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As 198 nations convene in Baku, Azerbaijan, for the 29th United Nations climate summit, one word will almost certainly dominate COP29 technical negotiations and private discussions: finance.
After two years of record heat, prompting an unprecedented string of extreme weather disasters, there appears to finally be a global consensus that a climate crisis — devastating wealthy and poor nations alike with drought, wildfire, flooding and sea-level rise — can no longer be ignored.
But a key consensus is still needed on how to mobilize the estimated $2 trillion by 2030 needed to rapidly transition national economies to a post-carbon world — fully converting to renewable energy and low-carbon transportation, while compensating countries in the Global South being ravaged by global warming impacts.
“People keep talking about this COP as being the finance COP,” said Andrew Deutz, a finance expert and global policy and partnerships manager with WWF. “But to be honest, from this meeting going forward, every COP will be a finance COP.”
A first significant step in this direction has been the discussion and, perhaps, adoption at COP29 of a new and ambitious financial target aimed at raising funds to support countries affected by the worsening impacts of climate change, known as the New Collective Quantified Goal (NCQG). While the specific details are yet to be determined, the discussions at COP29 could mirror how challenging it will be to find consensus on these new targets.
Leaders have called for a fair and robust NCQG, while civil society has worried that the pace of the negotiations and the current discussion might lead to a disappointing outcome.
Despite intense pressure from climate activists, national delegations have dodged the finance question year-after-year and COP after COP, creating a disconnect over where the many billions — or likely trillions — will come from for the mitigation, climate adaptation, and loss and damages initiatives required to avert climate catastrophe.
State money, investment capital or both?
“COP29 is a test of wealthy countries’ commitment to securing a livable planet,” said Teresa Anderson from ActionAid International, an environmental NGO. “If we want to unleash climate action on a scale that can save our future, the countries that have caused the climate crisis must pay to fix the mess. Whatever the cost, paying for ambitious climate action now will be far cheaper than the cost of catastrophe later.”
While it is little realized, wealthy countries have lately begun mobilizing for climate action, putting up $115.9 billion in 2022, according to the Paris-based Organisation for Economic Co-operation and Development (OECD). That amount exceeded the goal of reaching $100 billion by 2025.
The problem, however, is that even this amount is still far short of what’s needed — a troubling reality that will almost surely consume two weeks of talks in Baku.
Also worrying: Future levels of climate funding by wealthy nations remain in doubt, especially with climate denier Donald Trump retaking office in the U.S. in January 2025, and with big questions as to how willing European nations or China will be to dig deeper into public-money coffers to help India with its renewable energy transition, for example, or Bangladesh with flood protection.
“What will never work is expecting governments to fund the trillions of dollars necessary out of taxpayer money; it’s not going to happen,” Bill Winters, CEO of U.K.-based bank Standard Chartered, told Bloomberg during Climate Week NYC in September. “So, if the public sector isn’t funding this with appropriate impetus from governments, we (financial institutions) can definitely get this done.”
Such market-driven, profit-oriented bravado likely won’t sit well with climate activists and some national leaders who have seen how past nongovernmental financing too often piled more debt on debt-ridden nations.
“Pushing forward market mechanisms in place of climate finance is unacceptable,” said Kelly Stone, a policy analyst with ActionAid USA. “Market mechanisms are not climate finance. These mechanisms promote offsetting — letting countries and companies pay to avoid cutting their own emissions, which the world cannot afford, and which does not fulfill developed countries’ climate finance obligations.”
However, such concerns could be swept aside to address climate urgency: The World Bank, the International Monetary Fund and private institutions all say they stand ready to invest far more (with significant caveats) than G20 nations have done or ever will do.
Thinking big … really big
Deutz said an investment capital climate funding scenario needs to operate within a global context to work effectively. He suggested the math in support of climate finance could add up if one thinks broadly enough — meaning the whole planet.
“The world put to use $116 billion in 2022 through all its climate funds,” he told Mongabay. But “to hit other (climate-related) goals, the total amount that needs to go to developing countries for adaptation and loss and damage, for example, is $2 trillion. That’s a huge amount, right?
