| PYQ Relevance: Q) Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are India’s commitments at this conference? (UPSC CSE 2021) |
Mentor’s Comment: UPSC Mains have focused on India’s changing policy towards climate change (2022) and COP26 (2021).
The recent UN Climate Change Conference (COP29) held in Baku, Azerbaijan, concluded with significant yet contentious outcomes, particularly regarding the New Collective Quantified Goal (NCQG) for climate finance. This editorial reflects on the implications of the NCQG and the broader context of climate negotiations.
This editorial content can be used to present the significance of ‘Climate finance for developping countries’ and the challenges associated at Global stage.
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Let’s learn!
Why in the News?
COP29 dubbed the “Finance COP,” was expected to deliver an ambitious outcome on the NCQG (New Collective Quantified Goal on Climate Finance). However, it fell short by neglecting equitable burden-sharing and climate justice, overlooking the financial needs of the Global South.
Why do the Developing countries need Finance for climate change?
- Upfront Costs of Clean Technologies: Renewable energy technologies often have high upfront costs, which require government support to make them affordable to consumers, especially in developing countries.
- Long-term Benefits but High Initial Investment: While renewable technologies have lower long-term operational and fuel costs, the high initial investment remains a significant barrier.
- Financial Gaps and Urgency: Developing countries need urgent upscaling of finance to meet transformational goals. The pressure on government resources is compounded by the need for fiscal prioritization toward development activities.
- Debt Issues and Risk: High debt burdens in developing countries prevent them from accessing affordable capital, making it difficult to incentivize private investment in green technologies.
- High Cost of Capital: Developing countries face much higher lending rates, limiting their ability to access financial markets at favourable rates for climate action.
- International Support Needed: Finance from developed countries, particularly in the form of public grants instead of loans, is essential to support the transition to green energy in developing nations.
What are the roles of the NCQG (New Collective Quantified Goal on Climate Finance)?
- Origins and Rationale: The NCQG was designed to address the shortcomings of previous climate finance pledges, including the $100 billion annual commitment made at Cancun in 2010. The NCQG aims to establish clearer, more accountable climate finance goals.
- NCQG aims to establish a new financial target post-2025 to support developing countries, succeeding the $100 billion annual commitment from developed nations.
- Addressing Climate Finance Gaps: NCQG seeks to bridge climate finance gaps by ensuring both the quantity and quality of financial instruments meet developing nations’ needs.
- By setting a collective goal, NCQG promotes trust and cooperation among nations to effectively implement the Paris Agreement.
- Catalyzing Private Investment: NCQG encourages private sector investment by signalling stability and commitment to climate finance.
- Supporting Climate Resilience: The goal help developing countries adapt to climate impacts and transition to low-carbon economies with necessary funding.
- Upholding Principles of Equity: NCQG is grounded in Common but Differentiated Responsibilities (CBDR), ensuring tailored support for developing countries based on their specific needs and capacities.
What are the challenges?
- Financial Needs of Developing Countries: The UNFCCC’s Second Needs Determination Report estimated that $5 trillion to $7 trillion would be required by 2030 to meet the needs of 98 developing countries. Developing nations have requested $1.3 trillion annually by 2030.
- Disappointing Outcome at COP29: Developed countries agreed to a $300 billion annual commitment by 2035, which is seen as insufficient compared to the needs of the developing world. This amount does not represent a significant shift in financial flows and falls short of transformative action.
- Lack of Commitment to Climate Justice: The NCQG falls short in terms of equitable burden-sharing, failing to adequately recognize the financial needs of the global south and climate justice.
Way forward:
- Increase Financial Commitments: Developed countries must significantly enhance their financial commitments, moving beyond the $300 billion annually agreed at COP29, and align with the $1.3 trillion requested by developing nations to meet urgent climate goals.
- Ensure Equitable Burden-Sharing: Future climate finance discussions must prioritize climate justice, adhering to the principles of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC), ensuring that developed countries take on a larger share of the financial burden.
- Focus on Grants over Loans: Developed countries should provide more finance in the form of public grants rather than loans, addressing the debt burdens of developing countries and enabling them to invest in green technologies without further exacerbating fiscal constraints.
