Climate Finance Road to COP29

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

Source: IE

Why in News?

The UN Climate Change Conference (UNFCCC COP 27) convened in Sharm El-Sheikh, Egypt
established a Loss and Damage Fund for climate disaster recovery in developing nations.

The 2023 UNFCCC COP 28 (Dubai) focused on transitioning from fossil fuels, pledging
to triple renewable energy capacity by 2030.
As preparations for COP29 in Baku intensify, attention now turns to finance discussions,
particularly the New Collective Quantitative Goal (NCQG).

What is the New Collective Quantitative Goal?

The NCQG is a new annual financial target that developed countries must meet from 2025
onward to provide climate finance to developing countries.
It will replace the previous commitment of USD 100 billion per year that developed
nations had pledged in 2009 but failed to deliver.
The final NCQG amount is expected to be a central point of negotiation at the COP29 summit in
Baku, Azerbaijan, in November 2024.
The NCQG negotiations aim to set a higher collective amount that wealthy countries will
need to mobilise annually for mitigation, adaptation, and other climate action efforts in
poorer nations vulnerable to the impacts of climate change.
Securing an adequate NCQG figure is extremely important for developing countries, as a lack of
sufficient climate finance has been a major barrier to implementing effective climate plans
and building resilience against global warming's effects.
How Much Money is Needed for Effective Climate Action?

Global climate action faces a significant hurdle due to inadequate financing, especially in
developing countries.
Annual climate finance flows fall far short of the promised USD 100 billion mobilisation by
developed countries since 2020.
Even if that amount were available, it would only be a small fraction of the money needed
to keep the world on the 1.5°C pathway until 2030.
Current assessments suggest annual financial requirements amount to several trillions of dollars.
A 2021 report by UN Climate Change estimated that developing countries would need
about USD 6 trillion annually until 2030 to implement their climate action plans.
Updated reports are expected to raise this figure substantially.
The final agreement at Sharm el-Sheikh outlined that transitioning to a low-carbon
economy could require USD 4-6 trillion annually until 2050.
Tripling renewable energy capacity, as agreed in Dubai, is estimated to cost USD 30 trillion by
 2030 as per the International Renewable Energy Association (IRENA).
Combining these estimates suggests an annual requirement of USD 5-7 trillion, equivalent to about
5-7% of global GDP, highlighting the escalating cost of inaction.

Prospects for a Realistic New Annual Climate Finance Target

Exact amounts under discussion are undisclosed to the public at present. Given past performance,
the expectation that developed nations commit to significantly higher amounts is deemed
unrealistic.
India has called for the NCQG to be at least USD 1 trillion per year, primarily in grants and
concessional finance.
However, it is unlikely that developed countries will commit to an amount close to the
assessed requirements, given their failure to mobilise even USD 100 billion annually.
The UN Climate Change Executive Secretary has urged developed countries to make climate
finance "bigger and better," emphasising the need for "trillions, not billions".

What are the Challenges Regarding Climate Finance?

Insufficient Funds:
There is a significant gap between the funds needed to address climate change and
the actual resources available for climate-related projects and initiatives.
Many developing countries and vulnerable communities have limited access to climate
finance, hindering their ability to implement adaptation and mitigation measures.
Many organisations like the UNFCCC are currently facing severe financial challenges with a
budget that is less than half funded.
Lack of Ambition:
Developed countries have been reluctant to commit to the scale of funding necessary to
address the climate crisis, particularly in providing grants and concessional finance to
developing nations.
Transparency and Accountability:
There is a need for transparent and inclusive processes to monitor and measure the
delivery of climate finance commitments, ensuring that funds are distributed equitably
and used effectively.
Ensuring Equity and Justice:
The distribution and utilisation of climate finance should prioritise equity and justice, taking
into account the needs and priorities of the most vulnerable communities and
marginalised groups who are disproportionately affected by climate change.
Mobilising Private Finance:
While public finance from developed nations is crucial, mobilising private sector investment
and leveraging innovative financial instruments remain challenges in scaling up climate
finance.
Capacity Building and Technology Transfer:
Climate finance should not only focus on monetary support but also on capacity
building and technology transfer to enable developing countries to effectively
implement climate action and transition to low-carbon economies.
Debt Burdens:
The climate finance requirements add to the existing debt burdens of many
developing nations, raising concerns about their ability to access and repay loans for
climate action.
Economic Impacts:
The global economic slowdown and competing priorities may make it challenging for
developed nations to allocate significant resources towards climate finance.

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)

1. The Agreement was signed by all the member countries of the UN, and it will go into effect in
2017.
2. The Agreement aims to limit the 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.
3. 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:

(a) 1 and 3 only

(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Ans: B

Mains:

Q. 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. 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)

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