Climate Finance Road to COP29

The road to COP29 is focused on finalizing the New Collective Quantified Goal (NCQG), a crucial annual target for climate finance from developed to developing countries to tackle climate change.

{GS Paper – 3 Environmental Pollution & DegradationGS Paper – 2 Important International InstitutionsConservation}

For Prelims: Loss and Damage Fund, Conference of the Parties (COP 28), New Collective Quantitative Goal, Fossil Fuels

For Mains: Climate Finance and its Significance, Environmental Pollution & Degradation

Table of Contents

Context:

The 2023 UNFCCC COP 28 held in Dubai emphasised the shift away from fossil fuels and committed to tripling renewable energy capacity by 2030.
As preparations for COP29 in Baku gain momentum, the focus shifts towards finance discussions, especially concerning the New Collective Quantitative Goal (NCQG).

The New Collective Quantitative Goal:

The NCQG, effective from 2025, mandates developed nations to annually provide climate finance to developing countries, replacing the unmet pledge of USD 100 billion per year made in 2009.
At COP29 in Baku, Azerbaijan, the negotiation of the NCQG figure will be pivotal, aiming to establish a higher collective amount for wealthy nations to mobilise annually for climate action in vulnerable developing countries.
Securing an adequate NCQG figure is crucial for developing countries, as insufficient climate finance has hindered the implementation of effective climate plans and the building of resilience against the impacts of global warming.

Needed for Effective Climate Action:

Annual climate finance falls short of the pledged USD 100 billion mobilisation by developed countries from 2020.
Even if met, this amount would only represent a fraction of the funds necessary to achieve the 1.5°C pathway until 2030. Current evaluations indicate that annual financial needs amount to trillions of dollars.
A 2021 UN Climate Change report estimated that developing countries require approximately USD 6 trillion annually until 2030 to execute their climate action plans, with updated projections expected to raise this figure significantly.
The final agreement at Sharm el-Sheikh suggested that transitioning to a low-carbon economy could demand USD 4-6 trillion annually until 2050.
Tripling renewable energy capacity, as endorsed in Dubai, is projected to cost USD 30 trillion by 2030 according to the International Renewable Energy Association (IRENA).
Combining these assessments indicates an annual necessity of USD 5-7 trillion, approximately 5-7% of global GDP, underscoring the escalating cost of inaction.

Prospects for a Realistic New Annual Climate Finance Target:

India has advocated for the NCQG to be a minimum of USD 1 trillion per year, primarily in the form of grants and concessional finance.
However, it’s improbable that developed nations will pledge an amount close to the assessed requirements, given their track record of failing to mobilise even USD 100 billion annually.
The UN Climate Change Executive Secretary has urged developed countries to enhance climate finance significantly, stressing the necessity for “trillions, not billions.”

The Challenges Regarding Climate Finance:

Insufficient Funds: Limited access to climate finance impedes many developing countries and vulnerable communities from executing adaptation and mitigation measures. Organisations like the UNFCCC are grappling with severe financial constraints, as their budget remains less than half funded.
Lack of Ambition: Developed nations exhibit hesitancy in committing to the requisite scale of funding to tackle the climate crisis, particularly in offering grants and concessional finance to developing countries.
Transparency and Accountability: Transparent and inclusive monitoring processes are essential to gauge the delivery of climate finance commitments, ensuring equitable distribution and effective utilisation of funds.
Ensuring Equity and Justice: Prioritising equity and justice in the distribution and utilisation of climate finance is imperative, considering the needs and priorities of vulnerable communities disproportionately affected by climate change.
Mobilising Private Finance: While public finance from developed nations is vital, mobilising private sector investment and leveraging innovative financial mechanisms pose challenges in expanding climate finance.
Capacity Building and Technology Transfer: Climate finance should encompass not only monetary aid but also capacity building and technology transfer to empower developing countries in implementing climate action and transitioning to low-carbon economies.
Debt Burdens: Climate finance requirements exacerbate the existing debt burdens of many developing nations, raising concerns regarding their ability to access and repay loans for climate-related initiatives.
Economic Impacts: The global economic slowdown and competing priorities may hinder developed nations from allocating substantial resources toward climate finance efforts.

UPSC Civil Services Examination Previous Year Question (PYQ)

Prelims:

Q. With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct? (2016)

The Agreement was signed by all the member countries of the UN, and it will go into effect in 2017.
The Agreement aims to limit greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2ºC or even 1.5ºC above pre-industrial levels.
Developed countries acknowledged their historical responsibility in global warming and committed to donate $ 1000 billion a year from 2020 to help developing countries to cope with climate change.

Select the correct answer using the code given below:

1 and 3 only
2 only
2 and 3 only
1, 2 and 3

Ans: B

Mains:

Q:1 Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference? (2021)

Q:2 Explain the purpose of the Green Grid Initiative launched at the World Leaders Summit of the COP26 UN Climate Change Conference in Glasgow in November 2021. When was this idea first floated in the International Solar Alliance (ISA)? (2021)

Source: (IE) (DTE)

FAQs

1. What is Climate Finance?

Climate finance refers to financial resources allocated to address climate change. This includes funds for mitigation (reducing greenhouse gas emissions), adaptation (responding to the impacts of climate change), and capacity building (supporting developing countries in their climate action efforts).

2. What is the Road to COP29?

The Road to COP29 refers to the series of meetings and events leading up to the 29th Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC). These events provide a platform for countries to discuss progress on climate action and negotiate new agreements.

3. Why is Climate Finance Important for COP29?

Climate finance is critical for achieving the goals of the Paris Agreement, which aims to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels. Developed countries have committed to providing financial support to developing countries to help them mitigate and adapt to climate change.

4. What are the Challenges of Climate Finance?

There are several challenges associated with climate finance, including:

Mobilizing sufficient resources: Meeting the financial needs of developing countries requires a significant increase in public and private climate finance.
Ensuring equitable distribution: Climate finance needs to be distributed fairly among developing countries, taking into account their vulnerabilities and needs.
Accessing finance: Developing countries often face challenges in accessing climate finance due to complex procedures and eligibility requirements.

5. What are the Expected Outcomes of the Road to COP29 on Climate Finance?

The Road to COP29 is expected to result in progress on several key issues related to climate finance, such as:

Increased pledges of financial support from developed countries
Improved access to climate finance for developing countries
Agreement on new mechanisms for mobilizing climate finance

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Climate Finance Road to COP29 – UPSC