerable to the adverse impacts of climate change, including extreme weather events and slow-onset climate events. Among the most vulnerable are Small Island Developing States (SIDS), which include 39 countries in the Pacific and Indian Oceans, East Atlantic and Caribbean, and is home to around 70 million people. Despite contributing less than 1% of global GHG emissions, SIDS bear the brunt of climate change impacts. Between 1970 and 2020, SIDS lost USD 153 billion due to climate-related hazards and disasters. Even with commitments to limit temperature rise to 1.5 °C, SIDs face substantial risks of flooding from sea-level rise. Climate Finance and the L&D Fund are imperative to enable these communities and Indigenous populations to adapt to climate change and maintain their sovereignty.

During COP 27, parties established the financial mechanism for the L&D fund, and its governing body was agreed upon during COP 28. This includes the Warsaw International Mechanism (WIM), the Santiago Network and the Fund. The fund for L&D aims to provide financial support for both economic and non-economic losses caused by climate change, with the distribution of the funds set to begin in 2025. Since the commencement of COP 29, Sweden has been the only new contributor, bringing the total amount of L&D funds to $720 million.

The event “Unpacking the Loss and Damage Landscape” has made progress towards making the fund fully operational by sharing technical advancements, and unveiling the ‘template for expression of interest’ to expedite requests for assistance. However, without additional contributions and setting specific funding targets for L&D under the NCQG, the fund is unlikely to provide adequate aid to countries facing the most extreme impacts of climate change.

What key issues must be addressed during week 2 of COP29?

As week two of COP 29 begins, UN Climate Change Executive Secretary Simon Stiell emphasises the importance of securing climate finance:

“Climate finance is not charity; it is 100% in every nation’s interest, to protect their economies and people from rampant climate impacts”

With time running out significant progress must be made in ensuring the quality of climate finance, which should be provided as grants rather than loans. Loans will have devastating impacts on already struggling nations that feel the crippling effects of climate change. Additionally, securing public funding that is distributed promptly will be crucial to the success of the NCQG. Week 2 must attain increased commitments to L&D funding from developed countries, which is solely grant-based. The current $720 million in funds falls significantly short of the estimated future $400 billion per year of loss caused by extreme weather and slow-onset climate events, outlined in the Loss and Damage Collaboration report. A unified decision must be reached regarding specific targets and goals for the NCQG and L&D to ensure a successful COP 29.