COP29 Raises Climate Finance for Developing Nations

On Saturday, 23 November, the COP29 in Baku, Azerbaijan, wealthy and developing countries struck a new climate deal.

The intense negotiation over time resulted in a new target of US$300 billion in climate finance to help developing countries transition from fossil fuels and adapt to climate change’s catastrophic impact. However, the figure agreed upon, which will be paid yearly until 2035, was decried by its intended recipients as insufficient.

CNN reports that after the gavel went down to seal the new climate finance deal of US$300 billion per year, India’s representative Chandni Raina slammed the agreement as “abysmally poor” and a “paltry sum,” calling it “nothing more than an optical illusion” and unable to “address the enormity of the challenge we all face” (Paddison, 2024).

The newly announced climate fund, totalling $300 billion and officially called the New Collective Quantified Goal on Climate Finance (NCQG), is a significant step; however, it falls well short of the $1.3 trillion that experts believe is crucial to eliminating reliance on fossil fuels and supporting climate adaptation in developing nations.

Experts like Amar Bhattacharya, Vera Songwe, and Nicholas Stern of the Independent High-Level Expert Group on Climate Finance estimate that investments worth US$2.3 trillion to US$3.5 trillion will be needed to reach these climate goals by 2035.

However, rich countries say that the $300bn will unlock private money, spurring funding from other sources, such as multilateral development banks and private sources, and not just public funding from wealthy countries.

Simon Stiell, head of the United Nations Framework Convention on Climate Change, gave a more optimistic view of the new agreement, saying, “It has been a difficult journey, but we’ve delivered a deal,” “This new finance goal is an insurance policy for humanity, amid worsening climate impacts hitting every country” (Paddison, 2024).

Polluters pay

Wealthy nations have often been identified as significant climate change contributors primarily because of their large share of historical greenhouse gas emissions. In 2009, 43 developed countries, including the United States, Japan, and numerous European nations, committed to raising US$100 billion annually through International Climate Finance (ICF). This funding is aimed at aiding 155 developing countries in tackling climate change.

According to the Intergovernmental Panel on Climate Change (IPCC), this financial support is essential for facilitating a transition to a low-carbon and resilient global economy. The assistance can be loans, grants, or export credits from the public and private sectors.

However, the Organisation for Economic Development Cooperation (OECD) tracking shows that developed countries missed meeting the target every year from 2009 to 2021. Only in 2022 did they reach the target and surpass it for the first time when international climate finance totalled US$116 billion.

Most of this finance is from public sources and in the form of loans rather than grants at 69% in 2022, equivalent to US$63.6 billion. Some of the loans are also non-concessional, meaning they are offered at commercial rates, which increases the debt burden on these lower-income countries that are recipients of the loan. The OECD recommends mobilising more private funding to mitigate growing debts incurred by developing countries. This has increased private financing to 52% in 2022, equivalent to US$21.9 billion, and up from US$14.4 billion in 2021.

Regarding the new climate finance deal of US$300 billion annually agreed upon at the end of COP29 in Baku, Azerbaijan, CNN reports that developing nations wanted wealthy countries to pay a larger share of this figure through grants to keep them deeper in debt.

Other deals agreed at COP29

The primary purpose of this year’s COP is to wrap up some of the issues unsolved in previous COPs, such as the UN’s system’s need for new carbon credit trading rules, which were raised at COP21 in 2025.

This year’s COP claimed that it had achieved full operationalisation of Article 6, which is a trusted and transparent carbon market for countries as they collaborate to reach their climate goals. Part of Article 6 is to allow countries to trade carbon pollution rights, enabling countries to continue using fossil fuels if they could offset it elsewhere.

COP29 Lead Negotiator Yalchin Rafiyev commented, “Today, we have unlocked one of the most complex and technical challenges in climate diplomacy. Article 6 is hard to understand, but its impacts will be clear daily. This means coal plants are decommissioned, wind farms are built, and forests are planted. It means a new wave of investment in the developing world” (COP29 achieves, 2024).

Part of the Article 6 system of carbon credits allows nations to put planet-warming gasses in the air if they offset emissions elsewhere. It will also enable countries to identify and authorise carbon credits that can be traded with other countries. Backers said a UN-backed market could generate an additional US$250 billion annually in climate financial aid.

However, many experts consider this decision regarding carbon markets a contentious plan because it does not prevent misuse and will allow big emitters to continue using and investing in fossil fuels. Regarding this decision, the Economist notes that the timelines involved are not well defined, the transparency such systems need is not assured, and countries that do things badly will not necessarily face the consequences beyond having the facts pointed out.

COP29 was an essential moment for climate adaptation, with several key outcomes. The climate change summit agreed to establish a support program for implementing National Adaptation Plans (NAPs) for the least-developed countries. Finance and technical support will be provided to these countries to formulate and implement their NAPs.

This year’s COP also ensures the full operationalisation of the Loss and Damage Fund and awaited decisions by developing countries, including small island states, least-developed countries, and African nations. The Loss and Damage Fund was established during COP27 held in Egypt, which aims to provide financial assistance to countries most vulnerable to climate change impacts. The Loss and Damage Fund will be able to start financing projects beginning in 2025.

To learn more about what was achieved during COP29 in Baku, Azerbaijan, Carbon Brief provides an in-depth analysis of critical outcomes both inside and outside the COP.