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The second Needs Determination Report (NDR) by the United Nations Framework Convention on Climate Change (UNFCCC) provided a new figure in the contentious climate finance negotiations landscape. The report released September 10, 2024 stated that $5.012-6.852 trillion will be required cumulatively until 2030 to support developing nations to achieve their stated Nationally Determined Contributions (NDC).
The report provided an update to the first NDR, which was released in 2021, after discussions at the 24th Conference of Parties to the UNFCCC (COP24). It was a pioneering report since it officially laid out a figure for the quantum of climate finance needed by developing countries — $5.8-5.9 trillion until 2030. This figure was exponentially greater than the hitherto $100 billion per year goal until 2020 (later extended to 2025).
The second NDR report presents an updated snapshot of the needs highlighted by developing countries and is equally quintessential given the current context. In order to actualise the historical financial responsibility of the developed world and to fulfill the needs of developing countries, the New Collective Quantified Goal (NCQG) on climate finance is expected to be decided at COP29 in Azerbaijan this year. Ahead of this, the second NDR proves significant for arriving at a figure in line with the actual needs of developing countries.
The second NDR analysed several reports submitted by developing country parties under various processes of the Convention and the Paris Agreement.
The following table presents a brief overview of the needs articulated by developing country parties across eight types of reports reviewed in the second NDR. The ‘Costed needs’ are important to ascertain the quantum of finance required by developing countries to undertake climate action.
Of the 142 countries which submitted their NDCs, only 98 countries have reported costed needs, meaning the entirety of the needs of developing countries would be much greater. The first NDR identified costed needs of only 48 countries amounting to $5.8-5.9 trillion. Therefore, second NDR's updated estimation is more representative of the actual needs.
It is clear from the table that more than $5 trillion will be required for climate finance goals, implying $455-584 billion annually till 2030. This figure is from the NDC reports alone, and the needs highlighted from other country report submissions will push the figure to be far greater still.
The report further mentioned that 48 per cent of the total costed needs, amounting to $2.4 trillion is for conditional actions, whereas 18 per cent, amounting to $882 billion is for unconditional actions. The remaining $1.8 trillion remained unspecific about the conditionality.
This distinction is crucial since conditional actions, which are the bulk of costed needs, are to be fulfilled via international support in the form of finance, technology transfer and capacity building.
All these facts underscore the need for a large quantum of climate finance and the pressing responsibility on developed countries to fund it.
The report categorised countries’ needs thematically into mitigation, adaptation, cross-cutting and averting, minimising and addressing loss and damage. It provided crucial information regarding the needs within various sectors.
Mitigation needs account for 79 per cent of costed needs expressed in NDCs. Around 60 per cent of costed mitigation needs in NDCs are required in the energy sector. Other top sectors include forestry and biodiversity, waste management and transportation.
Adaptation needs are spread across sectors such as agriculture and food, ecosystem and biodiversity, water supply, health and sanitation among other cross-cutting sectors. Only 16 per cent of costed needs in the NDCs are accounted for as adaptation needs.
Finally, some reports also expressed cross-cutting measures and averting, minimising and addressing loss and damage (5 per cent and less than 1 per cent respectively). Such needs are reported in sectors like disaster management, coastal zones and water supply, among others.
The report warned that some regions have reported lower needs due to a lack of adequate data or informational tools. This doesn’t necessarily indicate that those regions have fewer needs, therefore quick comparisons must not be drawn.
According to the report, Africa and Asia dominate needs reported in NDCs. Africa has the largest number of needs, both costed and otherwise, whereas Asia has the highest costed needs amounting to $3.3-4.9 trillion.
In the regions of Asia, Latin America and the Caribbean, a majority of the total needs focus on mitigation. This trend tilts towards adaptation needs for regions such as Africa (a higher percentage of costed needs, however, focus on mitigation), Europe, Oceania, Least Developed Countries (LDCs) and Small Island Developing States.
Reported needs in NDCs by region
So far, NCQG negotiations have been riddled with debates between developing and developed countries, both disagreeing on fundamentals such as quantum of finance and who should contribute to it. In this light, the latest Needs Determination Report envisages to provide some concrete answers to the issues in contention.