THE CONTEXT: The 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) is set to take place in Baku, Azerbaijan, from November 11 to 22, 2024. This summit has been dubbed the “finance COP” due to its central focus on climate finance, particularly the New Collective Quantified Goal (NCQG). The NCQG is a key element of the Paris Agreement, designed to set a new financial target to support developing countries in their climate actions post-2025.
THE BACKGROUND:
- Paris Agreement and Article 9: The Paris Agreement, adopted in 2015, emphasizes the importance of climate finance in Article 9. This article states that developed countries should provide financial resources to assist developing countries in both mitigation and adaptation efforts. The NCQG is rooted in this commitment and seeks to enhance the scale and effectiveness of climate finance.
- Previous $100 billion annual climate finance pledge: The $100 billion annual climate finance pledge, made in 2009 and extended to 2025, has been a source of contention and distrust. Developed countries missed the original 2020 deadline, only meeting the target in 2022. This delay has undermined faith in their commitments and left developing countries struggling with the consequences of delayed action.
- Challenges in meeting the pledge: The insufficiency of the $100 billion target has become increasingly apparent. 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. This vast disparity highlights the urgent need for a more ambitious and realistic financial framework.
DEBATE ON EXPANDING CONTRIBUTOR BASE: The proposal to expand the contributor base for climate finance has sparked significant debate. Countries like Switzerland and Canada have suggested including additional countries based on criteria such as emissions and GNI per capita (PPP). This proposal targets countries like China and oil-producing nations such as Bahrain, Brunei, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates.
OPERATIONAL DEFINITION OF CLIMATE FINANCE: The Standing Committee on Finance (SCF) has updated the operational definition of climate finance. The current definition encompasses reducing emissions, enhancing sinks of greenhouse gases, reducing vulnerability, increasing adaptive capacity, and mainstreaming resilience of human and ecological systems to negative climate impacts.
KEY ISSUES IN NCQG NEGOTIATIONS:
- Developing Countries’ Perspective: Developing countries, particularly small island states and least developed countries, are often the most vulnerable to climate change impacts. Their position in the NCQG negotiations emphasizes:
- Equity and historical responsibility: They insist that the financial burden must not shift unfairly onto them.
- Focus on grants and concessional loans: There’s a strong preference for public finance, grants, and concessional loans.
- Clear, quantitative targets: Developing nations are pushing for specific, predictable time frames of either five or 10 years.
- Importance of adaptation finance: They stress the need for a balance between adaptation and mitigation funding.
- India, for instance, has suggested that the quantitative target should be no less than $1 trillion from developed countries’ public sources.
- Developed Countries’ Perspective: Developed countries are advocating for a different approach to climate finance:
- Broader contributor base: They push to expand the pool of countries contributing to climate finance.
- Outcome-driven strategies: There’s a focus on targeting low emissions and climate resilience.
- Private sector involvement: Developed nations emphasize the role of private finance and innovative financing mechanisms.
CHALLENGES IN CLIMATE FINANCE:
- Insufficiency of Current Funding: The current level of climate finance is extremely inadequate. The UN Environment Programme’s Adaptation Gap Report series consistently highlights that the $100 billion intended for all climate action is insufficient to cover the required funding for adaptation action alone.
- Over-reliance on loans: The current structure pushes vulnerable countries further into debt.
- Bias towards mitigation projects: There’s an investment bias towards mitigation, leaving crucial adaptation efforts underfunded.
- Difficulties in accessing funds: Developing countries face significant hurdles in accessing funds from entities such as the Green Climate Fund and Global Environment Facility.
THE WAY FORWARD:
- Need for balance between adaptation and mitigation finance: There’s a crucial need to strike a balance between funding for adaptation and mitigation efforts. The World Bank Group, for instance, has committed to increasing its climate finance to 45% of total lending for FY25, with a goal for half of its public sector climate financing to support adaptation and half for mitigation.
- Importance of technology transfer and capacity building: Developing countries need not only finance but also technology transfer and capacity building as means of implementation to support both mitigation and adaptation. The Commonwealth Climate Finance Access Hub (CCFAH) plays an important role in providing technical support to countries, particularly Small Island Developing States (SIDS) and other vulnerable countries, to navigate the complex landscape of climate finance.
- Restoring faith in multilateralism: The success of the NCQG hinges on whether it can restore faith in multilateralism and rebuild the fractured trust between developed and developing countries. It needs to account for historical responsibility, the unique challenges of developing countries, and the need for capacity building.
THE CONCLUSION:
The NCQG’s success will be a key determinant of whether COP29 turns out to be successful in addressing the urgent needs of developing countries burdened by the climate crisis they did not cause. The outcome of these negotiations will have far-reaching implications for global climate action, potentially shaping the ambition of nationally determined contributions (NDCs) due in early 2025.
UPSC PAST YEAR QUESTION:
Q. Explain the purpose of the Green Grid Initiative launched at world leaders Summit of the COP 26 UN Climate Change Conference in Glassgow in November, 2021. When was this idea first floated in the International Solar Alliance (ISA)?
MAINS PRACTICE QUESTION:
Q. “The New Collective Quantified Goal (NCQG) on climate finance is crucial for addressing the needs of developing countries in the face of climate change.” Discuss the key challenges and opportunities in finalizing the NCQG at COP29.
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