The United Nations Climate Change Conference (COP29) started yesterday in Baku, Azerbaijan. COP29 is hoped to be a pivotal moment in terms of adopting new collective quantified goals (NCQG) on climate finance. NCQG is expected to be a primary reference in terms of mobilizing financial resources to address the increasingly unattainable Paris Agreement goals.

Just a few days ago, the UN Environment Programme released its latest Adaptation Gap report highlighting the need for a dramatically increase in adaptation efforts. The report informs us that global average temperature rise is approaching 1.5°C above pre-industrial levels while the latest predictions put the world on course for a catastrophic rise of 2.6-3.1°C this century unless there are immediate and major cuts to greenhouse gas emissions. In this regard, NCQG should include stronger adaptation components in the next round of nationally determined contributions. However, the Global Landscape of Climate Finance 2024 report released by the Climate Policy Initiative identifies lagging adaptation finance as one of the persistent challenges across all economies alongside with a chronic investment gap in high-impact sectors and the danger of increasing investment in fossil fuels.

The discussions about inclusion of loss and damage funding constitute another layer of the problems regarding the quantum of the NCQG. The ad hoc work program on the NCQG on climate finance released in mid-October 2024 involves different proposals about the quantity and structure. It is a welcoming to see rising voices of supporting loss and damage funding. However, considering the prevalent idea that loss and damage funding should be based on grants, the identification of the contributors’ base creates another conundrum.

Loss and damage and adaptation funding have similar characteristics like public goods featured by upfront costs, long investment timeliness and lacking clear revenue streams. Thus, the primary motive for loss and damage funding is not financial gains or indirect financial benefits in the form of avoided costs as featured by adaptation funding. Loss and damage refers to the adverse observed economic and/or non-economic impacts and/or projected risks of climate change.

Given all these insights, a primary question still needs a prompt and actionable response: What should be primary criteria for identifying contributors to the loss and damage funding? Economic capability of countries (including advanced and developing economies), historical responsibility for greenhouse gas emissions, or any other factors? This question does not have a binary answer in nature. However, any choice of answers is constrained by domestic political factors, international geopolitical confrontations, and the risk of being ground for future legal obligations in climate finance provision.

In addition, the proportions of climate finance allocated among primary buckets, namely mitigation, adaptation and loss and damage funding also remain unsolved. One of the most recent estimations for loss and damage requires at least $724 bln while nearly all proposals for NCQG mentioned in the UNFCCC work programme are substantially less than these needs.

Climate change is a complicated problem that requires a middle ground between actionable policies, economic capabilities and responsibilities, along with scientific findings. It would also be altruistic to expect the current COP29 Presidency to solve NCQG conundrum and other climate issues among parties. However, COP29 is an opportunity to discuss all these issues and enable parties to align their divergent positions. Upcoming two weeks are crucial for global climate action; otherwise, the cost of inaction will be too late to fix for all parties.