Context

Parties to the United Nations Framework Convention on Climate Change (UNFCCC) have made new submissions for the New Collective Quantified Goal on Climate Finance (NCQG). 

Climate Finance Talks Begin Ahead of COP29 in Azerbaijan

• Climate Finance Discussions: As countries prepare for 29th Conference of Parties (COP29) to the UNFCCC, which will take place in Azerbaijan in November 2024, initial discussions on the central issue of climate finance are on the horizon.
• Ninth Technical Expert Dialogue (TED 9):  In Cartagena, Colombia, the TED 9 and the first meeting under the Ad Hoc Work Programme (AHWP) took place from April 23 to 26, 2024.

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Need for Climate Finance

• Finance as a Crucial Enabler of Climate Action: Developing countries, small island nations, and the world’s least developed countries are bearing the brunt of climate change caused by the developed nations.
  • In a world experiencing frequent extreme weather events, they are compelled to adapt and mitigate their way through the crisis. 
• Disproportional Impact on Developing countries: The economic impacts of climate disasters are considerably more severe for poorer countries, making it crucial to establish a financial target that addresses their needs and promotes climate justice.
• Advancing Climate Justice: Arriving at a goal that best serves the needs of these countries is thus significant for advancing climate justice. 

What is the New Collective Quantified Goal on Climate Finance (NCQG)?

• About: A NCQG also known as the post-2025 climate finance goal, will be negotiated with a baseline of $100 billion per year, considering the needs and priorities of developing countries. 
• Background: In 2009, developed countries committed to providing ‘new and additional’ financial resources amounting to about $30 billion to developing countries between 2010 and 2012. 
  • They also made a commitment of jointly mobilizing $100 billion every year by 2020 for the same. 
• Extending the $100 Billion Climate Finance Goal: In 2015, this goal of collective mobilization of $100 billion by developed countries was extended to 2025.
  • It was also decided that a new climate finance goal would have to be decided prior to 2025, amounting to at least $100 billion per year, and ‘taking into account the needs and priorities of developing countries’. 
  • This is the NCQG, also called the post-2025 climate finance goal / new goal. 

Significance of NCQG

• Discrepancy Between Current Climate Finance and Developing Countries’ Needs: The quantum of $100 billion  is inadequate compared to the climate finance needs of developing countries, which, by varying estimates, range from $1-2.4 trillion per year until 2030. 
  • (The latter is an estimate just for Emerging Markets and Developing Economies, making the total funding needed by including that for poorer countries possibly far higher.) 
•  Unmet Targets and Mobilization Efforts: The goal of $100 billion was not a negotiated one which has not been met in any year since its announcement.
  • The latest estimates show that developed countries mobilized $89.6 billion in 2021 for developing countries. 

Progress Made for NCQG

Nine Technical Expert Dialogues (TED) have been held over the last two years, discussing a range of options for the elements linked to the formation of the new goal, including: 

• Time frames: Whether the new goal should have a short-term time period (2025-29), in line with cycles of Nationally Determined Contributions (NDCs) of developing countries or longer.
• Structure: To decide whether the goal should be a single quantified figure with a decided amount of money
  • Or if the goal must be framed in terms of a share of a country’s gross domestic product / gross national income with options for ‘mobilizing’ funds.
  • The goal should have annual targets and sub-goals pertaining to thematic areas (mitigation, adaptation)
  • Or an inspirational goal aiming to make ‘all’ finance flows consistent with low-emissions development. 
• Quantum: Options for how to decide the quantum of the goal have also been discussed. 
  • These range from a bottom-up approach based on the cost estimates of developing country needs, to determining the quantum based on the range of contributors (developed countries, private actors, any others identified). 
  • Additionally, options for what sources and instruments should be used have also been discussed.  

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• Qualitative Elements: Whether the type of finance (concessional, grant based, public or private) should be included by way of guiding principles, or a clearly delineated objective have emerged. 
• Transparency: Existing frameworks such as the Paris Agreement), or a host of new modes of reporting and tracking have been considered to track the progress.