Hard finance questions demand answers at Cop 29

Bridging the climate finance gap between developed and developing countries will be a key aim, write Georgia Gratton, Bachar Halabi and Caroline Varin

Countries must decide on a new finance goal at the UN Cop 29 climate summit in Azerbaijan in November, and there is broad agreement that the global financial system must be reformed. But crucial questions remain unanswered on the sources, the amounts and the implementation of climate finance required.

Speakers at the Munich Security Conference put a strong focus on climate change and the finance to address it. But many just stuck with previous stances, suggesting that there has been little movement on the issue in real terms.

As well as public climate finance, "we need to free up much more private-sector money", EU climate commissioner Wopke Hoekstra told delegates in Munich. The EU, among others, has previously floated the idea of a tax on shipping containers and air travel, with the proceeds contributing to climate finance. Barbadian prime minister Mia Mottley in Munich reiterated previous calls for a minimal tax on the shipping sector. And Cop 28 president Sultan al-Jaber and German climate envoy Jennifer Morgan this week made another much-repeated request — for multilateral development bank involvement.

Mottley noted the progress made at Cop 28. The final text outlined the trillions of dollars needed for decarbonisation. But the "clear, granular issues that are necessary to secure progress" are slipping down the agenda as most of the focus in on "big-ticket issues", such as sources of funding, she said. Countries should meet two or three times a year in order to "have the decision-making framework to be able to secure progress", she suggested.

Hoekstra in Munich alluded to persistent disagreement over which countries should provide funding. "We… need to look at who has the ability to contribute to this and who has had a fantastic ride in the last 20-30 years, including the Europeans," he said. UN climate body the UNFCCC works from a list of developed and developing countries from 1992, when it was established. This determines just 24 countries, plus the EU, as contributors.

Developing trust

Cop 29 president-designate Mukhtar Babayev — the host's ecology minister — said at the Munich conference that he hoped Azerbaijan could serve as an "interconnector or bridge" for climate finance diplomacy between developing and developed countries. "Financing is at the heart of the issue," IEA executive director Fatih Birol said this week, promising to look at solutions to bring the cost of capital down for developing countries. But "there is still a lot of work to do to create a fit-for-purpose system", al-Jaber said.

Developing countries have called for years for meaningful climate finance to allow them to implement emissions reduction plans. Most developing countries also have a small share of historical emissions, relative to developed nations, with many of them the most vulnerable to the effects of climate change.

Countries must decide at the Cop 29 summit on a figure for the new collective quantified goal — the next stage of the $100bn/yr that the world's developed countries agreed to disburse to developing nations over 2020-25. But although most agree that trillions are needed, so far it appears that only India has put a number on the goal, naming in a submission to the UNFCCC a floor of $1 trillion/yr. And countries will have to ensure that any goal is met. Developed countries missed the $100bn/yr goal in 2020 and 2021, although it was likely to have been met in 2022.

Pressure is mounting on countries to deliver at Cop 29. The world is facing more frequent bouts of extreme weather, and Mottley warned delegates in Munich that the issue is no longer one of conversation, but of action.

Finance for clean energy investment in emerging markets