COP29: Finance dispute stalls deal between developing and developed countries

Amidst significant criticism regarding financial matters on the concluding day of the UN Climate Summit (22 November), the COP29 was prolonged until today (23 November). However, a stark divide persists between developed nations and the LDCs and AOSIS concerning climate finance.

Before one and half hour of closing plenary, the LDCs and AOSIS walked out from the final talks temporary, arguing that the proposed text failed to meet climate finance goals.

After several meetings today, developed countries have revised their pledge to $300 billion per year by 2035. However, the proposal remains unresolved, as the LDCs and AOSIS rejected the offer. They have consistently demanded over $1.3 trillion annually to meet their climate finance needs.

Earlier on Friday, the United States, the European Union, and other wealthy nations pledged $250 billion annually as climate finance for developing countries. However, the announcement sparked widespread outrage, with climate-vulnerable nations calling it a "mockery" and a "death sentence for millions of people."

As the developing nations voiced strong discontent over the draft climate finance agreement unveiled at the summit on Friday, it was extended by another day. 

Despite being delayed twice on the extended day (Saturday), the closing plenary, originally scheduled for 3:00pm, could not proceed due to a lack of consensus. While a new time was set for 7:00pm Baku time, the leaders of LDCs and AOSIS temporarily walked out of the talks at 5:00pm.

Cedric Schuster, minister of Samoans and the AOSIS in a statement at 6:00pm Baku time (8pm Bangladesh time) said, "We have presently removed ourselves from the stalled NCQG discussions, which were not offering a progressive way forward."  

He also said, "We want nothing more than to continue to engage, but the process must be inclusive. If this cannot be the case, it becomes very difficult for us to continue our involvement here at COP29. Yet we have found ourselves continuously insulted by the lack of inclusion, our calls are being ignored." 

Commenting on the walkout, Mohamed Adow, Director of Power Shift Africa, stated, "The proposal on the table is insufficient to address the NCQG and climate finance goals. The moral voices of climate justice have walked out of the talks, refusing to be associated with a text that would undermine climate action for the next decade."

Jiwoh Emmanuel Abdulahi, minister of Sierra Leone and the chair of LDCs said "We have temporarily walked out but remain interested in the talks until we get a fair deal of COP29."

Shawkat Ali Mirza, director of Climate Change and International Convention at the Department of Environment and a Bangladesh negotiator, told The Business Standard, "The draft text proposes a $300 billion pledge from developed nations, but it has significant gaps.

The Green Climate Fund (GCF) as a channel for accessing resources is completely absent. Instead, it only mentions financial entities like the Adaptation Fund (AF), the Least Developed Countries Fund (LDCF), and the Special Climate Change Fund (SCCF). Additionally, grant-based finance for adaptation and loss and damage, as well as highly concessional loans for mitigation, are missing. This is an unacceptable text at this stage."

What is in draft agreement? 

The draft agreement sets a target of raising $1.3 trillion to combat climate change, with an annual pledge of $300 billion to be provided by 2035. However, experts and climate advocates are deeply concerned that the commitment for the first year will be capped at just $100 billion, a fraction of the needed funding. 

Many argue that this amount falls far short of addressing the urgent needs of the world's most vulnerable countries, particularly those that are already suffering from the devastating impacts of climate change.

COP29 delegates have indicated plans to set the New Collective Quantified Goal (NCQG) for climate finance at $300 billion per year, a figure they argue will help meet the financial demands of climate adaptation and mitigation efforts. 

However, this target has yet to be met with strong backing from the wealthiest nations, many of which have a history of failing to fulfill past climate finance promises.

The criticisms have been especially sharp from LDCs, AOSIS and nations facing severe climate-related damage, who say the agreement will not provide them with the necessary resources for adaptation and recovery.

Climate experts have also criticised the minimal increase in adaptation finance – a mere 1% to 3% rise – which they argue will not meet the scale of the challenge. 

Additionally, the practice of double counting, where financial contributions are counted toward both development assistance and climate finance, threatens to further undermine the integrity of the agreement. 

