Since COP29 was billed as the “finance COP”, it was to be expected that the flow of money would be the main focus of the negotiations at the climate summit in Baku. Yet on the afternoon of Friday 22 November, the wealthy countries were accused of still keeping a tight grip on their “chequebooks”. The summit was a desperate search for an agreement that all participants could accept.
A few hours before the summit closed on the evening of 22 November, the COP29 presidency tabled several new drafts stating that the investment earmarked for climate finance was 1.3 trillion dollars (1.25 trillion euros).
This figure of 1.3 trillion US dollars matches the demands set out by the group of 77 developing countries and China. It sits alongside a sub-target of 250 billion US dollars that wealthy countries would have to pay to developing countries by 2035. That sum is far below the 500 billion US dollars demanded by the G77 group. It provides for around 220 billion US dollars to go to the least developed countries and 30 billion US dollars to the “small island” states (Oceania, the Caribbean, the Indian Ocean and so on).
China appears to be one of the main beneficiaries, followed by the fossil fuel producing countries, which have substantially watered down the wording on moving away from fossil fuels.
For the European Union's negotiating team it is a failure. EU representatives were concerned about backsliding on last year's Dubai commitment, which stressed a gradual phase-out of fossil fuels. In the latest document tabled in Baku, this issue is worded vaguely.
The text published on 22 November offers a “masterclass example”, describing the “multi-sectoral and multi-dimensional nature of a just transition” and how it can “promote the creation of green, decent jobs and ... significant socio-economic opportunities linked to the transition away from the use of fossil fuels in energy systems”.
As early as 21 November, EU climate commissioner Wopke Hoekstra described the latest text as “clearly unacceptable”.
The biggest failure concerns funding
One of the delegates' priorities was to discuss the 100 billion US dollars a year that developing countries considered insufficient. From 2025, donor countries have set a new collective target worth more than 1 billion US dollars a year. The funding would be provided over the next five years. Even this proposal is regarded by developing countries as insufficient. The previous annual target, set in 2009, was only met in 2021.
"While 1–1.3 trillion US dollars is an appropriate figure to use in order to reflect external funding needs in full, the negotiators need to determine how much of it will consist of public money allocated from public sources. That is exactly where we are currently stuck,” said Gaia Larsen, director of climate finance access at the World Resources Institute.
Some developing countries want “the whole trillion” to be public funding. That has never looked realistic, however. The European Union has indicated that its offer would be between 200 and 300 billion dollars. The United States has made no offer at all. That is hardly surprising, since president-elect Donald Trump has already threatened to withdraw the US from the Paris Agreement (again).
At the heart of the dispute over the scale of climate finance is disagreement about who should contribute. Europe and other wealthy countries have sought to broaden the base of contributors to international climate assistance, including the Loss and Damage Fund. This was agreed at last year's COP summit in Dubai. The agreement would mean that China and Saudi Arabia could also make contributions.
Ahead of the Baku summit, the European Parliament set out its position and called for all major countries and countries with rapidly growing economies that have high emissions and a high GDP to provide financial support for international climate action.
Is China still a “developing” country?
Although China is the world's second largest economy, it maintains that it is still a developing economy and has joined forces with the G77 group of developing countries to resist the proposed funding model. The head of China's climate delegation, Zhao Yingmin, argued that Beijing would in future take part in climate finance on a voluntary basis, without assuming binding commitments. China has got its way. The document of 22 November speaks of developing countries “being invited to make voluntary contributions” to climate finance.
At the same time, the European Union leads a group of wealthy countries that is unwilling to discuss new financial commitments without quid-pro-quo conditions (something for something). The EU wants a broader agreement on new funding to include a commitment to phase out the use of fossil fuels and to move towards global carbon pricing.
EU officials believe this would help create a level playing field internationally and encourage other countries to introduce emissions trading systems and schemes. The approach would be modelled on the EU's carbon border adjustment mechanism – with taxes on imports linked to carbon emissions.
This deadlock has been particularly frustrating for African countries, many of which are on the front line of extreme climate change. Panama's envoy Juan Carlos Monterrey Gomez also described the 250 billion US dollar offer as “shameful, dispassionate and evil”.
A blank sheet of paper
Others call everything on offer at the so-called “finance COP” a blank sheet of paper. On Friday, the chair of the African group of negotiators, Ali Mohamed, said the target of 250 billion US dollars “is completely unacceptable and inadequate”. He had earlier described the so-called “quantified goal” as “the reason we are here... but we are no closer, and we need the developed countries to engage on this issue urgently”.
Others are more optimistic
“It is not a landing zone yet, and at least we have not taken off without a map,” Germany's climate envoy Jennifer Morgan said of the 22 November announcement.
The Baku summit has attracted a great deal of criticism. Many pointed to poor organisation and to the inconsistency of holding climate summits in oil-producing countries such as Azerbaijan and last year's COP host, Dubai.
“If the Baku summit fails to reach agreement on the main climate finance target, there is a risk that it could trigger a collapse of ambition as serious as that at the UN climate summit in Copenhagen in 2009,” said Adonia Ayebare, chair of the G77 group of developing countries. The stakes are high.