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Home / UPSC Editorials / Climate Finance Negotiations at COP29

Climate Finance Negotiations at COP29 - UPSC Editorials

Last Updated on Jan 06, 2025
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Context: The contentious issue of climate finance at COP29, particularly the gap between developing countries' needs and developed nations' commitments through the New Collective Quantified Goal on Climate Finance (NCQG).

  • NCQG aims to establish a new financial target for supporting developing countries in their climate action post-2025. 
  • NCQG builds upon the previous commitment made in 2009, where developed countries pledged to mobilize $100 billion per year by 2020 for addressing the needs of developing countries in combating climate change.

Read the article on Green Finance!

Analysis based on 

Editorial COP29, climate finance and its optical illusion published in The Hindu on January 1st, 2025

Topics for UPSC Prelims

COP29, International climate agreements, Climate summits, Green Climate Fund, Adaptation Fund

Topics for UPSC Mains

Climate change and global warming, Importance of climate finance in achieving global climate goals

Key Developments in Climate Finance Negotiations

UNFCCC 1992 established developed countries' obligation to provide climate finance.

  • 2001 - Marrakesh Accords: Established the first dedicated climate funds:
  • Special Climate Change Fund (SCCF)
  • Least Developed Countries Fund (LDCF)
  • Adaptation Fund (later operationalized under Kyoto Protocol)
  • 2009 Copenhagen pledge: Developed countries committed to mobilizing $100 billion annually in climate finance for developing nations by 2020. This target became formally enshrined in the Paris Agreement but was met only in 2022
  • 2010 - Cancun Agreements
  • Formally established the Green Climate Fund (GCF)
  • Created Standing Committee on Finance
  • Developed initial framework for monitoring, reporting, and verification
  • Paris Agreement: Article 9(1) reinforced developed nations' responsibility to contribute to developing countries' green energy transition.
  • Reaffirmed $100 billion goal through 2025 
  • Called for "scaling up" finance beyond 2025 
  • Broadened donor base to include voluntary contributions from developing countries 
  • Established enhanced transparency framework for financial support
  • Loss and Damage Fund: The establishment of the Loss and Damage Fund at COP27 in 2022 (held at Sharm el-Sheikh, Egypt), marking the first formal mechanism for compensating developing nations for climate impacts. 
  • New Goal: COP29 set $300 billion by 2035, far below developing nations' demand of $1.3 trillion by 2030.
  • Private Market: The emergence of innovative financing mechanisms like debt-for-nature swaps, green bonds, and climate resilient debt clauses are creating new pathways for climate finance

Read the article on the Environment Conventions & Protocols! 

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Why is the Current NCQG Considered Inadequate?

The current NCQG is considered inadequate due to the following reasons:

  • Needs Gap: Falls short of UNFCCC's estimated needs of $455-584 billion annually
  • Coverage Issue: Only addresses half of 5,760 identified needs from 98 developing countries
  • Vulnerability Concerns: No minimum allocation floors for Least Developed Countries(LDCs) and Small Island Developing Countries(SIDS)
  • Loss and Damage: Ignores Global Stocktake estimates of $447-894 billion annual costs by 2030.

Read the article on Climate Change in India!

India's Position on Climate Finance

 India advocates for an equitable distribution of climate finance based on common but differentiated responsibilities and calls for substantial grant-based funding to support its climate goals.

  • Equity Framework: Based on common but differentiated responsibilities principle
  • Opposition: Rejected NCQG due to inadequate consultation and insufficient funding
  • Financial Demand: Called for $1.3 trillion by 2030, with $600 billion as grants
  • Implementation Link: India’s climate progress submission contingent on adequate finance

Read the article on the Climate Change Performance Index 2024!

Implications of Inadequate Climate Finance

Inadequate climate finance impedes developing nations' ability to effectively combat climate change, thus compromising global temperature targets, technological advancements, and sustainable development initiatives.

  • Implementation Capacity: Insufficient funding affects climate action effectiveness
  • Global Temperature Goals: Threatens achievement of 1.5°C target under Paris Agreement
  • Trust Deficit: Creates tension between developed and developing nations
  • Development-Climate Balance: Forces developing nations to choose between development and climate action
  • Technology Transfer: Limits access to clean technologies and capacity building especially in developing countries.

Read the article on the World Climate and Climate Change!

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UPSC Practice Question

The gap between climate finance commitments and developing countries' needs represents a critical challenge in global climate action. Analyze the implications of inadequate climate finance for developing nations like India. (150 words, 10 marks)

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