Author: Azar Hasanli

COP29 continues in Baku, Azerbaijan, with primary negotiations focused on the new collective quantified goal (NCQG). I attended one of the discussions as an observer, and the dynamics were disheartening.

The UNFCCC shared the ad hoc work program on the NCQG for climate finance in mid-October 2024, which includes various proposals on its quantity and structure. Both developed and developing parties participating in the discussion criticized the document, albeit from contrasting positions. Developing parties highlighted the importance of taking common but differentiated responsibilities (CBDR) as a ground element in the discussions. Developed parties, namely the United States, Canada, and Australia, tagged CBDR as an “unworkable element” of the NCQG. The European Union aligned with other developed parties, asserting that the CBDR principle is applied in a different context compared to the stance of developing parties. Developed parties emphasize capabilities in climate finance mobilization, while developing parties often focus on responsibilities. The needs of vulnerable parties appear to be a derivative outcome of these two principles.

The answer to this question is naturally explored from a policy aspect. However, the core principles of international environmental law are not only grounded in legal responsibilities but are also deeply rooted in ethical foundations. If we are taking about just transition, the direct and indirect cost of this process should reflect fair shares in responsibilities and commitments. In this regard, climate finance allocation between different pillars should be grounded in the frameworks combining ethical considerations with enabling policy actions. It seems that both developing and developed parties approach this problem predominantly from a domestic or international political setting rather than real policy frameworks.

I had opportunity to participate in different sessions on adaptation and mitigation financing topics. There is a general concern about the current allocation of climate finance among these pillars. Currently around 85% of climate finance goes for mitigation financing, while adaptation financing remains one of the structural challenges across all countries, especially in the developing ones. The problem with adaptation financing is multidimensional, including limited scalability and the non-existence of universal and sound impact assessment tools. According to CPI, adaptation finance doubled between 2018 and 2022; however, annual flows are still at just one-third of the volume required until 2030 in emerging and developing economies.

What should be an ethical framework for climate finance allocation among these pillars? Mitigation efforts provide more measurable outcomes and may attract interest from the private sector. However, data and knowledge gaps hinder the ability to identify, develop, and prepare potential climate adaptation projects. The limited scalability of adaptation measures makes it the responsibility of governments to take a leading role, especially given the very high debt levels in most developing countries. The problem becomes more complicated when loss and damage funding, which addresses the impacts associated with climate change, is added.

Thus, the primary problem still exists not only in the mobilization of climate finance, but also in its allocation. The ethical challenges on the mobilization side are the responsibilities and commitments of stakeholders. On the allocation side, the primary ethical consideration appears to be the most impactful usage of these limited funds. There is not any universal methodology and metrics addressing this problem although different options exist. Therefore, the NCQG issue should not be considered resolved, even if parties agree on the quantified goals. Addressing climate change requires impactful spending and investments across various pillars, with their ratio still residing in the gray area at the intersection of policy, politics, and ethics.

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.