COP 29 agrees $1.3 trillion climate finance deal. But is it enough?

Last month about 200 countries reached a new climate finance deal at the 29th conference of parties to the United Nations Framework Convention on Climate Change (UNFCCC), aka COP 29, in Azerbaijani capital seat Baku.

The new deal, colloquially known as New Collective Quantified Goal or NCQG, now mandates developed countries to i) triple the annual finance from the previous goal of $100 billion to $300 billion by 2035 which will be provided in the form of loans and concessional loans.

ii) secure efforts from all actors, including private sources and multilateral institutions, to scale up annual financing to an additional $1 trillion by 2035.

Developed countries here refer to higher income and industrialised countries that historically emitted carbon in large amounts. 

While, developing and least developed countries refer to lower income countries with low carbon emissions throughout history. With limited economy size and domestic sources against intensifying climate adversities, they need external finance, including from bilateral and multilateral sources.

Although some negotiators have deemed it an overall voracious step towards climate combat, the developing and least developed countries feel defeated.

The LDC Group, a bloc of 45 least developed countries who face a pressing climate urgencies, have called the agreement a ‘failure’ and ‘a staggering betrayal’.

“Powerful nations have shown no leadership, no ambition, and no regard for the lives of billions of people on the frontlines of the climate crisis,” said the group’s press release.

Issuing a press release following the agreement, UN Secretary-General António Guterres said, “Developing [and least developed] countries swamped by debt, pummelled by disasters, and left behind in the renewables revolution, are in desperate need of funds,” further adding he had hoped for a more ambitious outcome — on both finance and mitigation.

Why this dissatisfaction? To understand, let’s rewind to where it all began — COP 15, held in Denmark’s capital seat Copenhagen. 

Over 100 countries came together to conceptualise funding pledges from developed countries and emission pledges from developing countries or major economies like China, and recognised the needs of climate vulnerable countries, among others.

The UNFCCC's categories for climate vulnerable countries:

At the 2009 summit, developed countries pledged an interim finance goal of $30 billion from 2010 to 2012, to support immediate climate action needs and capacity building as part of a “Fast Start” finance commitment, but failed to meet it.

Similarly, the COP 21 (2015 summit) gave the landmark Paris Agreement that emphasised long-term climate finance goals committing to provide $100 billion annually by 2020.

This commitment was subsequently extended until 2025, affirming that a new scaled up goal would be reached by diversifying the sources as bilateral and multilateral other than public and private.

According to the Organisation for Economic Co-operation and Development (OECD), who is tasked with keeping track of climate finance of the developed countries, the developed countries reached this target in 2022, two years later than the originally conceived deadline.

*Note: Data for Mobilised Private in 2015 is not available | Source: OECD

As developed countries fell short on the 2020 goal too, and jumped to new dates time and again while the amount was already very less to carry out climate actions this decade only.

The inability of developed countries to meet their pledge does grow suspicions amongst climate vulnerable countries whether or not the NCQG meet for several reasons. But the question has now also changed to — 

Is the new goal amount itself adequate?

Climate vulnerable countries need at least $8.5 trillion annually to meet actions pacing with climate adversities between 2024 and 2030, and over $10 trillion annually between 2031 and 2050, says Climate Policy Initiative —  a global organisation for climate research and advisory — as reported in May.

This estimate isn’t an exaggeration. 

Developing and least developed countries face annual economic losses of over $500 billion from extreme weather, likely to push at least an additional 100 million people into poverty by 2030, according to estimates from the World Bank.

For further context, consider Nepal, one of the most climate vulnerable countries.

Between 1971 and 2019, the country faced a tragic and relentless toll from climate-induced disasters, with thousands of lives lost each year, says a government report. The most devastating of these events include floods, landslides and wildfires. 

The economic impact, on the other hand, has been staggering, with the country incurring an average annual loss of NRs 2.78 billion — roughly 0.08% of its GDP in the fiscal year 2018/19, says a government report. 

In extreme years, economic losses have been tremendous. Estimates suggest that these losses amounted to 2 to 3 percent of the GDP in 2021. The economic loss and damage from a single disaster event in 2017 in Terai plains was around 2.1% of the GDP. 

With 2024 set to become the hottest year on record, surpassing last year, Nepal and other vulnerable countries must brace for more frequent and intense extreme weather events.

This year, another single event — a torrential rainfall in September killed 249 individuals including 60 children, leading an estimated loss of 46.68 billion rupees (approx. $346 million; taking $1 = NRs 135) in damages.

While the loss incurred in just one disaster incident amounts to hundreds of millions of dollars, countries like Nepal struggle with climate-induced disasters throughout the year. 

Earlier in August, Thyanbo glacial lake outburst flood (GLOF) swept away Thame village in the Khumbu region of Solukhumbu district, displacing 135 people.

In 2023, ICIMOD stated in an assessment that the glaciers, snow, and permafrost of the Hindu Kush Himalaya are “undergoing unprecedented and largely irreversible changes over human timescales, primarily driven by climate change” and “are some of the most vulnerable to these changes in the world.”

The Hindu Kush Himalaya region is currently home to over 25,000 glacial lakes, of which, 47 potentially dangerous glacial lakes (PDGLs) are located in the Koshi, Gandaki, and Karnali river basins of Nepal, the Tibet Autonomous Region of China, and India.

Similarly, a new glacial lake inventory report suggests high mountains in Asia is a global hotspot for GLOF risks, endangering lives of one million people residing within a radius of 10 km of a glacial lake. The number and size of glacial lakes continues to grow.

Take another example — wildfires. It is another prominent case of losses where Nepal lags behind in mitigation. Most of the time, it is difficult to assess precise loss, resulting in lack of data to determine actual budget needs.

Scientific studies have confirmed that human-driven climate change is responsible for the distinct patterns seen in all of these changes and disasters.

To put all this into the context of the NCQG, supposedly to be achieved by 2035, amid climate vulnerabilities escalating in more countries, the deal amount is already too little, too late.

At the COP 29, India emphatically opposed the deal saying that $300 billion from developed countries is too low, and 2035 is too distant.

Developing countries, including India and the LDC group, have been advocating for $1.3 trillion immediately as public financing from developed countries.

Hinting at previous failures, the UN Secretary-General António Guterres asserted that “commitments must quickly become cash.”

Additionally, it’s much more than the pledged amount falling short. 

When accounting for inflation, one of the concerning issues in vulnerable countries, worsened by the climate change effects itself, the amount would further fall short. 

While the flow of climate finance appears murky in lack of defined mechanism, nor is access to such finance easy for climate vulnerable countries, including for bureaucratic and technical reasons.

Nepal’s National Disaster Risk Reduction and Management Authority (NDRRMA) Chief Executive Anil Pokhrel told the_farsight in an interview that there must be a fast track mechanism for vulnerable countries like Nepal.

Mitigation measures are way expensive and that disaster-prone countries should get easy and direct access to the global financing pool for combating disaster, he said, adding that the current global mechanism is too bureaucratic and requires “due diligence” from external agencies.

Another issue is transparency, with the deal closing on rather vague terms when it outlines “secure efforts of all actors to work together to scale up finance to developing countries, from public and private sources”, thereby leaving a certain onus on the developing and least developed countries for receiving the said finance from private capital.

All these delayed and uncertain long-term solutions remind of the famous quote by the British economist Keynes, whose economic principles continue to guide the developed economies: “In the long run, we are all dead” —  where Keynes was making a case that governments must make fixes in the short-term, rather than waiting for market forces to do so over the long-run.

In the context of climate urgency, the recent NCQG deal stands in opposition to this wisdom.