Will It Be Business as Usual in Baku?

Agricultural lands flooded. Rivers drying up. Lives, livelihoods, way of life, health and wellbeing severely threatened. Homes, communities, and whole nations on the verge of disappearing. Climate shocks are growing exponentially all over the world, with the heaviest costs borne by marginalized and frontline communities especially in the Global South.

No matter the response to the climate crisis — be it rolling out solar panels in rural Kazakhstan, engineering floodwalls in coastal Bangladesh, or rebuilding homes after cyclones in the Philippines — they all require one core thing: funding. As how societies response to the climate crisis is in large part determined by the availability of and access to financial resources, it is one of the most important and contentious issues negotiated at the UN climate change negotiations, or Conference of the Parties (COP). This is particularly true this year, with the scheduled conclusion of the New Collective Quantified Goal on Climate Finance (NCQG) leading to the negotiations being dubbed the “Finance COP”.

There are three categories of climate action: mitigation refers to the reduction of greenhouse gas emissions, adaptation refers to actions that help reduce vulnerability to the current or expected impacts of climate change, and loss and damage refers to response measures in the aftermath of  unavoidable and irreversible climate impacts. Continued failure to mitigate, coupled with huge gaps in adaptation, have resulted in more catastrophic events that lead to massive loss and damage for those least responsible for the crisis.

Climate justice principles as enshrined in international environmental law guided the founding of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992. The Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) essentially acknowledge that while all countries are affected by climate change, some bear a greater share of responsibility. Meanwhile, the Polluter Pays Principle (PPP) recognizes that the Global North ought to shoulder that responsibility by financing developing countries’ climate action. The goals of the Convention were laid out in the Paris Agreement, in which Article 9 clearly states that “developed country Parties should continue to take the lead in mobilizing climate finance”.

However, there is much less agreement about the degree to which these principles are being adhered to in the positions and commitments of the Global North, or “developed countries” in UN terminology. Those disagreements, many predict, will dominate the negotiations at COP29 in Baku.

Fault Lines at COP29

The 2009 UN climate change negotiations in Copenhagen resulted in an “agreement” that developed countries would provide developing countries 100 billion US dollars per year to finance their efforts at building resilience and transitioning to low-carbon pathways. This comparatively modest goal was the result of political intimidation by developed countries to begin with, because in reality, 100 billion is a far cry from what is needed to even begin to respond to developing countries’ needs. Making matters worse, there is a vast gulf between what was promised and what has actually been delivered, leading many to raise accusations of a “broken promise”.

Further research on holistic carbon inequalities has shown that by 2050, the Global North will actually owe the Global South approximately 192 trillion dollars for atmospheric appropriation, a term denoting when countries overshoot their fair share of the remaining carbon budget. Broken down, this amounts to around 5 trillion per year, and thus forms the demands laid out by numerous civil society organizations and networks in the run-up to COP29. Developed countries have failed to come up with an estimate themselves, showcasing a lack of will to even get the ball rolling. It is essential, however, for the new financial goal to respond to the genuine needs of developing countries, moving from billions to trillions in terms of annual financing. In addition, a clear timeline needs to be set as to when how much will be provided, with clear consequences should it not be adhered to. This omission was considered a considerable weakness of the agreement in Copenhagen.

The question of how finance is provided is even more crucial when considering that those countries experiencing the harshest of climate change impacts are also those suffering most from the debt crisis.

Another point of contention is which countries should contribute to the new climate finance goal. In accordance with the convention, only developed countries have the responsibility of providing climate finance. However, the categorization of which countries are developed and which are developing was established in the early 1990s based on socio-economic indicators that, negotiators from developed countries argue, have changed significantly. According to the latter, emerging economies such as the United Arab Emirates or Singapore should no longer be treated as developing countries. China in particular is cited as a country that should contribute to the new climate finance goal.

On the face of it, these positions are understandable, considering China’s current output in CO2 emissions is the highest in the world. However, the argument does not account for China having the second-largest population, as well as a large percentage of domestic goods produced for export to the Global North. Most importantly, even if those countries that have undergone significant industrialization since the early 1990s were to contribute to the NCQG, it still would not be enough to make up for developed states not fulfilling their responsibilities.

