COP29: Developed countries urged to find $1 trillion a year for poorer nations as UN climate talks focus on finance

BAKU: Giving much needed talking points around nature and quality of new post-2025 climate finance here at UN climate conference (COP29), an Independent High-Level Expert Group on the issue on Thursday suggested that the negotiations should be focused on mobilising $1 trillion per year by 2030 in “external (public and private) finance from all sources” for the investments in emerging market and developing countries (EMDCs), other than China, and about $1.3 trillion by 2035 to deliver the Paris Agreement goals. It also argued that private finance can meet about half of these needs given the changing nature of investment opportunities.
Simply put, the investment needed from external sources for climate action would just be 1% of the annual global GDP ($100 trillion) and only half of the global defence spending ($2.4 trillion).
Observers, who are following the negotiations, believe that the annual post-2025 climate finance goal is most probably around that figure only as even developing countries’ annual figure is $1.3 trillion. Though the developed countries have, so far, not put out their number, the convergence point may land somewhere around the figure suggested by the high-level group. The share of public and private finance in the overall bouquet will, however, be a big sticking point.
The 33-member independent group, tasked by the Presidencies to help develop and put forward policy options and recommendations to encourage and enable the public and private investment and finance necessary for delivery of the commitments and targets of the UNFCCC Paris Agreement, also pitched for mobilising the finance at the earliest to save cost. “Any shortfall in investment before 2030 will place added pressure on the years that follow, creating a steeper and potentially more costly path to climate stability,” it said.
Referring to the overall investment need for climate action, one of the lead authors of the expert group report and its co-chair, Amar Bhattacharya, however, emphasised that the bulk of the investment for climate action would, in any case, be domestic finance. “Different kinds of investment need different kinds of finance… Largest in terms of amount is for energy transition. It is also clear that a lot of that investment would come from the private sector,” said Bhattacharya while explaining the details in a media huddle.
The report, released on the sidelines of COP29 on Thursday, estimates that the global projected investment (both external and domestic) requirement for climate action is around $6.3–6.7 trillion per year by 2030, of which $2.7–2.8 trillion is in advanced economies, $1.3-$1.4 trillion in China, and $2.3–2.5 trillion in EMDCs other than China.
“For 2035, we estimate global investment requirements for climate action to be around $7–8.1 trillion per year, with advanced economies needing $2.6–3.1 trillion, China $1.3–1.5 trillion, and EMDCs other than China requiring $3.1–3.5 trillion. These needs are our estimations of what is required for delivery on the Paris Agreement, and the investments will also make a vital contribution to sustainable growth and the achievement of the Sustainable Development Goals,” said the authors in the report.
They said, “External finance from all sources, international public and private, along with others, will need to cover $1 trillion per year of the total investment needed by 2030 and around $1.3 trillion by 2035…We argue that cross-border private finance can meet about half of these needs given the changing nature of investment opportunities.”
After putting out these figures, the authors of the report concluded that “advanced economies need to demonstrate a credible commitment, including through the New Collective Quantified Goal (NCQG) to provide and mobilise the finance needed for climate action in developing countries”.
“It is not just the quantum but also the quality of finance. There needs to be more commitment of concessional capital… Most Countries in the global south are already on the verge of debt trap so in order to help them transition faster, the new climate finance goal is the minimum that countries in the global north need to commit to,” said Vibhuti Garg, Director, South Asia, IEEFA.