Stage set for new climate finance goal enroute to Baku

The 60th Session of United Nations Framework Convention on Climate Change (UNFCCC) Subsidiary Bodies, also called the Bonn Climate Change Conference, commenced on June 3, 2024, and expectedly, all eyes this year are on climate finance. With a new climate finance goal to be decided at the 29th Conference of Parties (COP 29) to the UNFCCC in Baku, Azerbaijan later this year, the progress made at this mid-way mark is instrumental for an ambitious outcome.

Conference kicks off

The Executive Secretary of the UNFCCC, Simon Stiell, reiterated the urgency of the discussions on the New Collective Quantified Goal on climate finance (NCQG), reminding country leaders: “We cannot afford to reach Baku with too much work left to do.”

Even as countries made statements at the opening plenary, themes of discord among developed and developing countries on the new climate finance goal became apparent. Uganda, speaking on behalf of the G77 and China, the largest developing country group at the negotiations, highlighted their expectations from the conference, “Setting an ambitious NCQG that is needs-based, in trillions of dollars and ensuring that financial resources flow from developed to developing countries.” The European Union’s opening statement suggested that the NCQG comprise a wide variety of sources, and stressed that “public resources alone will not suffice”.

Technical Expert Dialogue commences

The same evening, official deliberations on NCQG kicked off with the 10th Technical Expert Dialogue (TED 10). In continuance of the talks conducted in Colombia in April, experts and diplomats met to elaborate on the aspects of ambition, qualitative elements, transparency and structure of the goal.

Different Party representatives provided their inputs on these themes. On ambition, the divergence between the Global North and South was once again brought to the fore. Sofia Vargas of Colombia — also the finance negotiator for the Independent Alliance of Latin America and the Caribbean (AILAC) — emphasised that the NCQG must support rather than penalise the ambition for climate action of developing countries. She said, “NCQG can make a contribution to the element relating to the ‘disablers’ of finance that make finance costly for [developing] countries.” In previous deliberations as well, other developing countries have mentioned how barriers in the global financial architecture such as high cost of capital, the existing debt burdens and lack of fiscal space make accessing climate finance difficult for developing countries. Vargas added that for the goal to sufficiently address the issue of ambition, consensus on making concessional finance work for developing countries is paramount.

On structure of the goal, Ben Abraham of New Zealand mentioned the need to premise considerations of the structure of the goal on what worked and did not work in the precursor to the NCQG, that is, the $100 billion commitment of developed countries. While developed countries have previously suggested ‘multi-layered’ structuring of the goal, developing countries have remained steadfast in their ask for sub-goals based on different themes of mitigation, adaptation and loss & damage.

Expanding on the Cartagena discussions, TED 10 also delved into the qualitative elements of the NCQG, such as additionality, access, delivery, enabling environments, predictability, and the quality of climate finance which specifically pertains to developing countries receiving grant-based concessional finance.

Regarding ‘additionality’, in 2009, developed countries committed to providing ‘new and additional’ climate finance. However, there has been considerable debate over whether the money provided truly adheres to the principle of ‘additionality.’

A case in point is the Official Development Assistance (ODA) — overseen by the Organisation for Economic Co-Operation and Development — which constitutes foreign aid from developed countries to developing countries for development purposes. Michai Robertson, representing the Alliance of Small Island States, pointed out that the Global Environment Facility’s 1994 independent evaluation understood ‘climate finance’ “as being the money that is additional to official development assistance [ODA], other official flows, and financing committed under other regimes”. According to an article by the Center for  Global Development, concerns arise from the potential risk of climate finance not being ‘additional’ due to the reallocation of existing aid. Furthermore, there is apprehension about the possibility of diverting aid away from non-climate developmental objectives, all while still falling short of meeting either development or climate needs.   

On transparency, the Enhanced Transparency Framework (ETF) under Article 13 of the Paris Agreement provides guidance to countries on reporting greenhouse gas emissions, progress towards achieving their nationally determined contributions, climate change impacts and adaptation, and information on financial, technology and capacity-building support provided and mobilised as well as that needed and received.

Tibor Lindovsky from the Transparency and Reporting Division at the UNFCCC presented an overview of the ETF. The Framework requires parties to submit biennial transparency reports (BTRs) every two years. 2024 is the year of BTRs as the first set of submissions are due by December 31st, 2024. Notably, developed countries ‘shall’ report on financial, technology and capacity-building support provided and mobilised, whereas developing countries ‘should’ report the same. This highlights that the greater onus to report on ‘support provided and mobilised’ lies on the developed countries. The modalities, procedures, and guidelines for the ETF are to be reviewed no later than 2028.

In one of the panel discussions, the recurring issue of the absence of a definition of ‘climate finance’ was raised, emphasising how this ambiguity leads to miscalculations and inconsistent accounting methodologies. This concern has persisted, evident from the previous NCQG technical expert dialogue in Cartagena. Developing nations continue to advocate for a precise definition of ‘climate finance’ to ensure transparency on what should and should not be counted as climate finance. 

The NCQG technical discussions concluded with closing remarks from Elmaddin Mehdiyev, finance team leader of the incoming COP 29 presidency, “A fair and ambitious NCQG in Baku will be the foundation for success on future global climate action taking into account the needs and priorities of the developing countries. Also, the NCQG provides a political opportunity to rebuild confidence in the Paris Agreement, repair trust, and to offer reassurance to developing countries that the international community is resolved to address finance barriers to enhance climate ambitions.”