COP29 Report: Progress on Climate Finance
At the United Nations Climate Change Conference, or COP29, which met in November in Baku, Azerbaijan, climate finance took center stage. Climate finance has been a significant focus of international climate negotiations since 2009. As a virtual delegate to COP29 representing the Episcopal Church, I paid close attention to the dialogues on this topic.
Climate Finance Explained
Climate finance refers to financial resources given as grants, loans and investments to support efforts to deal with a rapidly changing climate. Contributors include governments, corporations, multilateral development banks and other financial institutions. Climate finance includes both domestic and international funds related to climate change mitigation, adaptation and losses. Investment in energy transition, including renewable energy projects, constitutes the majority of mitigation-oriented climate finance, reaching trillions of dollars globally—both domestically and in investment relationships with developing countries.
In recent COP negotiations, adaptation-oriented climate finance has been a major focus. This is in part due to political difficulties around frank discussions of fossil fuels and energy transition in the international arena—and in part due to strong advocacy from climate-vulnerable countries for funding for adaptation to the impacts of climate change.
In COP negotiations going back to 2009, wealthy, developed nations and multilateral financial institutions have made large commitments to fund climate adaptation and mitigation in developing and climate-vulnerable countries. These commitments reflect the growing recognition that the countries who have contributed least to climate change are most vulnerable to climate impacts. Island nations, coastal and low-lying nations, and other nations struggling with the impacts of climate change need large investments in order to update energy infrastructure to reduce emissions, update civic and agricultural infrastructure, and address real losses that take place—material, ecological and cultural.
More than half of the world population is incredibly vulnerable to climate risks like drought and its impact on agriculture, natural disasters like hurricanes and typhoons, strain on public infrastructure, and civil conflict spurred by these pressures. Without adequate governmental resources to adapt, all of these risks are exacerbated. Between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year from undernutrition, malaria, diarrhea and heat stress alone. This year, the planet crossed 1.5°C of warming since 1850—and is on track to pass 2.7°C by the end of this century. In addition to massive investment in energy transition and other mitigation projects, funding for adaptation is tremendously important to stabilize climate-vulnerable countries and prevent the displacement of hundreds of millions of people as climate refugees.
Funding for adaptation is tremendously important to stabilize climate-vulnerable countries and prevent the displacement of hundreds of millions of people as climate refugees.
Commitments Versus Reality
However, wealthy countries have fallen far short of their pledges. Financing commitments remain far below adaptation funding needs—and actual contributions are often lower than commitments. In 2009, a target of $100 billion annually was established as a starting point, to be raised by 2025—which COP29 accomplished in its final hours, raising the target to $300 billion. However, actual estimates of need range from $300 billion to $2 trillion annually. Annual funding falls far short of this and often constitutes loans, not the necessary grants, deepening developing countries’ debt. All this means that the needed funds are at least 10 times the amount that has been contributed to date.
There is also the argument over “who is liable to pay”—that is, the “fair share” contribution of various nations. Under current UN definitions, “developed” nations include only 43 countries—and don’t include major economies like China, India and the UAE. Although these nations actively make climate-related investments—China in particular is investing billions of dollars in developing countries—their negotiators are keen to retain their “developing” nation UN status, which keeps their contributions voluntary—and keeps them eligible for investment. However, developed nations argue that given the high carbon footprint of these nations, their fair share of emissions reductions and climate investment is higher.
Among multilateral climate funds, the Green Climate Fund is the world’s largest fund solely dedicated to climate adaptation. The fund was established by the 2010 Climate Conference, collecting more than $20 billion to date. Projects supported include water reclamation and renewable energy in Barbados, agricultural adaptation in Vietnam and Malawi, and e-transit projects in Costa Rica and India.
Climate Change and Climate Finance in the U.S.
How do these issues show up in an American context? The truth is, hardly at all. American news media and political discussions tend to revolve around domestic issues and rarely hold in-depth discussion of our role as a major contributor to global climate change. Outside of technical forums, mainstream discourse on our ethical obligation to contribute to climate adaptation internationally—or humanitarian issues in general—is virtually non-existent. This vacuum was brought into sharp relief in September’s presidential debate when climate change was mentioned very briefly—with no discussion of adaptation or global issues.
There are several reasons for Americans’ general lack of interest in global issues, especially when it comes to the impacts of climate change. To date, Americans have been relatively insulated from climate impacts due to our national wealth, food systems and infrastructure, and perceive themselves as less vulnerable than people in developing countries, despite major heat waves and hurricanes. This has likely distorted the general public’s impression of the impacts already experienced in many parts of the world. With the rise of the “America first” mentality, increasing domestic economic and political insecurity, and with the change of presidential administration, a reduction in American contribution to global climate finance is likely.
Historically, however, the U.S. has been one of the largest contributors to climate finance—and to many projects of international and humanitarian concern. The $61 billion of investment in clean energy investment through the Inflation Reduction Act is an example of domestic climate finance. The U.S. was one of the founding contributors to the Green Climate Fund, contributing over $2 billion. But domestic politics can get in the way of honoring pledges: the Biden administration pledged $11 billion annually to global climate finance, but Congress has authorized less than $1 billion of actual funding. And what makes climate finance so tricky to account for is that a significant portion of contributions come in non-monetary ways, such as capacity-building partnerships.
Financing commitments remain far below adaptation funding needs—and actual contributions are often lower than commitments.
Outcomes at COP29
In the final hours of COP29, negotiators agreed on a target of collectively raising $300 billion per year from wealthy nations—the U.S., the E.U. and Japan—by 2035. This amounts to a $200 billion increase over previous commitments, which have only recently been met. Closing the gap will not be easy—especially given the likelihood of a reduction in American funding. COP negotiators were well aware of this potentiality and sought to safeguard finance flows by calling “all actors”—private finance, NGOs and other nations—to help achieve a $1.3 trillion goal that developing nations argue is essential to meet their climate adaptation needs. The final text also called for a “Baku to Belém Roadmap,” opening a pathway for ongoing negotiations over climate finance contributions throughout the next year leading up to COP 30 in Belém, Brazil.