“But on the other hand, the global economy is $105 trillion (annually), and it grew by $5 trillion in 2023. So, we’re looking at a small percentage of the global economy (2%) needed for our climate needs. Plus, the world spent $7 trillion alone (in 2022) subsidizing the fossil fuel industry. A lot of that needs to be redirected to projects not destroying the planet. When you look at those numbers as a reference point, ($2 trillion) is not such a crazy amount of money.”
Barbara Buchner, an economist and global managing director of the Climate Policy Initiative in San Francisco, told Mongabay she agreed: “The money is there,” she said, especially considering how quickly the world mobilized trillions to fight COVID-19, ramp up defense spending for NATO, and pay fossil fuel subsidies in recent years.
“Redirection of existing funds needs to become a priority,” Buchner said, then added, “I think we have been focusing far too much up to now on the quantity side, which obviously is important, but far less so on the quality side, on the impact of every dollar spent, which is more challenging, but I think it’s really important.”
Finance deployed; bigger hopes delayed
That’s where things get challenging: the weighing of risk and reward.
For example, Standard Chartered does the vast majority of its climate finance in Asia, Africa and India, all areas with massive energy-transition and climate-adaptation needs. Climate finance is 10% of the bank’s revenue, and it plans to invest $2 billion on such projects in 2025.
“If we can offer a decent, risk-adjusted return (to investors), there’s plenty of money” available,” Winters said. “I think the only way we’re going to be successful in the fight against climate change is to offer people an acceptable return; it doesn’t have to be a huge return. That’s the only way to move trillions and trillions.”
But to Buchner’s point, Winters discussed the quality of investing in a reforestation project in the Democratic Republic of the Congo, which has the world’s second-largest tropical forest.
“I think we’ve got a problem before we even get to that point, which is coming up with the right projects that have the right assembly of risk takers,” Winters said. “There are the technical risks of surveillance and monitoring. Is the money actually being used for what’s intended, and not being siphoned off by bribery or corruption? And so, before you even get to the point of delivering the money, you’ve got real technical problems that have to be overcome. The good news is that everybody is aware of this, and we’re trying to correct it as best we can.”
Valerie Hickey, global environment director at the World Bank, told Mongabay that at COP29, it’s essential to “build high-quality carbon markets, which have not yet met their potential.” That, too, would help attract so-called ESG investors (environmental, social and governance).
Hickey added, “We’re committed to devoting 45% of total financing to climate by 2025, with half of our public financing going to adaptation and half to mitigation, across a wide variety of sectors. In fiscal 2024, we hit 44%, or $43 billion, and believe we will pass our overall goal sometime next year. However, we need to keep pushing on adaptation and achieving balance in our commitments.”
Offering examples of where the World Bank is now directing billions, Hickey pointed to a new public transportation system in Senegal that will move 300,000 passengers daily; a new initiative to bring affordable renewable energy to 100 million Africans by 2030 in concert with the African Development Bank; and a pilot wetland restoration project in Rwanda with a support grant from the U.S.-based Global Environment Facility.
“We need to celebrate progress where it is being made,” Hickey said. “And we need a contagion of good ideas and actual impact to spotlight the way forward.”
Overall, WWF’s Deutz said, “I like to think we’re getting closer to a financial tipping point. We still need a lot more ambition in the (climate) mitigation efforts of the world, but we’re starting to see economies that are figuring that out.”
Asked how much progress on finance can realistically be expected over the next two weeks at COP29 — the third consecutive COP held in a major oil-producing country — Deutz tempered his optimism.
“I’m not sure we’re seeing the political leadership we need in the next two weeks,” he said, “which is why a lot of people are sort of already thinking past Baku to Belém (Brazil at COP30) next year. So, what can President (Luiz Inácio) Lula (da Silva) deliver? And what can the Brazilians deliver when we have a COP in the Amazon?”
Banner image: As delegates from 196 nations convene Nov. 11 in Baku, Azerbaijan, for the 29th United Nations climate summit, one word will almost certainly dominate COP29 technical negotiations and private discussions: finance. Image courtesy of David Akana.
Justin Catanoso, a regular contributor, has covered seven U.N. climate summits between 2014 and 2021. In October, he covered the U.N. Convention on Biological Diversity in Cali, Colombia.
Mongabay-Africa Program Manager David Akana contributed to this story from Baku, Azerbaijan where he is currently covering the COP29 climate summit for Mongabay.
Africa needs COP29 funding & international finance reform to manage climate change (commentary)
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