The draft final agreement of the G20 finds a compromise between wealthier countries and developing nations on who should contribute to the climate finance goal. This is one of the issues that COP29 has been unable to resolve
The G20 summit in Rio could reignite hope for a strong agreement at COP29 in Baku on the climate finance issue. The UN summit in Azerbaijan is stalling. After the first week of negotiations in Baku, progress has been nearly nonexistent, with both the Global North and South sticking to their positions. However, political leaders at the G20 in Rio are reportedly working on an agreement that addresses one of the most contentious points in the Baku negotiations on climate finance.
“Economic Carnage” if the G20 Fails to Unlock Climate Finance
From Baku, the UN has already turned its focus to the G20 summit in Rio. The countries meeting on November 18-19 in Brazil account for 85% of the world’s economy and about 80% of global greenhouse gas emissions. In other words, they are the nations with the greatest means to address the primary cause of the climate crisis, of which they are the biggest contributors. And they are also among those with the most to lose, as the United Nations reminds.
“Climate impacts are already tearing apart every G20 economy, destroying lives, severely impacting supply chains and food prices, and fueling inflation,” said Simon Stiell, the UN official leading climate action. “Bolder climate action is basic self-preservation for every G20 economy. Without rapid emission cuts, no G20 economy will be spared the economic carnage caused by climate change.“
Progress on Climate Finance at G20 Rio?
According to a preliminary draft of the summit’s final communiqué, seen by Reuters, G20 leaders “have agreed on a text that mentions voluntary contributions from developing countries to climate financing, though not defining them as obligations.” Why is this so important?
What Happens in Rio Doesn’t Stay in Rio
First: What the premiers and presidents decide at the G20 will be followed by their ministers at COP29. A strong political input is exactly what usually helps climate negotiations overcome differences, even the most deeply rooted ones.
In many instances, this has happened through agreements between the United States and China, the world’s top polluters. This time, it could happen through the G20’s approval, bringing together countries aligned on opposite sides in Baku.
Promising Over $1,300 Billion per Year
Second: The G20 compromise could pave the way for higher figures in climate finance at COP29. So far, drafts of the post-2025 climate finance framework have included all possible options, with little room for effective mediation.
Wealthier countries have not specified an annual amount to mobilize because they want to expand the pool of contributors. Developing countries do not want this expansion and are calling for clear figures, with specific sub-targets, and a good balance between loans and grants, as well as resources for mitigation, adaptation, and loss & damage.
The G20 Rio formula for climate finance expands the pool, but does not obligate any other countries to contribute beyond the wealthier ones (i.e., the developed countries listed in Annex 1 of the UN Framework Convention on Climate Change). It aligns more closely with the principles of Article 9 of the Paris Agreement, upon which climate finance relies.
As a result, an annual numerical target can be set, potentially higher than the current figures cited ($1,000/$1,300 billion), relying on contributions from other countries.
The Climate Finance Needs According to the UN
These figures represent the scale on which the new post-2025 climate finance target, known as the New Collective Quantified Goal (NCQG), should be set. The NCQG must be decided at COP29 and will replace the current target of mobilizing $100 billion per year by 2020, extending until 2025.
This was confirmed by the third report from the Independent High-Level Expert Group on Climate Finance (IHLEG) of the UN, a technical working group launched at COP26 in Glasgow in 2021, tasked with assessing global climate finance needs across various recipients and sectors.
What does the report, released at the start of COP29 in Baku, say? The climate finance required annually for developing and poorer countries is $1 trillion by 2030 and $1.3 trillion by 2035.
Breakdown of the figures mentioned in the UN report for 2030:
- Global investment needs for climate action: $6.3 trillion to $6.7 trillion per year by 2030.
- Of this total:
- $2.7 trillion to $2.8 trillion for advanced economies,
- $1.3 trillion to $1.4 trillion for China,
- $2.3 trillion to $2.5 trillion for other developing countries (excluding China), with half of this coming from their own budgets.
Developing countries will account for 45% of the incremental investment needs from now until 2030, though they are lagging behind, particularly sub-Saharan Africa.
For 2035, the UN’s figures are:
- Global climate action investment needs rise to $7 trillion to $8.1 trillion annually.
- Of this total:
- Advanced economies need $2.6 trillion to $3.1 trillion,
- China needs $1.3 trillion to $1.5 trillion,
- Other countries need $3.1 trillion to $3.5 trillion.
The composition of the climate finance needs identified by the report is crucial. The $2.4 trillion required for developing countries excluding China by 2030 includes:
- $1.6 trillion for the transition to clean energy,
- $250 billion for adaptation and resilience,
- $250 billion for losses and damages (loss & damage),
- $300 billion for natural capital and sustainable agriculture,
- $40 billion to promote a just transition.
