COP29 Wraps Up Amid Financial Turmoil

Following two weeks of discussions at COP29 in Baku, a climate finance agreement was finalized early Sunday morning. This funding is crucial for addressing climate change and adapting to its effects. Nevertheless, as representatives departed from the Azerbaijani capital, there was minimal optimism regarding the deal’s benefits for Africa.

“We leave Baku without a substantial climate finance target, with no concrete strategies to keep global temperature rise to 1.5°C, and without the essential support needed for adaptation and to tackle loss and damage,” remarked Evans Njewa, chair of the Least Developed Countries bloc at COP29. “This is not merely a setback; it signifies a betrayal.”

The agreed text establishes a goal for developed nations to deliver a minimum of $300 billion each year in climate finance to developing countries by 2035. While this figure indicates a threefold increase in current commitments, it is widely seen as only a small portion of what is required to support nations that have contributed the least to climate change but are experiencing its harshest impacts.

The newly defined “new collective quantified goal on climate finance” (NCQG) was intended to reflect actual needs. Governments undertook a lengthy examination of their financial requirements for adaptation and mitigation. Based on this assessment, developing countries requested that the NCQG reach $1.3 trillion annually.

Yet, the expectation that global policymakers would adopt a stringent needs-based approach clashed with the reality of fiscal limitations in developed nations, which initially suggested a target of merely $250 billion. After a walkout by the Alliance of Small Island States, this figure was revised to $300 billion, coupled with a vague mention of “increasing” funding to $1.3 trillion in the final document.

“A true disaster”

The results of the NCQG negotiations generated significant backlash among NGOs in Africa.

The $300 billion agreement is “irresponsible and perilous,” stated David Abudho, climate justice lead for Oxfam in Africa, in an interview with African Business. He suggested that poorer countries were “pressured” into this outcome, deeming the text “a heartless triumph for the affluent but a genuine tragedy for our planet and communities grappling with the repercussions of climate breakdown, including flooding, starvation, and displacement.”

“And what about any pledges for future funding? They are as hollow as the agreement itself.”

Indeed, there is significant uncertainty on how the ambitions set forth in Baku will materialize. The result was an agreed text rather than a legally binding commitment requiring specific actions from designated parties.

The route to realizing the $300 billion goal is unclear, let alone the ambitious $1.3 trillion objective. There is no transparency regarding how climate finance contributions will be shared among developed nations, and it remains ambiguous which nations are classified as “developed” and thus responsible for providing climate finance. For example, Western governments argue that China, being the largest emitter globally, should also contribute. Although the text states that financing will derive “from a wide range of sources,” including the private sector, it does not clarify how or through whom this private finance will be mobilized.

According to Oxfam, the actual climate finance needs of the Global South amount to $1.5 trillion annually by 2030. It asserts that most of this funding should come in the form of grants, especially for adaptation, to prevent worsening debt situations in developing nations. While the COP29 text acknowledges the necessity of grants in some scenarios, it does not exclude the possibility that interest-bearing loans might be categorized as climate finance.

COP-out?

Even prior to the discussions in Baku, there were rising concerns about the ongoing relevance of the annual COP meetings. This issue was further complicated by the recent re-election of Donald Trump, who previously withdrew the U.S. from the pivotal Paris Agreement aimed at curbing global temperature increases.

During the summit, a coalition of climate leaders initiated a strong call for reforms to the COP process, which included establishing a mechanism to monitor climate finance expenditures. The disappointment surrounding the NCQG is likely to escalate demands for a reassessment of how global governments tackle climate change.

South African entrepreneur Ivor Ichikowitz described the COP29 agreement as a “complete sham.” He shared with African Business that nations with the highest emissions dominate the negotiation process, rendering climate finance “unable to flow” due to significant conflicts of interest.

Expressing frustration at hearing the “same rhetoric” in Baku as in previous COP meetings, Ichikowitz asserted that governments from Africa and the Global South must take the reins. “The only way to resolve this is for the affected nations to become vocal and cease being compliant, to resist coercion into unfavorable agreements, and instead take the lead in directing the process.”

Mobilizing private finance

The discussions surrounding the future of the climate agenda are expected to intensify. However, for the moment, the duty of delivering climate finance primarily falls on development finance institutions.

Marco Serena, chief sustainable impact officer at the Private Infrastructure Development Group (PIDG), a donor-supported infrastructure finance organization, acknowledges that Africa “cannot perceive COP as a complete success.”

Nevertheless, he views this agreement as “a foundation to build upon.” The $300 billion target, while inadequate to address the needs of developing countries, serves as “a starting point,” he notes, stressing the urgency of establishing plans to deploy these funds effectively.

Serena indicates that PIDG, which focuses on climate initiatives, aims to attract private finance for infrastructure by mitigating risks throughout the project lifecycle. This includes investing in blended capital structures and financing projects that are in their early, high-risk development phases.

Given the financial limitations in Western countries, the results of COP29 suggest it is unrealistic to anticipate a significant influx of public finance allocated towards climate efforts in Africa.

Holger Rothenbusch, managing director and head of infrastructure and climate at British International Investment, the UK’s development finance institution (DFI), concurs that attracting private capital is essential for institutions aiming to assist Africa in deploying renewable energy.

“Our focus increasingly revolves around how we can utilize our balance sheet and capital more efficiently to attract commercial investment alongside our contributions,” he states. While DFIs have traditionally adopted a “patient capital” strategy, Rothenbusch mentions that BII is working to “innovate in recycling capital more rapidly, thus making use of the same dollar multiple times.”

However, Rothenbusch argues that public funding is crucial for adaptation projects.

“Adaptation is where scarcity will have the greatest impact, as it requires grants and heavily subsidized financing, which is a severely limited resource,” he suggests.

“Such funding is not appealing to commercial investors, as many needs will pertain to public goods, like constructing sea walls, for example,” Rothenbusch concludes. “This requires donor funding and substantial public sector backing at a large scale.”

  • Related Posts

    ChowWow Rises in Popularity as Solana Encounters Obstacles: Here’s Why Investors Are Paying Attention

    Disclaimer: This article is for informational purposes only and should not be considered as investment advice. The content on this page is intended solely for educational use. Solana’s price has…

    Continue reading
    September: Mammila Returns to Revitalize the Club

    Chippa United’s head coach Thabo September has revealed his support for the appointment of Morgan Mammila as the second assistant coach for the Chilli Boys. Mammila made his return to…

    Continue reading

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    You Missed

    ChowWow Rises in Popularity as Solana Encounters Obstacles: Here’s Why Investors Are Paying Attention

    ChowWow Rises in Popularity as Solana Encounters Obstacles: Here’s Why Investors Are Paying Attention

    September: Mammila Returns to Revitalize the Club

    September: Mammila Returns to Revitalize the Club

    Portfolio Committee Calls for Arrest of Zanzou Nightclub Owners

    Portfolio Committee Calls for Arrest of Zanzou Nightclub Owners

    Nigerian Lawmaker Sues Binance Executive Over Bribery Claims: Report

    Nigerian Lawmaker Sues Binance Executive Over Bribery Claims: Report

    Munetsi Ready to Compete at Moses Mabhida Stadium in Zimbabwe’s World Cup Qualifier

    Munetsi Ready to Compete at Moses Mabhida Stadium in Zimbabwe’s World Cup Qualifier

    Musk Launches Grok-3 AI Chatbot to Rival OpenAI and DeepSeek

    Musk Launches Grok-3 AI Chatbot to Rival OpenAI and DeepSeek