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COP29: Climate Finance Commitments and Global Disparities

Syllabus:

GS-2:

Groupings & Agreements Involving India and/or Affecting India’s Interests , Effect of Policies & Politics of Countries on India’s Interests , International Treaties & Agreements

GS-3: Environmental Pollution & Degradation

Focus:

COP29 in Baku focused on climate finance negotiations, with developing nations calling for a significant increase in financial support from developed countries. Despite promises, the agreed commitments fell short of actual needs, raising concerns over global equity and the effectiveness of climate action in vulnerable regions.

The Importance of Climate Finance in International Negotiations

• Historical Context:
  • Climate finance has been a key issue in international climate change negotiations since 1991.
  • The United Nations Framework Convention on Climate Change (UNFCCC) established the need for developed countries to support developing nations in their climate actions, specifically through finance and technology transfers.
  • The Paris Agreement (2015) reaffirms this commitment in Article 9(1), mandating developed nations to mobilize climate finance for developing countries.
  • The Intergovernmental Panel on Climate Change (IPCC) emphasized in its sixth assessment report that finance, capacity-building, and technology transfer are essential for climate action in developing countries.
• Need for Climate Finance:
  • Anthropogenic greenhouse gas emissions have already contributed to a 1.1°C rise in global temperatures between 2011-2020, a level that necessitates urgent climate action to limit global warming to 1.5°C by the end of the century.
  • Developing countries face a dual challenge: they need to mitigate climate impacts while adapting to the growing effects of climate change.

Key Outcomes of COP29:

• Tripling Climate Finance: Agreement to increase annual climate finance from USD 100 billion to USD 300 billion by 2035 through the New Collective Quantified Goal (NCQG).
• Mobilisation of Additional Funds: Aimed to raise USD 1.3 trillion annually by 2035, combining public and private sector contributions under the Baku Finance Goal.
• Carbon Market Mechanisms: Finalized agreements on Article 6 of the Paris Agreement, enabling bilateral carbon trading and a global crediting mechanism.
• Baku Adaptation Road Map: Introduced to enhance global climate resilience with a focus on vulnerable regions and sectors.
• Support for National Adaptation Plans (NAPs): Comprehensive program to assist Least Developed Countries (LDCs) with long-term adaptation strategies.
• Enhanced Transparency Framework (ETF): Countries must transparently report emissions and climate efforts, with first Biennial Transparency Reports (BTRs) submitted.
• Global Climate Transparency Platform: Launched to streamline BTR submissions and reinforce transparency commitments.
• Indigenous Peoples and Local Communities: Adopted the Baku Workplan to integrate traditional knowledge into climate policies.
• Gender and Climate Change: Extended the Lima Work Programme on Gender for 10 more years, ensuring gender equality in climate action.
• India’s Comprehensive Role at COP29:
• India’s Initiatives:
• LeadIT Summit: Co-hosted with Sweden to decarbonise heavy industries.
• Solar Energy Leadership: Promoted through the International Solar Alliance (ISA), aiming for a 20-fold increase in global solar capacity by 2050.
• SIDS Adaptation Finance: Advocated for climate finance to support Small Island Developing States (SIDS).
• India’s Stance:
• NCQG Proposal: Suggested USD 1.3 trillion annually, with USD 600 billion in grants for developing nations.
• Mitigation Work Programme: Opposed changes to Paris Agreement temperature goals, urging developed nations to address pre-2020 mitigation gaps.
• Just Transition: Called for financial and technological support for a just transition for developing nations.
• Global Stocktake (GST): Criticised the UAE dialogue’s misalignment with finance and emission trends.
• Adaptation: Supported the Baku Road Map and clearer progress indicators for the Global Goal on Adaptation (GGA).
• India’s Side-Events:
• Disaster-Resilient Infrastructure: Organised by India and CDRI to discuss resilient infrastructure for climate change.
• LeadIT Member Meet: Held with Sweden, focused on accelerating low-carbon industry transitions.
• Energy Transitions for the Global South: Led by India and ISA, focusing on solar energy in developing countries.
• India-Sweden Industry Transition Partnership (ITP): Promoted low-carbon industrial transitions through international collaboration.

The Challenge of Mobilizing Climate Finance

• The $100 Billion Commitment:
  • In 2009, developed countries agreed to mobilize $100 billion annually by 2020 to support developing countries. However, this target was only met in 2022.
  • Despite this, the $100 billion commitment has proven to be insufficient for the growing needs of developing countries, especially in light of their Nationally Determined Contributions (NDCs) under the Paris Agreement.
• Underestimating the Financial Needs:
  • The $100 billion mark does not account for the full extent of financial requirements for climate action. It falls short of the estimated finance needed across various sectors to keep global warming under 1.5°C.
  • The Standing Committee on Finance (SFC) of the UNFCCC has estimated that developing countries require between $455 billion and $584 billion annually to meet their climate goals.
• COP29 and the New Collective Quantified Goal (NCQG):
  • At COP29 in Baku, Azerbaijan (November 2024), discussions were aimed at establishing a new financial goal for climate finance, replacing the outdated $100 billion floor.
  • The new goal was meant to reflect the scale and needs of developing countries in addressing the climate crisis.

