Climate Finance Dominates COP29 Discussions Amid Rising Tensions

Key Focus: Setting a New Climate Finance Goal
At the 29th UN Climate Summit (COP29) in Baku, Azerbaijan, the central issue is climate finance. As the world grapples with the escalating impacts of climate change, developed nations are facing mounting pressure to establish a new collective finance goal. The focus is on how much is needed, who will contribute, and how the funds will be allocated to developing countries that are suffering the most from climate impacts.

Revisiting the $100 Billion Target: Is It Enough?
The previous climate finance target of $100 billion annually—set by developed countries—was supposed to continue until 2025. However, many argue that this amount is insufficient to meet the growing needs of developing countries, especially as the cost of managing climate change-related disasters has surged into the trillions. A report by ActionAid highlighted that in 2022, developed nations provided just $28-35 billion in grants, far less than what was spent globally on ice cream ($71 billion). Experts are now pushing for a much larger and more sustainable funding commitment to meet the true financial needs of climate adaptation and mitigation.

Expanding Donor Base: Should More Countries Contribute?
A significant point of contention is who should contribute to climate finance. Currently, only 23 countries—mainly from the Global North—are required to provide finance to developing nations under the UN climate framework. This “Annex II” group was based on the historical responsibility of developed nations, as they are the largest emitters of greenhouse gases. However, emerging economies such as China and the Gulf states are being increasingly urged to contribute as well, given their growing economic power and carbon footprints. Some proposals suggest a “multilayered” approach, where larger economies like China could contribute to a global investment layer, while not being held directly responsible for the $100 billion target.

Grant vs. Loan: What Form Should Climate Finance Take?
Another key issue at COP29 is whether climate finance should primarily be in the form of public grants or loans. Developing countries prefer grants, which do not add to their debt burden, while developed nations often push for loans, arguing that private investment will be crucial to meeting the trillions needed. However, loans, especially non-concessional loans at market rates, are seen by many as problematic for poor nations struggling with debt. The majority of the $100 billion target has been provided through loans, but developing countries argue that grants are a more equitable solution.

The Need for Adaptation and Loss & Damage Financing
While much of the climate finance has focused on mitigation—such as clean energy projects—developing nations are calling for more funding to address adaptation and loss and damage. This includes support for building resilient infrastructure, such as flood defenses and climate-resistant crops. The issue of “loss and damage” has been a particularly contentious area, with some countries pushing for sub-targets to ensure that these needs are properly funded. However, nations like the US have expressed concerns about the financial burden, making it a difficult negotiation point.

Ongoing Negotiations and the Future of Climate Finance
With intense negotiations underway, the COP29 summit will set the course for global climate finance in the coming decades. The world will be watching closely as nations work to reach a consensus on the amount of money needed, the responsibilities of different countries, and the best mechanisms to ensure that funds are used effectively to tackle the climate crisis.