Bridging the climate finance gap: COP29’s defining moment

The 29th Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change in Baku, Azerbaijan arrived at a moment of unprecedented global urgency, with developing nations grappling with escalating losses from climate change and the long-overdue need for adequate financing.

The main goal of COP29, like other past conferences, is to advance global efforts, particularly through strengthening commitments made under the Paris Agreement to limit global temperature rise to 1.5 degrees above pre-industrial levels.

In 2015, as part of the Paris Agreement, countries agreed to establish a New Collective Quantified Goal (NCQG) to succeed the 2009 COP15 Copenhagen’s US$100 billion annual goal. The goal encompasses climate initiatives in two key areas: Mitigation, aimed at reducing greenhouse gas (GHG) emissions, and adaptation, focused on enhancing resilience to climate effects.

However, even with intensified efforts, nations will still confront unavoidable losses and damages from existing climate impacts. “Loss and damage” specifically address the consequences that exceed one’s capacity to adapt, such as the loss of homes, livelihoods and lives.

A ceremonial milestone at COP29 was the Nov. 12 signing of foundational agreements for the Fund for Responding to Loss and Damage (FRLD), marking its transition toward operationalization.

Independent High-Level Expert Group on Climate Finance estimates that developing countries will require approximately $1 trillion annually in external climate finance by 2030, rising to $1.3 trillion by 2035. Of this, about $500 billion should come from public funds and the remaining $500 billion from private sources.

However, much of the private financing will need to be catalyzed by public investments through mechanisms such as guarantees or co-investments, which help reduce the risks associated with emerging markets and technologies. At COP29, a key focus for negotiators is securing the public funding component and leveraging it to attract private investment.

The operationalization of the FRLD is a historic milestone, but its initial capitalization barely addresses the scale of destruction. As UN Secretary-General António Guterres noted during the Annual High-Level Dialogue on Complementarity and Coherence, this amount, equivalent to the annual earnings of the world’s 10 best-paid footballers, “does not even account for a quarter of the damage in Vietnam caused by Hurricane Yagi in September”.

Guterres emphasized that the FRLD must serve as a starting point for robust, innovative financing mechanisms, calling for solidarity levies on shipping, aviation and fossil fuel extraction as necessary steps to mobilize resources at scale.

COP29 signed off on a fund to help vulnerable nations harmed by climate change, but pledges so far stand at just $720 million, following the latest pledge by Sweden worth $19 million. While welcomed, this amount underscores a systemic inertia; collective and structural failure to respond adequately to the crisis.

The world must get serious about the level of finance required and write checks that match, in order to bridge the trust deficit between developed and developing nations. Historical emissions data starkly illustrate the inequities at play: While industrialized countries of the Global North are responsible for the majority of carbon emissions, it is the Global South that faces the most devastating consequences.

For many, the fund is not about charity, but accountability and equity.

Indonesia’s address at COP29 highlighted the ambition of developing countries to lead by example. The country’s vision aims for sustainable and resilient growth with a goal to avoid 1 billion tonnes of GHG emissions and achieve net-zero by 2060 or sooner. Key targets include a shift from fossil fuels to renewable energy, expanding renewables from 13 to 75 gigawatts, reforesting 12 million hectares and restoring ecosystems to boost food production and support blue economy.

Businessman and head of Indonesia’s delegation Hashim Djojohadikusumo unveiled President Prabowo Subianto’s plans for comprehensive green growth. The policy framework is contingent on $235 billion in investments, alongside a robust carbon market leveraging 557 million tonnes of carbon dioxide (MteCO₂e) of verified carbon credits.

He also showcased “extensive” saline aquifers, claiming a storage capacity of 500 gigatonnes. While these plans underscore Indonesia’s proactive stance, they expose heavy reliance on international aid, multi-bilateral agreement and public-private partnership. Hashim’s optimistic narrative must contend with the realities of mobilizing multibillion-dollar investments, while protecting community rights and biodiversity.

The energy transition also presents an opportunity to tackle historical inequities. Regions rich in critical minerals hold the keys to renewable energy technologies. However, as Guterres also warned, this must not become a “stampede of greed”. Investments in these resources must prioritize local indigenous people, create jobs and infrastructure with transfer of technology for host countries and avoid aid dependency, while safeguarding against social and environmental degradation.

As COP29 concludes, the stakes cannot be higher. The discussions must advance with urgency and clarity, delivering a financing architecture that is scalable, predictable and equitable.

Policymakers must act decisively to close the climate finance gap by scaling commitments to match the urgency of the crisis. Developed nations must pledge at levels commensurate with the urgency of the climate crisis, with the FRLD and NCQG targeting annual financing of at least $724.43 billion, to restore trust and demonstrate genuine commitment. Innovative financing mechanisms should be pursued, including solidarity levies on high-emission industries and climate damage taxes.

Strengthened governance and regular reviews of the FRLD and Warsaw International Mechanism (WIM) are essential to ensure accountability, scalability and alignment with evolving needs. Above all, swift implementation of pledges and the establishment of a robust NCQG framework are critical to begin disbursement by 2025, using the FRLD to test and refine financing modalities.

This is to ensure sustainable funding streams, as well as equitable and transparent systems that prioritize community access and country-driven utilization.

COP29 must not merely be another milestone in climate negotiations; it must be a turning point where ambition meets action. Bridging the climate finance gap requires courage, innovation and an unyielding commitment to justice, particularly for the world’s most vulnerable and poorest of the poor.

This article was published in thejakartapost.com with the title “”. Click to read: https://www.thejakartapost.com/opinion/2024/11/23/bridging-the-climate-finance-gap-cop29s-defining-moment.html.