Fausto Corvino
In the lead-up to COP29, Fausto Corvino emphasized the need for a paradigm shift within the international climate negotiations to ensure that the global rich bear a greater responsibility for climate finance. In this follow-up article, he explains why COP29 has failed in its historic mission to lay the foundations for a rapid and equitable global transition to low-carbon energy. The final outcome is disappointing and falls far short of what climate justice advocates have been campaigning for.
COP29 failed in its historic mission to lay the foundations for a rapid and equitable global transition to low-carbon energy, especially in developing countries. The final outcome is disappointing on all fronts. Through what some have called a “sandwich” approach to climate finance, so-called developed countries have committed to providing concessional climate finance to developing countries at less than half of what developing countries, already burdened with debt servicing to foreign creditors, were expecting. And, most importantly, much less than what climate justice advocates have been campaigning for.
What were the expectations for climate finance at COP29?
The 2015 Paris Agreement (COP21) stipulated that by 2025, i.e. by COP29 at the latest, the parties should agree on a so-called New Collective Quantified Goal (NCQG) on climate finance. This is the money that so-called developed countries must commit to provide to developing countries, especially the most vulnerable, on an additional and concessional basis (not necessarily grants, but also concessional loans, for example) for climate mitigation and adaptation – plus compensation for loss and damage, which was instead channelled into a separate, purely voluntary fund that was operationalised at COP28 in 2023. All this, not least, to ensure that developed countries meet their climate justice responsibilities towards developing countries, based primarily on their past emissions and their ability to contribute.
The NCQG is intended to replace the previous international climate finance target set at COP15 in Copenhagen in 2009. The latter called for developed countries to provide at least $100 billion per year to developing countries by 2020, with both additionality and concessionality clauses. The $100 billion target was not based on scientific or economic considerations. It was mainly a symbolic figure, first proposed by UK Prime Minister Gordon Brown in a speech at London Zoo, and later pushed by then US Secretary of State Hillary Clinton (one could think also for domestic political reasons). The $100 billion target was reached two years later than scheduled, in 2022, according to the OECD. However, many doubt that the target was ever actually reached. Indeed, the OECD’s method of calculation takes concessional loans at face value rather than grant equivalent, and the climate relevance of this funding may have been exaggerated in the absence of appropriate controls.
What could have been different?
In short, the $100 billion by 2020 target was very modest and far below the real needs of developing countries, and even in the most optimistic hypothesis (i.e. assuming the OECD methodology is valid) it was not met on time. The NCQG should therefore have had two main features. First, rather than being based on the political considerations of developed country governments, primarily aimed at their own electorates, the NCQG should have been based on the real needs of developing countries. The UN-appointed Independent High-Level Expert Group on Climate Finance released its third report during the first week of COP29, on 14 November. It reiterated the previous report’s finding that to meet their Paris mitigation pledges, implement climate adaptation, cope with climate disasters and implement conservation, developing countries and emerging economies (excluding China) will need $1 trillion per year in cross-border finance by 2030. The new report adds that this figure will rise to $1.3 trillion by 2035.
Second, the NCQG should have called on developed countries to provide money in the most concessional way possible. That is, mainly in the form of grants. A study by the International Institute for Environment and Development (IIED) shows that low-income countries spend almost twice as much on servicing public debt, mainly to foreign creditors, than they receive in climate finance from developed countries. For poorer countries, therefore, any increase in debt, even on a concessional basis (e.g. loans at below-market interest rates and/or with grace periods), would pose a significant threat to financial stability. In addition, climate finance and private investment, even when mobilised with public funds, have so far tended to favour mitigation projects in middle-income countries, where the risks are lower and the returns higher. This makes climate finance for poorer countries, and adaptation finance for developing countries in general, unsatisfactory.
Finally, the NCQG should have been provided on a concessional basis for reasons of remedial justice. Low-income countries have little or no responsibility for the climate crisis and are most vulnerable to climate risks, while developed countries have emitted the most on a per capita and consumption basis and have the most resources to address climate threats and/or recover from losses.
