CHENNAI: As the COP29 negotiations draw closer, the climate finance gap between developed and developing nations remains a major hurdle, casting a shadow over the upcoming summit. With less than three months to go, the pressure is mounting on wealthier countries to make good on their promises and agree to a new climate finance goal that adequately supports vulnerable nations in their fight against climate change.
However, a recently published UN negotiations document reveals that a deal remains elusive, with seven competing proposals on the table and little consensus in sight.
Developed countries have long committed to mobilise $100 billion per year by 2020 to help poor nations adapt to the impacts of climate change and transition to greener economies. However, this goal has repeatedly fallen short. The funding shortfall was particularly glaring in 2020 and 2021, when developed countries failed to meet the target, sowing mistrust among the Global South. Although the $100 billion goal was finally met in 2022, the delay and under-delivery highlighted the fragility of international climate finance commitments.
As the world prepares for COP29 in Baku, Azerbaijan, there is a renewed push for a new, more ambitious collective quantified goal on climate finance (NCQG). This new target, set to replace the $100 billion goal, is intended to reflect the evolving needs of developing countries, taking into account the growing urgency of climate action and the increasing severity of climate impacts.
However, there is sharp divergence on the size of the new target. A UN document outlining the negotiations of different groups reveals a wide range of views and priorities. The divisions highlight a growing rift between developed and developing nations, with wealthy countries like Canada and the European Union warning that their budgets are already stretched, while developing nations demand a much larger financial commitment.
Current stand
Arab Group Proposal: The most ambitious option calls for a target of $441 billion per year in grants from developed countries, combined with an aim to mobilise a total of $1.1 trillion annually from all sources, including private finance, from 2025 to 2029. This proposal reflects the position of the Arab countries, emphasizing the need for substantial public funding to meet the growing demands of developing nations.
Independent Alliance of Latin America and the Caribbean (AILAC) Proposal: This proposal demands that developed countries provide an undisclosed sum in trillions annually in grant-equivalent terms through 2035. It also seeks to mobilise additional funds per year through public interventions to support developing countries’ adaptation, mitigation, and loss and damage efforts. The proposal insists on equitable burden-sharing among developed countries based on their historical greenhouse gas emissions.
African Group of Negotiators Proposal: It sets a target for developed countries to mobilise $1.3 trillion per year by 2030, with an aggregate goal of $6.5 trillion. It calls for a balance between mitigation, adaptation, and loss and damage, and emphasises the need for enhanced access to finance, particularly through grant-based and concessional terms, especially for adaptation.
Alliance of Small Island Developing States (AOSIS) Proposal: It proposes an unspecified annual provision and mobilisation goal in grant-equivalent terms of new, additional, and adequate climate finance per year to developing countries from 2025 to 2035. This proposal includes specific sub-goals for mitigation, adaptation, and loss and damage response, with a significant proportion of funds delivered through established mechanisms like the Adaptation Fund.
European Union Proposal: The EU’s proposal sets a global target of over $1 trillion per year, including domestic investments and private funding, with a smaller portion provided by countries with high greenhouse gas emissions and economic capabilities, such as China. The EU also stresses the need for a balanced distribution of funding between mitigation and adaptation and calls for contributions from all countries with significant emissions and economic capacity.
Least Developed Countries (LDC) Group Proposal: The LDC Group calls for a concrete yearly target of grant-based and highly concessional climate finance from developed countries, with a balanced allocation between mitigation, adaptation, and loss and damage. It proposes that at least 20% of financial resources should flow through the operating entities of the financial mechanisms established under the Paris Agreement.
Canada’s Proposal: It focuses on progressively increasing financial resources to support the the Paris Agreement goals. The proposal includes a mix of public finance, private investment, and innovative financial mechanisms. It emphasises human rights, gender equality, and the roles of Indigenous Peoples in designing and delivering climate finance.
Justice denied
While developed nations stress the importance of mobilising private finance and maximising existing resources, developing countries highlight the inadequacy of current funding and the growing financial burden they face due to climate impacts. For many developing nations, the financing gap is not just a matter of numbers but of justice.
They argue that wealthy nations, which have historically contributed the most to greenhouse gas emissions, bear a moral obligation to provide the funds. “Developed countries must acknowledge their historical responsibility,” says one negotiator.
Harjeet Singh, Global Engagement Director, Fossil Fuel Non-Proliferation Treaty Initiative, told TNIE developing countries are making bold strides in scaling up renewable energy and tackling climate impacts, but their efforts are crippled by insufficient financial and technological support.
7 climate finance package options under consideration for COP29
Package 1
This option sets an annual climate finance goal informed by the Standing Committee on Finance Needs Determination Report (SCF NDR), targeting a trillion-dollar mobilisation over a decade (2025-2035).
It emphasizes a concrete, yearly target of grant-based and highly concessional climate finance from developed countries to developing countries.
The package also calls for provisions for Least Developed Countries (LDCs) and Small Island Developing States (SIDS), and sub-goals for mitigation, adaptation, and loss and damage. Additionally, it aims for 20% of the funding to flow through the operating entities of the Financial Mechanism.
Package 2
This package proposes a significant annual mobilisation goal of $1.3 trillion by 2030, with a focus on public finance up to 2023.
It outlines an equitable geographic distribution of funds and considers sub-targets to ensure a balance between adaptation, mitigation, and loss and damage.
It also suggests burden-sharing arrangements among developed countries. The proposal reflects a commitment to progressive efforts beyond the existing $100 billion target, aiming for more ambitious climate action.
Package 3
This introduces a target year for a global investment goal, aiming for several trillion dollars from all sources—public, private, domestic, and international—by 2035.
Within this framework, it proposes a sub-goal of billions of dollars annually, specifically for developing countries, particularly SIDS, LDCs, and fragile or conflict-affected states.
The package calls for contributions from both developed and high-income developing countries, including those among the top emitters.
Package 4
This option sets an annual mobilisation goal over 2025-2029 of at least $1 trillion to $2 trillion per year, emphasising the need for developed countries to provide climate finance in grant-equivalent terms as much as possible.
It includes a minimum of $441 billion provided annually through grants, and the scope of funding encompasses adaptation, mitigation, loss and damage, technology transfer, transparency, and capacity building.
This package stresses the importance of burden-sharing and equitable contributions, particularly from countries with high greenhouse gas emissions and economic capabilities.
Package 5
It focuses on an overarching investment goal for global investments to achieve Article 2, paragraph 1(a-b) of the Paris Agreement by 2035. It includes an aspirational target to align finance flows with net-zero targets by 2050.
The package also aims to mobilise substantial funding for adaptation and mitigation in developing countries and calls for the enhancement of development and implementation policies by all parties to scale up finance from all sources.
Package 6
This package offers a dynamic approach, proposing an annual mobilisation goal from 2025 through 2035 with flexibility to adjust based on evolving needs. It includes provisions for at least a trillion-dollar mobilisation goal in addition to public interventions.
The package also suggests a framework that supports new and additional finance, ensures predictable and adequate contributions, and focuses on thematic sub-goals for mitigation, adaptation, and loss and damage, while incorporating a mechanism for periodic reviews to align with updated scientific findings.
Package 7
The final package envisions a multi-stage goal structure with specific annual targets for global investment flows up to 2035. It outlines provisions for new and additional finance aimed at supporting the climate action goals of developing countries, especially those with the least resources and highest vulnerabilit.
The package emphasises the importance of burden-sharing, historical responsibility, and equitable distribution of funds.