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Wednesday, July 24, 2024

Countries Debate New Climate Finance Goals at COP29 Summit

Climate finance is critical funding provided by large economies to help poorer countries invest in projects aimed at reducing greenhouse gas emissions and managing the increasingly severe impacts of climate change. This financial support is essential for these nations to transition to clean energy and build resilience against extreme weather events.

In 2009, developed nations committed to transferring $100 billion annually from 2020 to 2025 to support these efforts. This year’s UN climate talks aim to establish a new goal to replace this commitment post-2025.

The required funding has grown significantly since the initial $100 billion target. A 2023 independent report highlighted by the UN estimates that $2.4 trillion per year will be necessary by 2030 to meet climate goals and protect developing nations, excluding China. This figure represents a four-fold increase and includes both public and private finance, as well as contributions from development banks.

Ahead of COP29, various countries have proposed new targets. The Arab group, including Saudi Arabia, the UAE, and Egypt, suggests a $1.1 trillion annual goal, with $441 billion from developed country governments in grants. India, African countries, and small island nations also support raising more than $1 trillion per year, though opinions differ on the proportion that should come from government budgets.

Negotiators are considering a two-layer goal: a larger overall target encompassing all global climate finance sources, and a smaller core target focused on public money from wealthy governments. Developed countries, including the United States and the European Union, agree that the new goal must surpass the previous $100 billion target, though specific figures have not been proposed.

Currently, only a select group of wealthy countries are required to provide climate finance, a list established in 1992 that remains unchanged. The EU and US argue this list is outdated and advocate for the inclusion of new donors like China, Qatar, Singapore, and the UAE. However, China opposes this addition, making it a central issue for COP29 negotiations.

Most public climate finance today is provided through loans, with a smaller portion as grants. Some countries argue that loans at market rates and export credits should not count as climate finance, as they increase the debt burden on poorer nations. The definition and sources of climate finance will be a crucial topic at COP29.

To address stretched public budgets, new funding sources are being considered. These include taxes on fossil fuel and defense sectors, and debt swaps where a portion of a country’s debt is forgiven in exchange for increased climate investments.

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