July 24, 2024

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Countries draw battle lines for talks on new climate finance goal

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Developed and developing countries are gearing up for heated discussions over the size of the goal and who should provide money for it

Governments are drawing their battle lines over what a new global climate finance goal should look like as talks face time pressure for a decision to be made at Cop29.

With fewer than nine months to go until the UN climate summit in Baku, negotiators are currently staring at a long list of options and no agreed details for the goal that is due to kick in from 2025.

They still need to work out everything from how large the overall sum should be, to what it needs to pay for, over how many years, and the best way to monitor the money.

But nations are at odds over what upcoming negotiations should prioritise.

Most developing countries want to talk about numbers and commit rich nations to stump up the highest amount of cash possible with the fewest strings attached. Meanwhile, developed countries argue it shouldn’t be just them paying and want the focus to be first on broadening the list of contributors.

Moving past contentious $100bn target

Experts say acrimony over the existing $100-billion annual target – which the new goal is set to replace – makes finding common ground more difficult.

Developed countries failed to provide that promised yearly sum to developing nations by the initial 2020 deadline and, again, in 2021. They now “look likely” to have met the goal in 2022, according to an assessment by the Organisation for Economic Co-operation and Development (OECD) based on preliminary data that is not publicly available.

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The new collective quantified goal (NCQG) is due to be agreed at this year’s climate summit. The decision will be especially important for vulnerable countries that want to know how much money they are likely to receive as they draft their new climate plans due in 2025.

Two things are certain: It needs to be more than $100 billion a year and take into account the priorities of developing countries. Everything else is still to play for.

After several meetings in the last two years, negotiators produced dozens of options across the main issues at stake. They now need to narrow those down to hand politicians a draft text with the most contentious issues to be fought over in Baku in November.

New submissions made by countries this month give an insight into how they think those discussions should play out.

How big should the goal be?

Determining the exact size of the new goal is one of the thorniest elements to untangle.

The final figure will vary depending on the answers to a series of interconnected, and still unresolved, questions: What is the timeframe? Does it need to fund only emissions-cutting and adaptation measures, or loss and damage too? Will it include private finance?

“The $100 billion was just a political number, while the new goal needs to rely on science and an assessment of actual needs,” said Natalia Alayza, a climate finance expert at WRI, a US-based think-tank.

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The sources used to work that out will play a crucial role. One much-referenced document in negotiations so far is the needs determination report written by the UNFCCC’s standing committee on finance. Published in 2021, it tallied the money required by developing countries to fund actions listed in their climate plans. The report concluded a total of $5.8-5.9 trillion will be needed up to 2030.

India and the Arab group of countries, led by Saudi Arabia, argue this means rich nations have to provide at least $1 trillion a year under the new goal.

Experts say the chances of that are close to zero. “Developed countries would never be able to convince their parliaments to spend those sums,” said Michai Robertson, a research fellow at London-based think-tank ODI and adviser to the group of small island nations. “What’s likely to happen is that, once an overall technical figure is established, there will be a highly political discussion on a fractional amount to be used for the goal.”

Who should pay?

Developing countries lament that their wealthy counterparts have so far shied away from any talk of numbers in the negotiations. The latest submissions from the US, EU, UK, Japan and Australia do not mention figures or possible sources to determine them.

Alpha Kaloga, the lead negotiator for the African group, told Climate Home donor governments should stop coming to the table with “empty pockets”.

“If they are negotiating in good faith, they should say ‘this is the amount that we commit now, the signal we want to give’,” he added. “They should come with ambitious numbers and then push for other countries that are in a position to do so to pitch in.”

Cop28 new climate finance goal

Negotiations over the new climate finance goal at Cop28. Photo: IISD/ENB | Mike Muzurakis

But developed countries are pressing for discussions to move in the opposite direction. Before agreeing to any dollar amounts, they want to settle the question of who is going to fill the money box. Spoiler: They think it shouldn’t be just them.

In its submission, the EU says the new goal should take into account “the evolving capacities of countries to contribute to the provision and mobilization of climate finance”. The US laments that options to determine the contributor base “have not been sufficiently discussed or identified” in technical meetings to date.

Japan is more explicit: “Emerging countries with a capacity to do so” should be added to the list of contributors, its submission says. “Now is the time to move away from the binary opposition between developed and developing countries,” it adds.

Legal arguments over contributors

Last year, similar rhetoric animated discussions over who should pay into the nascent loss and damage fund. Rich countries argued that high-emitting nations like China, South Korea, Russia and the Gulf petrostates should contribute. In the end, developing nations were only “encouraged” to do so “on a voluntary basis”. The United Arab Emirates, host of Cop28, pledged $100 million to the new fund.

Most developing countries still strongly oppose any changes to the contributor base. They argue that the 2015 Paris Agreement puts the responsibility of fulfilling the climate finance goal squarely on the shoulders of rich governments.

“It is clear that they are attempting to shift the burden,” said Kaloga.

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But developed countries point the finger at another section of the landmark Paris text. Article 2.1 calls for “making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. They claim this provides cover for their argument that everyone should pay for climate action.

ODI’s Robertson doesn’t see any realistic legal avenue to compel additional countries to stump up the cash for the goal. “Either nations self-declare that they now consider themselves ‘developed’ or all 195 parties agree to amend the Paris Agreement and redefine, top-down, who is and isn’t a developed country,” he said. “Both options seem impossible.”

Tracking delivery of pledges

Heated negotiations are also expected over the transparency arrangements to monitor if and how the money is delivered.

The earlier $100-billion pledge came with no official rules on what activities could be counted. As Reuters discovered, Italy provided money to a retailer opening gelato stores across Asia and Japan financed a new coal plant in Bangladesh. Both projects were included in the countries’ contributions towards the $100-billion goal.

The fundamental issue is that there is no internationally agreed understanding of what climate finance means.

Most developing countries are pushing for a common definition to be included in the new goal to be set at Cop29, alongside strict rules that prevent any accounting tricks.

“Transparency is one of the biggest lessons to learn from the $100-billion goal. Not only we don’t know if it’s been met, but how it’s been met,” said WRI’s Alayza. “We need to ensure that data is comparable, accurate and consistent – and accurately reflects what has been provided.”

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