The 2035 target for meeting these funding goals, they warn, could be too late for the millions already at risk from rising seas, extreme weather, and shifting agricultural patterns.

The draft deal also leaves key financial mechanisms, such as the Green Climate Fund and the LDC Fund, largely unchanged, a move that has left many experts questioning whether they will be adequate to address the growing needs of the most vulnerable populations.

"This is not charity; it is our fair share," said Sohanur Rahman, executive coordinator of YouthNet Global, a youth-focused environmental organisation. 

"The commitments from developed countries are insufficient, and the time to act is now," he added.

Draft text seeks support from developing countries!

The draft proposal suggests that the $300 billion annual finance goal should include voluntary contributions from developing countries, stating, "Encourages developing country parties to make additional contributions, including through South–South cooperation, to or supplementing." 

However, this aspect remains undecided.

The agreement further states, "Decides that a significant amount of public resources should be provided through the operating entities of the Financial Mechanism, the Adaptation Fund, the Least Developed Countries Fund, the Special Climate Change Fund, and other relevant mechanisms, ensuring equitable distribution across all geographical regions. It also decides to pursue efforts to collectively triple flows from these funds from 2023 levels by 2035 to support the delivery of the goal."

What are the sources of money? 

The draft text of the "New Collective Quantified Goal" (NCQG) released today mentions that "developed country parties will take the lead, aiming for $300 billion per year by 2035 for developing country parties to support climate action. This will come from a wide variety of sources, both public and private, bilateral and multilateral, including alternative sources."

The fund is intended to address the evolving needs of developing countries through grants or grant-equivalent terms. The finance will be new, additional, affordable, predictable, and non-debt-inducing, supporting adaptation, mitigation, and loss and damage.

It will assist developing countries in implementing their Nationally Determined Contributions, Long-term Strategies, National Adaptation Plans, Climate Finance Strategies, and Technology Action Plans from 2023 to 2035.

However, the draft text does not specify how much of the pledged $300 billion will be provided as grants and how much will be in the form of loans. Moreover, experts and activists say the text leaves the door wide open to loans private sector finance, which risk locking developing nations into further cycles of debt, poverty and disease. They also called it "a mockery".  

M Zakir Hossain Khan, chief executive of Change Initiative, told TBS, "It is clear that they kept open doors for loan, a cycle of debt for developing countries. They are not talking about debt relief; they are talking about debt sustainability. It means encouraging loans. By this thousands of people of developing countries will go to under poverty line and will fall into debt trap. In the name of loan there will be created a new climate colonialism. Moreover, the fund for just transition must be additional and fund for loss and damage must be grant basis." 

Returning with empty handed? 

Harjeet Singh, climate activist and global engagement director for the Fossil Fuel Non-Proliferation Treaty Initiative, said "The extended climate talks lay bare the deep inequities in the multilateral process. The latest draft ignores the urgent needs of developing countries and the voices of climate justice advocates. 

"The COP29 Presidency must ensure an inclusive and transparent process that centres those on the frontlines of the crisis. Developed countries must commit trillions, not empty promises—anything less makes them squarely responsible for the failure of these talks and the betrayal of billions across the globe."

Pavel Partha, an ecology and diversity researcher and Director of the Bangladesh Resource Centre for Indigenous Knowledge, shared his thoughts before boarding his flight to Bangladesh. 

He said, "We are not returning empty-handed; we are carrying a heavy load of disappointment. We leave Baku burdened by the ruthless procrastination and false promises of the world's major carbon-polluting nations. Their deceit has become all too familiar. This shameless and cruel climate bargaining game continues, but for LDCs and AOSIS, this is a matter of existence and survival.

"While the promise of $250 billion has now risen to $300 billion annually, we had asked for trillions. Immediate decisions are needed on how the funds for adaptation, loss and damage (L&D), and LDCs will be allocated and managed. It is important to enforce binding commitments on how countries will ensure this funding."

He added, "Key issues like agriculture, food systems, indigenous knowledge, the rights of indigenous and local communities, and localized adaptation strategies were notably absent from the final agreement."