COP29 in Baku: climate finance takes centre stage

2 September 2024, Category: All insights, News

By Remus Bandacu, Victoria Verdesoto-Phothirath, Juliana Castro Escobar

As we approach the COP29 in Baku, Azerbaijan, the global community stands at a critical juncture in the fight against climate change. The geopolitical context adds an extra layer of complexity to the negotiations. The outcome of the U.S. election, scheduled just a week before the conference, could significantly impact the talks and the future of international climate action.

The first Paris Agreement Global Stocktake found that the world is off track to meet the 1.5 °C global warming target. According to the latest IPCC report, the window for action is increasingly narrowing. Global GHG emissions will need to be slashed by at least 60% relative to 2019 levels by 2035 to achieve this. COP29 presents a critical opportunity for countries to strengthen their NDCs, especially G20 countries, which are responsible for 75% of the world’s emissions. 

Additionally, almost half the global population is vulnerable to climate change impacts. The Global Goal on Adaptation, established under the Paris Agreement, aims to enhance adaptive capacity, strengthen resilience, and reduce vulnerability to climate change. However, financing for adaptation falls far short of what is needed, particularly in the most vulnerable countries. 

E Co. is launching a series of blog posts to explore the key themes and expected outcomes of COP29. With inputs from our experts, we will provide you with insights into the most pressing issues on the global climate agenda, and how they might shape the future of climate action.

• The finance COP
• The road to COP29 – upcoming E Co. insights

The finance COP

Climate finance is set to be the major theme at COP29, with the spotlight on the New Collective Quantified Goal on Climate Finance (NCQG). This new goal, which will replace the previous target of mobilising USD 100 billion per year, is due to be agreed upon at COP29 and aims to address the persistent gaps in global climate finance. 

The NCQG negotiations are critical, as the new goal needs to reflect the true scale of climate finance required. The Independent High-Level Expert Group on Climate Finance suggests that emerging markets and developing countries (excluding China) will require around USD 2.4 trillion annually by 2030 to meet climate and nature goals – four times current investment levels.

The work has been ongoing for several years, as the UNFCCC had established a work programme for developing the NCQG in 2021. At the technical level, four Technical Expert Dialogues (TEDs) have been held annually in 2022 and 2023, which brought together Parties, academia, civil society, and private sector actors to discuss key aspects such as quantity, types of instruments, access, and sources of funding. To also ensure political engagement and guidance, two High-Level Ministerial Dialogues (HLMDs) have also been convened in 2022 and 2023, which provided a platform for ministers and high-level representatives to discuss key issues and advance shared understanding of the goal.

Yet final negotiations at COP will have to contend with a number of ongoing dilemmas. The timeframe of the new goal, with proposals ranging from 5 to 25 years, needs to balance long-term certainty with flexibility. Shorter time frames allow for more frequent reassessment but could limit ambition, while longer-term goals might provide more stability but risk becoming outdated.

The debate over contributors touches on fundamental issues of equity and responsibility. Some developed countries, including Germany, call for broadening the contributor base beyond traditional Annex II parties to include emerging economies. Conversely, climate-vulnerable developing countries argue that they already receive insufficient finance and that developed countries must increase their contributions.

Additionally, the current climate finance landscape has been criticised for its heavy reliance on loans and developing countries will require significant concessional finance to prevent further unsustainable debt. The NCQG must therefore address not just the quantity but also the quality of climate finance, potentially setting targets for grant-based funding and other non-debt creating instruments.

The NCQG must also improve accountability and transparency in climate finance, particularly in adaptation finance. Clear parameters and reporting mechanisms are crucial for ensuring that funds are used effectively and reach the intended beneficiaries, enhancing the credibility of climate finance efforts.

Lastly, the balance between funding for mitigation and adaptation is also a critical aspect. Currently, most climate finance flows to mitigation projects (around 95% of flows from 2021-2022), despite the urgency of adaptation action. The NCQG negotiations will need to address this disparity, such as by setting specific sub-goals for adaptation. At COP26 in Glasgow, countries agreed to double adaptation finance by 2025, but progress has been slow. The NCQG presents an opportunity to reaffirm and strengthen this commitment, ensuring that adaptation receives the attention and resources it urgently requires.

The road to COP – upcoming E Co. insights

While climate finance will be the headline issue in Baku, it’s far from the only critical topic on the agenda. In our upcoming blog series, we’ll delve deeper into three key areas that will shape the outcomes of COP29:

1. Mitigation: raising stakes, creating markets

2. The Global Goal on Adaptation: measuring adaptation

3. Resilience: addressing loss and damage

Our upcoming series will not only explore the above key themes, but also showcase relevant case studies from our work unlocking climate finance with clients across the globe to illustrate how high-level decisions at COP29 can translate into tangible climate action on the ground.

We’re inviting you to be part of the dialogue! Our team will be present at the COP29, and we’d love to connect with you there.

For us at E Co. COP29 is a highly valuable forum to meet face-to-face with our global climate finance and sustainable development community. We invite you to connect in Baku with our Managing director, Rowan Putman and our Senior analyst Victoria Verdesoto Phothirath by sending a message to amy@ecoltdgroup.com to set up a meeting and share your news and ask your questions.

Whether you’re attending in person or following the proceedings remotely, we want to hear your thoughts, questions, and experiences. How do you see the outcomes of COP29 impacting your work? Reach out to us on LinkedIn, or come find us in Baku!