At COP29, developed countries stepped up and made an audacious pledge. They promised to deliver $300 billion annually by 2035 to assist developing countries in their battle against climate change. This ambitious new financial pledge comes amidst significant discussions and disagreements. Now countries are having to figure out how to meet their new obligations and the impact of shifting existing funding streams. Recent reports indicate that a substantial share of that climate finance will indeed come from development aid budgets. This means that we don’t have tons of new contributions flowing in.
In 2022, CARE Denmark made a significant discovery. They made it clear that high-income countries mostly paid for public climate finance from 2011 to 2018 by diverting their current development aid. This again begs the question of what true additionality will mean for the funds committed at COP29. Over three quarters of countries made a target in 2009, often expecting that new financial commitments would build on their existing contributions.
Financial Commitments and Expectations
Leading economists have indicated that for developed nations to effectively address the impacts of climate change, they need to provide climate finance of at least $300 billion annually by 2030, increasing to $390 billion per year by 2035. This urgent need for enormous financial support highlights the urgency of the mobilization of resources by rich countries.
The Center for Global Development (CGD) has reviewed the $300 billion target. They considered it highly misleading, since up to one-third of this entire amount could be achieved through merely rebranding or repurposing existing financial resources. This casts serious doubt on whether developed countries like the US can actually achieve these targets. They will be hard pressed to achieve it without cutting other key sectors of global development assistance.
US President Joe Biden called the new climate finance deal “ambitious.” This sends a clear signal of the Biden administration’s strong commitment to international cooperation in addressing the world’s climate challenges. Countries have until 1 October to submit their financial plans. Numerous questions remain about their capacity to deliver on these commitments without overextending their financial capacities.
The Role of Multilateral Development Banks and Additional Contributions
Multilateral development banks have gone further, pledging a remarkable increase in their contributions. They are winning an extra $84 billion from developed countries to plug the leakage in climate finance. What’s in place is only expected to cover about $220 billion a year by 2035. This means developed countries will need to find another $80 billion from somewhere else to meet their commitments in a robust manner.
Additionally, China and other emerging economies have been pressured to provide new and additional finance as part of that COP29 framework. This call acknowledges the need for all countries to engage in a greater level of effort to combat climate change. It highlights our collective duty to ensure a just financial burden-sharing between developed and developing nations.
Indeed, the European Union (EU), United Kingdom (UK), and United States (US) are exceptions among 23 resilient advanced and emerging economies. They are eager to play a larger role in climate finance initiatives. This coalition desires to lead by example. They will prove that collaborating can make meaningful improvements in addressing global climate challenges.
Challenges Ahead and Future Outlook
Despite these optimistic pledges, challenges remain evident. Switzerland’s environment minister, Albert Rösti, went on to declare that Switzerland will not pledge any additional public money for climate finance. He highlighted that the country is in the midst of a deep fiscal reorganization. They do not expect to need any new public dollars to get there either.
According to Climate Policy Watchers projections, developed countries’ climate finance will reach $197 billion by 2030. This figure, $579 billion, is based on the commitments they have already made. By 2030, contributions from private finance are projected to increase the total by more than $58 billion. At the same time, dedicated climate funds are expected to contribute an additional $1.3 billion, bringing their cumulative total to around $5 billion.
Countries are already working hard to complete their COP29 promises. Now, the efficacy of these financial commitments will be key to addressing climate change’s disparate impacts on vulnerable populations.
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