In the lead-up to COP29, climate finance has become a central focus in global efforts to address climate change, especially as the world nears the annual summit of the Paris Agreement parties. The urgency of discussions on climate finance has grown, underscoring the recognition that without adequate financial resources, the goals of the Paris Agreement may remain unattainable.
Recent advancements in climate finance, such as the creation of the Fund for Loss and Damage (FLD), highlight the complexities and challenges of securing necessary funds for climate mitigation and adaptation, particularly in developing nations. The long-standing debate over the definition and scope of climate finance is expected to intensify in the coming months.
Several key developments have already set the stage for what is anticipated to be a pivotal and contentious COP29 in Baku this November. One of the most significant pre-COP29 developments is the progress made during the SB60 expert dialogues towards the New Collective Quantified Goal (NCQG) on climate finance. This new goal is meant to replace the unmet $100 billion annual target established in 2009 and aims to reflect the current and future financial needs of developing countries as they face the impacts of climate change.
Negotiations around the NCQG have been notably complex, with developed and developing nations at odds over the scale and scope of the new target. Developing countries have argued that the $100 billion target was both unmet and insufficient given the rising costs of climate adaptation and mitigation. They are pushing for more ambitious financial goals that reflect their growing vulnerabilities and the urgent need for substantial investment in climate-resilient infrastructure. Negotiators at COP29 will face the challenge of determining a new, ambitious target that adequately addresses these rising costs.
Additionally, the issue of ‘loss and damage’ (L&D) has gained prominence in climate finance discussions. L&D refers to the irreversible impacts of climate change that exceed communities’ adaptive capacities, including the loss of lives, livelihoods, and cultural heritage. This issue is expected to be one of the most contentious topics at the upcoming summit. The FLD, which has already held two board meetings, has made little progress, with only $792 million committed so far. Upcoming meetings will determine the next steps for the fund.
Another priority will be the Global Stocktake (GST) process initiated at COP28, which assesses the collective progress of countries in meeting the Paris Agreement’s goals. The GST findings are expected to drive discussions on increasing national climate commitments and ensuring the world stays on track to limit global temperature rise to 1.5°C.
As COP29 approaches, there is also growing attention on the role of the private sector in climate finance. Public finance alone is considered insufficient to meet the extensive financial requirements of global climate action, leading to efforts to mobilize private capital. Discussions will focus on creating an environment that encourages private investment in climate initiatives, ensuring these investments align with climate objectives, and addressing concerns about equity and accessibility for the most vulnerable communities.
Azerbaijan, the host of COP29, has introduced the Climate Finance Action Fund (CFAF) with an initial fundraising target of $1 billion. The CFAF’s anticipated funding sources include fossil fuel-producing countries and companies involved in oil, gas, and coal, with Azerbaijan as one of the founding contributors.
To prepare for COP29 and position itself as a potential recipient of climate funding, the country must take several steps. First, it should develop a comprehensive, data-driven National Adaptation Plan (NAP) based on Provincial Adaptation Plans. If provincial plans have not yet been developed, they should be created urgently. Similarly, the country’s Nationally Determined Contributions (NDCs), currently under revision, should clearly outline climate strategies, specific financial needs related to mitigation targets, and associated strategies. These documents should highlight specific bankable projects aligned with global climate goals, demonstrating a commitment to sustainability and resilience.
Strengthening institutional frameworks by establishing dedicated climate finance units within government ministries and departments is also crucial. Effective coordination among these units will demonstrate a commitment to international climate finance institutions, ensuring that funds are allocated and used efficiently. Additionally, improving data collection and reporting mechanisms is vital for building trust with donors, as it provides accountability and demonstrates measurable progress.
Engaging the private sector as a key contributor to climate action is another critical step. Involving companies across various industries, such as energy, manufacturing, agriculture, and finance, will reflect a commitment to integrating climate considerations into manufacturing, supply chain operations, and business models. Public-Private Partnerships (PPPs) can also attract climate finance to contribute to the federal climate fund before seeking external resources. By facilitating private-sector access to concessional finance with favorable terms and conditions, the government can make it easier for private projects to secure necessary funding from bilateral and multilateral climate finance institutions.
At COP29, it is essential for the government to co-design private-sector projects that align with international climate goals, such as the Paris Agreement’s aim to limit global temperature rise to well below 2°C above pre-industrial levels. Projects that reduce greenhouse gas emissions, enhance energy efficiency, or increase resilience to climate impacts are more likely to attract funding from climate financiers at the event.
Finally, the government should actively participate in international climate dialogues to voice its needs and priorities, ensuring the global community understands the specific challenges it faces and the support it requires. Effective participation, based on solid assessments and thorough preparation, will enhance the country’s ability to secure the necessary climate finance for resilience and sustainable development.
COP29 will be a crucial moment to advance climate action, with a particular focus on securing the finance needed to meet the daunting challenge of climate change.
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