Discrepancies in Climate Finance Commitment

• The $300 Billion Offer:
  • In response to demands from the developing world for $1.3 trillion by 2030, the developed countries agreed to release only $300 billion annually by 2035.
  • This sum still falls far short of the estimated needs of developing countries, as outlined by the UNFCCC’s SFC.
  • The financial needs identified in the NDCs of 98 developing countries total much more than the offered amount, indicating a significant shortfall.
• Impact on Vulnerable Countries:
  • The NCQG did not allocate specific financial floors for countries most vulnerable to climate change, such as the Least Developed Countries (LDCs) and Small Island Developing States (SIDS).
  • During COP29, SIDS called for a $39 billion allocation, while LDCs demanded at least $220 billion to address their unique climate challenges.
• The Failure of the Global Stocktake (GST):
  • The first-ever Global Stocktake (GST), conducted in 2023, revealed economic costs of climate change that are expected to reach $447 billion to $894 billion per year by 2030.
  • The GST’s findings failed to influence the negotiations on the NCQG, and the lack of meaningful finance for loss and damage was a key issue in the discussions.

India’s Response to the NCQG Proposal

• India’s Climate Finance Demands:
  • India has consistently advocated for climate finance to be based on the principles of equity and the “common but differentiated responsibilities” (CBDR) framework.
  • India’s position is that developed countries should mobilize at least $1.3 trillion annually by 2030 to support developing countries, with a significant portion (at least $600 billion) coming in the form of grants and concessional resources.
• Disappointment with the NCQG:
  • India expressed extreme disappointment with the adoption of the NCQG at COP29, particularly because it was finalized without proper consultation with India or other developing nations.
  • India criticized the COP29 presidency and the Secretariat for undermining trust and collaboration by adopting the NCQG without considering the specific needs of developing countries.
  • India outrightly rejected the NCQG, emphasizing that it failed to deliver the necessary resources to implement its NDCs and would negatively impact the ambition of developing countries.
• India’s Stance on Implementation:
  • India stressed that the scale of climate finance must be adequate to meet the mitigation and adaptation needs of developing countries.
  • It called for the developed world to raise the scale and quality of climate finance, ensuring that it is directly accessible, affordable, and effectively mobilized.

Challenges in Climate Finance:

• Insufficient Financial Commitments:
  • Developed countries’ climate finance commitments remain well below the required amounts, with the $100 billion target only met in 2022.
  • The new $300 billion annual commitment by 2035 is still far from the estimated $455 billion-$584 billion needed annually by developing countries.
• Unmet Needs of Vulnerable Countries:
  • The financial needs of the Least Developed Countries (LDCs) and Small Island Developing States (SIDS) are largely ignored, with inadequate allocations made for these vulnerable regions.
  • The failure to account for loss and damage remains a significant issue.
• Lack of Accessible and Affordable Finance:
  • Climate finance is often inaccessible, with limited mechanisms in place for developing countries to directly tap into the resources they need for mitigation and adaptation.
• Inadequate Consultation and Collaboration:
  • The NCQG process at COP29 lacked proper consultation with developing nations, undermining trust and collaboration, especially with countries like India.

The Path Forward: Rethinking Climate Finance

• Addressing the Climate Finance Gap:
  • The primary issue at COP29 was not just the quantity of financial commitments, but also the quality and accessibility of climate finance.
  • There is an urgent need to create a coherent global climate finance architecture that ensures developing countries have direct and affordable access to the funds necessary for both mitigation and adaptation actions.
• The Role of Developed Countries:
  • For the Paris Agreement’s objectives to be realized, developed countries must fulfill their financial commitments and not only mobilize larger sums but also ensure that these funds are allocated in ways that directly benefit vulnerable nations.
  • This will require the establishment of mechanisms that ensure predictable and sustainable flows of finance, particularly for the most vulnerable countries like LDCs and SIDS.
• Reaffirming the Paris Agreement’s Goals:
  • The NDCs remain central to the success of the Paris Agreement. For developing countries to enhance their climate ambitions, the developed world must meet its financial obligations.
  • As the climate crisis intensifies, it is critical that the global community come together to ensure that financial resources are sufficient and appropriately targeted to meet the global challenge of limiting temperature rise and adapting to climate impacts.

Conclusion:

COP29 highlighted the growing divide in climate finance commitments between developed and developing nations. The failure to meet financial needs for climate mitigation and adaptation challenges the Paris Agreement’s objectives, stressing the need for equitable, accessible, and robust financial frameworks to address climate vulnerabilities globally.

Source: The Hindu

Mains Practice Question:

Discuss the challenges and potential solutions to ensuring adequate climate finance for developing countries in the context of global negotiations. How can the international community create a more effective climate finance architecture?