New Climate Finance Goal: Too many options, too little time?

As countries prepare for the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29) to be held in Baku, Azerbaijan in November, the first discussions on the headline issue of climate finance are around the corner. 

A crucial meeting for the post-2025 climate finance goal is to be held in April in Colombia. Parties to the UN Framework Convention on Climate Change (UNFCCC) have made new submissions on what they want discussed at Colombia and beyond for the New Collective Quantified Goal on Climate Finance (NCQG). 

What is NCQG and why is it important?

In 2009, developed countries committed to providing ‘new and additional’ financial resources amounting to about $30 billion to developing countries between 2010 and 2012. They also made a commitment of jointly mobilising $100 billion every year by 2020 for the same. 

In 2015, this goal of collective mobilisation of $100 billion by developed countries was extended to 2025. It was also decided that year that a new climate finance goal to succeed this one would have to be decided prior to 2025, amounting to at least $100 billion per year, and ‘taking into account the needs and priorities of developing countries’. This is the NCQG, also called the post-2025 climate finance goal / new goal. 

NCQG is important for two key reasons. First, the figure of $100 billion is inadequate. It is a drop in the ocean compared to the climate finance needs of developing countries, which, by varying estimates, range from $1-2.4 trillion per year until 2030. (The latter is an estimate just for Emerging Markets and Developing Economies, making the total funding needed by including that for poorer countries possibly far higher.) Secondly, the goal of $100 billion was not a negotiated one – it was a political one. 

Crucially, in no year since its announcement has the goal actually been met. The latest estimates show that developed countries mobilised $89.6 billion in 2021 for developing countries. Although, given the lack of a widely agreed upon definition of what counts as climate finance and what does not, this may be an overestimation. 

Finance is a key enabler of climate action. Developing countries, small island nations and the least developed countries of the world have contributed the least to the climate crisis but are among the most vulnerable (both to physical impacts and the consequent economic losses caused by climate change). Arriving at a goal that best serves the needs of these countries is thus significant for advancing climate justice. 

What has happened so far? 

Eight Technical Expert Dialogues (TED) have been held over the last two years, discussing a range of options for the elements linked to the formation of the new goal, including: 

• Time frames: Whether the new goal should have a short-term time period (2025-29), in line with cycles of Nationally Determined Contributions (NDCs) of developing countries or longer, say 10 years or more (for instance, until 2050), or a combination. 
• Structure: For instance, whether the goal should be a single quantified figure with a decided amount of money, or if the goal must be framed in terms of a share of country’s gross domestic product / gross national income, with options for ‘mobilising’ funds as well. Whether the goal should have annual targets and sub-goals pertaining to thematic areas (mitigation, adaptation) or merely an inspirational goal aiming to make ‘all’ finance flows consistent with low-emissions development. 
• Quantum: Options for how to decide the quantum of the goal have also been discussed extensively. These range from a bottom-up approach based on the cost estimates of developing country needs, to determining the quantum based on the range of contributors (developed countries, private actors, any others identified). Additionally, options for what sources and instruments should be used have also been discussed.  
• Qualitative Elements and transparency: On qualitative elements, options on whether the type of finance (concessional, grant based, public or private) should be included in the goal by way of guiding principles, or a clearly delineated objective have emerged. On transparency for tracking progress of implementation of the goal, existing frameworks such as the Enhanced Transparency Framework (Paris Agreement), or a host of new modes of reporting and tracking have been considered. 

Several aspects of the new goal need further consideration, such as exact start dates and revision of timelines, as well as baseline data and knowledge gaps prior to beginning its implementation. It was decided at COP28 in Dubai that at least three more technical dialogues and three meetings for making this shift would be conducted in the lead up to COP29. 

To begin this process, the ninth TED and an additional meeting are going to be held in April 2024 in Cartagena, Colombia. Countries have made submissions on what should be discussed in Colombia, as well as suggestions for the roadmap following this. There are stark differences among the submissions made by different countries and groups. 

What have different countries proposed?

India is the only country that has put forth a figure in this round of submissions, $1 tn per year, to be considered the quantum of money that developed countries must provide to developing countries as part of the new goal. For this, India has suggested a timeframe of 10 years, with separate annual mobilisation targets for each five year period to be in line with the cycles of updating the Nationally Determined Contributions. 

The key considerations for the first set of deliberations are what should be discussed at the first TED of the year and the meetings among Parties to be held between them. Most developing country groups, including the Like Minded Developing Countries (LMDC), the African Group, the Arab Group and the Least Developed Countries (LDC) have suggested the focus first be on the quantitative aspects and time frames of the goal, in other words, how much money the goal should encompass and along what timelines it should be disbursed. In contrast, developed country submissions, including those of the US and the EU have suggested who should provide the money (contributors) and how to determine who should receive it (recipients) should take priority. The European Union and the Independent Association of Latin America and the Caribbean (AILAC) have also stressed the need to consider the linkages between different elements of the goal. 

Highlights from latest submissions made for NCQG 

Almost all countries and groups agree that the high-level dialogues among ministers of different countries should improve this year, by moving from being a space where pre-formed statements are merely read out to actually engaging throughout the year on the political aspects needing consideration for the successful implementation of the goal. 

It is agreed that the aim of the discussions between countries and other stakeholders at the technical dialogues and back-to-back meetings through the year is to produce a draft negotiating text for deliberation at COP29. 

The road ahead 

The process on NCQG so far has foregrounded what is already known: Developing countries, for serving whom this goal is to be created to begin with, call upon a focus on the actual amount of money, time frame for disbursement and non-debt creating instruments to be the central pillar of the NCQG. 

Developed countries have focused more on who should contribute and on bringing the need to align all financial flows into the conversation. These distinctions in approach are reflective of the stark difference between the needs and priorities of countries who have contributed to and are impacted by the climate crisis in very different ways. 

The need to scrutinise the process to ensure it truly considers the principles of equity and justice in its implementation remains significant. 

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