The question of who should pay is not the only topic of debate. A growing issue is also who should receive money. In the run-up to COP29, there has been a push by developed countries to prioritize the poorest countries (known as Least Developed Countries, or LDCs), as well as small island nations (known as Small Island Developing States, or SIDS). Many developed countries and civil society organizations based in the Global North see this as an opportunity to provide charity to those most in need, rather than advocate for structural justice. Yet the convention actually states that all developing countries are eligible for climate finance, and many of the more progressive outcomes at previous COPs have been achieved in large part to the unity of developing countries. This issue threatens to drive a wedge between them, significantly affecting the chances of a progressive outcome on the NCQG.

There is also the question of exactly where funds will come from. It is important that climate finance remain distinct from humanitarian aid or development assistance already being provided. Governments need to be transparent in where the funds for the climate finance goal go, to avoid funds being siphoned off from other development commitments and to avoid double counting. Another issue is whether loss and damage should be considered part of the new climate finance goal. While developing countries want a holistic approach to climate finance that encompasses mitigation, adaptation, and loss and damage, developed countries seek to keep financing for loss and damage separate.

The next issue is how climate finance is provided. Developing countries are calling for the bulk of climate finance to come from public sources, generally in the form of grants with few strings attached, allowing for recipients to address their most urgent priorities and needs. Currently, most climate finance comes in the form of loans, which need to be paid back with interest. Yet at least with regard to adaptation and loss and damage, it is unclear how private finance will be incentivized without tangible returns on investment. While some areas within the mitigation sector do offer returns (in particular renewables), there is a risk of adaptation and loss and damage being left behind. To make matters worse, the call for increasing the flow of private finance often goes hand in hand with creating what are known as “enabling conditions”, generally meaning austerity along with a scaling-back of public provisioning systems and safety nets, such as social welfare, healthcare, or education.

COP29 in Baku represents a chance to rebuild the trust lost through the broken promises of Copenhagen.

The question of how finance is provided is even more crucial when considering that those countries experiencing the harshest of climate change impacts are also those suffering most from the debt crisis. Developing countries are essentially asked to borrow on the international credit market at high interest rates to invest in the alleviation of the impacts of climate change, a problem their populations have contributed hardly anything to. In addition, the indebtedness of developing countries also prevents them from making the transition to renewables and moving away from fossil fuel energy systems as laid out in the Paris Agreement.

It is therefore key that COP29 also reinforces momentum towards reforming the International Financial Architecture (IFA), which is rooted in colonialist and neo-colonialist development policies. Calls for debt cancellation to alleviate the impacts of the climate crisis have been growing, and a clear signal to the Fourth Conference on International Financing for Development should be made in the NCQG. Cancelling illegitimate debt would mean that developing countries would not be forced to spend vast amounts of their national budgets on repayments to its lenders, and could instead focus on investing in renewables and protecting their populations from the impacts of climate change. Furthermore, how the NCQG relates to the United Nations Tax Convention, an initiative aimed at democratizing global economic governance through reforming the global tax architecture, remains to be seen.

COP29 in Baku represents a chance to rebuild the trust lost through the broken promises of Copenhagen. Finding agreement in the NCQG process by securing a progressive goal for climate finance that is needs-based, non-debt-creating, and predictable, will be a key step towards rebuilding that trust. Nothing less than the success of the Paris Agreement hangs in the balance.

Geopolitical Headwinds

The undeniable urgency of the climate crisis aside, the geopolitical context in which COP29 will take place cannot be ignored. The crisis of multilateralism does not seem conducive to progressive outcomes. Public funds are spent on spiralling military budgets to fund wars of aggression, in conjunction with a rise in authoritarian tendencies in much of the Global North. Recent elections across Europe indicate the populist far right is still growing, to which conservative forces have responded by shifting their own positions even further to the right. Amongst many harmful consequences, this has fuelled a rise in scepticism of international development issues and a diminished presence for progressive voices advocating for international climate finance in the Global North, which in turn could have a significant effect on NCQG negotiations. Although Donald Trump will not yet be president next week, his victory in the US presidential election means that the world’s most powerful country will also be a powerful adversary of not only climate finance, but the whole UNFCCC process.

Nevertheless, there are a few rays of hope. COP29 is taking place amidst some genuine momentum for the reform of the international financial system. Any long-term sustainable solution has to enable countries of the Global South to reclaim their sovereignty and fiscal space to determine their own development pathways. This should mean upending the Global North and its institutions’ colonial stranglehold. It is crucial that this momentum not go to waste — lest the people of the Global South completely lose their faith in the ability of the international order to take their interests into account during this era of global transition and transformation.