After a turbulent week in Baku, an agreement was reached in the early hours of Sunday, November 24. The figure to focus on is the $300 billion annually that developing countries will receive from rich countries in climate finance until 2035.
Early Sunday morning, prolonged applause followed the president’s statement. COP29Mukhtar Babayev, that an agreement had been reached on how rich countries can economically help poorer countries in their fight against climate change.
The applause masked what had often been a fractious affair for most of the previous negotiationsthat they were about to fail after developing countries walked out of the negotiations on Saturday, temporarily suspending them.
Almost immediately, An Indian delegate called the figure of 300,000 million dollars “miserable”an opinion shared by many of those present at the negotiations, especially representatives of developing countries, who were asking for a much larger amount: 1.3 trillion dollars.
World Resources Institute President and CEO Ani Dasgupta said the final amount was “an important advance towards a safer and more equitable future“, but admitted that the poorest and most vulnerable nations are “legitimately disappointed that the richest countries have not put more money on the table when the lives of billions of people are at stake.”
Now the focus should be on How the final text of the COP29 agreement will be applied in practiceas well as how other stakeholders can help bridge the gap in financing the battle against climate change.
Who can help bridge the climate change funding gap?
The COP29 text included a line calling on all parties to cooperate using “all public and private sources” to approach 1.3 trillion dollars.
It is, in effect, a appeal to banksas well as to the private sector with their vast resources, to contribute and help close the climate financing gap that governments cannot or do not want to cover on their own.
Much is expected of multilateral bankswhich are ultimately backed by governments, as they are financed with taxpayer money from their member countries. They are currently the largest source of climate financing for the developing and fastest growing world.
Also called multilateral development banks (MDBs), these institutions are bound by mandates that require them to provide development aid – at a low rate compared to private banks – of various types to regions that need it. Some examples would be the financing of a railway line very necessary to facilitate economic growth in a certain region, or the granting of a loan for the construction of a renewable energy project.
The largest of these is the World Bank, with regional examples such as the Asian Development Bank, based in Manila, and the African Development Bank (AfDB), based in Adbidjan.
These institutions were one of the main reasons why in 2022 the world met the objective that countries had set out in 2009 to provide developing nations with 100 billion dollars annually to confront climate change. In fact, climate finance provided by these banks to developing countries more than tripled between 2013 and 2022, reaching $47 billion in that year alone, according to the OECD Creditor Reporting System. In the future, however, MDBs will need a lot of help if they are to achieve climate finance goals.
The hope underlying the COP29 text’s call for ‘private sources’ To help fill the funding gap will require private investors, such as private commercial banks, to step up their game to get closer to the $1.3 trillion target.
In 2022, private investors contributed $22 billion to finance the fight against climate change, significantly less than the $41 billion contributed by foreign governments.
Where will the money go?
The agreement reached over the weekend replaces the one from 15 years ago, which had burdened rich countries with 100 billion dollars annually in climate finance for the developing world.
This year’s agreement has similar objectives and aims help poorer countries prepare for a warming world and to prevent it from getting hotter. To do this, the transition from fossil fuels to clean energy will be financed and the necessary infrastructure will be created to install technologies such as wind and solar on a large scale.
ADVERTISINGBesides, Areas most affected by extreme weather will need money to adapt and prepare against phenomena such as floods, typhoons and fires. Agricultural practices will also have to become more resilient to extreme weather events, as will the construction of new homes.
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