Why in the news? 

As the climate bomb ticks, Global Climate negotiators are working on a new global climate finance budget ahead of COP29 in Baku this November.

• In 2009, developed countries committed to paying $100 bn every year. However, they failed to do so.

Context:

• The 2022 climate change conference (COP 28) held in Sharm el-Sheikh decided to establish a Loss and Damage Fund. 
• These funds would work as a “transition away” from fossil fuels, and a promise to triple global renewable energy capacity by 2030.
• On March 22, a two-day meeting was concluded in Copenhagen, Denmark, the first minister-level climate meeting for this year, and a ‘New Collective Quantitative Goal’ was finalized.

What is the New Collective Quantitative Goal (NCQG)?

• NCQG represents the yearly sum that developed countries must gather from 2025 onward to finance climate action in developing nations.
• It has to be higher than the $100 billion that developed countries, collectively, had promised to raise every year from 2020, but had failed to deliver.

Collective Funds need to ensure effective Climate Action:

• UN Climate Change Report (2021): According to a report by UN Climate Change, developing countries would need approximately $6 trillion annually between 2021 and 2030 to implement their climate action plans.
• Estimation in Sharm el-Sheikh Agreement: The final agreement at Sharm el-Sheikh included estimates suggesting that a global transition to a low-carbon economy could require about $4-6 trillion annually until 2050.
• Global GDP Percentage: While these estimates vary, an approximate range of $5-7 trillion annually is suggested to effectively address climate change. This would require deploying about 5-7% of the global GDP towards climate action.
• Renewable Energy Capacity: Meeting the target of tripling renewable energy capacity, as agreed in Dubai, is estimated to cost $30 trillion by 2030, according to the International Renewable Energy Association (IRENA).

Prospects for a Realistic New Annual Climate Finance Target:

• Current Funding Shortfall: The UNFCCC, responsible for organizing climate meetings and facilitating the implementation of climate agreements, is facing a severe shortage of funds. Its budget is currently less than half funded, which hampers its ability to fulfill its mandate effectively.
• Call for Increased Climate Finance: There is a call for developed countries to commit to significantly higher levels of climate finance. India, for instance, has called for the New Collective Quantitative Goal (NCQG) to be set at least at $1 trillion per year 
• Need of Innovative Funding Sources: Simon Stiell, Executive Secretary of UN Climate Change, emphasized the need for innovative funding sources to meet the substantial financial requirements for climate action.  
• Dependence on Contributions: The UNFCCC relies heavily on contributions from countries and voluntary organizations to carry out its work. 

How will this money be used?

• On-time Delivery: Ensuring effective delivery of the new funding is essential for achieving meaningful impact.
• Transparent and Inclusive Monitoring: Developing countries emphasize the need for a transparent and inclusive process to monitor and measure the agreed-upon amount.  
• Distribution Across Needs: The new funding is distributed across different climate action areas such as mitigation, adaptation, and addressing loss and damage as per need 

Conclusion: Developed countries must commit to higher climate finance, possibly $1 trillion annually, for effective action. Innovative funding sources and transparent monitoring are crucial for impactful distribution across climate action areas.

Mains PYQs

Q  Clean energy is the order of the day.’ Describe briefly India’s changing policy towards climate change in various international fora in the context of geopolitics.(UPSC IAS/2022)

Q ‘Climate change’ is a global problem. How India will be affected by climate change? How Himalayan and coastal states of India will be affected by climate change? (UPSC IAS/2017)

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