The ‘sandwich’ approach to climate finance
Developed countries have pulled off a masterpiece of diplomatic doublespeak. On the one hand, they have acknowledged the real needs of developing countries, based on the most recent estimates of the Independent High-Level Expert Group on Climate Finance. Indeed, the COP29 draft decision on finance (Art. 7) calls on “all actors” (i.e. not necessarily developed country governments) to provide $1.3 trillion, from both public and private sources, to developing countries by 2035 – what we can call the needs-based climate finance target. On the other hand, developed countries have committed to a NCQG, i.e. climate finance that developed countries must provide to support climate action in developing countries, of only $300 billion per year by 2035 (Art. 8). This falls far short of the needs of developing countries. In addition, the way the text is drafted does not rule out that only a small percentage of NCQG funds will be in the form of grants.
This leaves a gap of about $1 trillion between the needs-based climate finance target ($1.3 trillion) and the NCQG ($300 billion), which is where the sandwich analogy comes in. The main question is therefore how to fill this gap – or how to fill the sandwich. Moreover, the “sandwich” approach has allowed developed countries to avoid the delicate diplomatic issue of whether the group of countries considered “developed”, and thus obliged to provide international climate finance, should be expanded beyond the Annex II list of mainly rich Western countries inherited from the 1992 United Nations Framework Convention on Climate Change (UNFCCC) – i.e. beyond the countries that were members of the OECD in 1992 (excluding Turkey) – to include, for example, emerging economies such as China or some Arab petro-states. Non-Annex-II countries will contribute to closing the money gap if they want to, but they have no obligations with respect to the NCQG.
Who is really paying for it?
The COP29 draft decision on finance states that the NCQG ($300 billion) is to be paid for only by developed countries, i.e. Annex II countries. It can be covered either by public finance or by private finance mobilised through public funds, and either bilaterally or through multilateral development banks. Moreover, the amount is so relatively small that it can be provided by developed countries with little effort. Indeed, some argue that by adding up the money already pledged by developed countries, a reform of the multilateral development banks (MDBs) and an increase in private investment (mobilised through public finance, but always geared to a return for the private actors making it), a good part of the NCQG could be met.
The draft decision does not clarify how the difference between the needs-based climate finance target and the NCQG – let’s call it the remainder – which amounts to $1 trillion per year by 2035, is to be bridged. The text allows for the remainder (or the stuffing of the sandwich, so as not to lose the analogy) to be provided not only by public funds but also by “all [private] sources” (Art. 7). More importantly, the draft decision “encourages” developing countries to contribute to the remainder on a voluntary basis (Art. 9). This means that both the money that countries like China or the United Arab Emirates are already investing in climate projects in developing countries, including for profit, and the money that developing countries are borrowing from other developing countries or emerging economies by taking on additional debt, could count towards the remainder. Another part of the remainder can be filled by private companies from developed countries investing in renewable energy in developing countries, taking most of the profits and perhaps using taxpayers’ money from developed countries as collateral in case of losses. What is less likely at this stage is that a significant part of the remainder will be covered by what many have called solidarity levies, such as a global tax on frequent flyers, a tax on financial transactions, a levy on the extraction of fossil fuels, and so on.
In sum, the COP29 draft decision on finance creates the conditions under which developed countries can say they are moving towards meeting the climate needs of developing countries, even though it is mainly the latter that will pay. Moreover, this is all for a rather limited period of time, until 2035. At that point, if the remainder is not met, developed countries could, as before, set a new climate finance target using the unmet target as a floor.
Fausto Corvino is a Marie Skłodowska-Curie Postdoctoral Fellow in Philosophy at the Hoover Chair in Economic and Social Ethics at UCLouvain (Belgium). Previously, he was a postdoctoral fellow in philosophy at the University of Gothenburg (Sweden), the University of Turin (Italy) and the Sant’Anna School of Advanced Studies (Pisa, Italy). He holds a PhD in Politics, Human Rights and Sustainability from the Sant’Anna School of Advanced Studies, with research in political philosophy. His main research interests are climate justice, intergenerational justice and economic ethics.
DISCLAIMER
Fausto Corvino received funding from the European Union’s Horizon Europe research and innovation programme under the Marie Skłodowska-Curie grant agreement No 101109449 (PROHIBLUX). Views and opinions expressed are however those of the author only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the REA can be held responsible for them.