Key Priorities and Perspectives of Developing Countries as Parties Work to Establish a NCQG for the Climate Finance

By Student Delegate Jiayu Deng 

What is NCQG?

At COP21 in Paris, Parties decided to set a new collective quantified goal (NCQG) before 2025. Taking into account the needs and priorities of developing countries, this new NCQC has a floor of $100 billion per year. Parties implemented an ad hoc work program from 2022 to 2024, to be facilitated by two co-chairs: one from a developed country, and one from a developing country. To inform the work program, the co-chairs must maintain regular consultations with the constituted bodies (the Standing Committee on Finance in particular), as well as United Nations agencies, climate finance experts, academia, and private sector and civil society actors.

NCQG, also known as the “post 2025 climate financing goal,” promotes consensus by holding four technical expert dialogues every year. The third technical expert dialogue, which was held in September 2022, focused on the needs and priorities of developing countries and the roles of public and private actors in the NCQG, as well as sources and instruments. NCQG discussion and consensus-building is meant to promote the Paris Agreement’s long-term goals and rebuild the confidence of all parties on the effectiveness and utility of negotiations on climate finance.

Why does NCQG matter

Climate finance is an important ingredient in meeting the climate goals of the Paris Agreement for both developed and developing countries, even though their needs and priorities are different. Some developing countries are projected to grow their population, economy, and energy demand significantly, and will face the challenge of seeking to reduce emissions while bringing electricity and improved quality of life to a growing population. If they can achieve clean development, developing countries can help curb climate change. But if they cannot, they may greatly accelerate climate change. To promote efficient, equitable, and efficient climate finance, it is necessary and important to take the needs and priorities of developing countries into account in the agenda and implementation of NCQG.

An October 2021 report issued by the Standing Committee on Finance (SCF) shows that by 2030, developing countries will need almost $6 trillion to fund the actions listed in their National Determined Contributions (NDCs). This is the first report that attempts to quantify the needs of developing country Parties related to implementing the Convention and the Paris Agreement.

Four key priorities

Investment in the following areas is crucial for developing countries and requires strong financial support, although relative demand varies from country to country:

  • Investment related to supporting energy structure transformation and sustainable development. Developing countries, such as Brazil, South Africa, India and China, are expected to continue rapid growth in population, economic and energy demand. Maintaining healthy and sustainable development remains the most important priority for many developing countries. However, if growth follows the “old path” of developed countries, the climate will suffer immensely. Low-carbon and sustainable development is crucial to future global emissions. If developing countries can go on a clean road, they can increase the momentum for achieving the 1.5-Degree goal of the Paris Agreement.
  • Increased investment in climate change adaptation and resilience, and reduced damage particularly for Small Island Developing States (SIDS). The current investment in climate change disproportionately favors mitigation efforts over adaptation. In SIDS, geographical proximity of human settlements to the ocean makes them extremely vulnerable to climate change-related disasters, such as sea-level rise, ocean acidification, and tropical cyclones. According to a recent report, 15% of the primary income from SIDS go to debt-servicing. Climate change and climate disasters will devastate the debt sustainability and credit ratings of SIDS. Scale economies favored by large international investors are difficult to achieve in Whether such countries can develop further is not as pressing a concern as how they can survive in their homeland given the adverse effects of climate change. Therefore, it is necessary to seek economic, technical, and capacity-building support and grants for SIDS.
  • Increased investment in natural capital and biodiversity restoration. Beyond low-carbon industrial transformation and enhanced climate adaptation, stronger climate resilience and biodiversity protection remain a strong path to achieving climate goals. By reforming land management practices (e.g., agriculture and forestry) we can protect global food security, improve landscape productivity and increase natural carbon storage capacity. Countries with rich natural resources have great potential to contribute should be given support to increase the global carbon storage capacity.
  • Quantifying current needs and priorities. Due to the lack of data and limited capacity, many countries have been unable to provide a precise estimate of climate finance needs. So, the overall figures of actual funding requirements may greatly exceed current estimates. Estimating the financial requirements for climate adaptation is also a big challenge given that different accounting methods may lead to different results. It is necessary to reach a consensus on the calculation method so as to provide sufficient information for NCQG’s deliberations and negotiations.

In order for an NCQG framework to actually work for developing countries, there are also some thorny issues that require developing countries’ attention. They focus more on the implementation level, such as:

  • How to mobilize adequate funds after an agreement is made at COP? The next question is where does the money come from? In 2020, developed countries only committed $80 billion of the $100 billion promised to developing countries each year. Roughly $20 billion was provided to Africa in the entire 2016–2019 period, a far cry from the African Negotiators’ Group request for $1.3 trillion a year in climate finance to be made available from 2025, using the solution of debt-for-climate to tackle Africa’s debt constraints.
  • How to ensure developing countries can access climate finance funding? This question concerns fair distribution of funds. Different climate funds have different application requirements, and some application documents, processes and payment operations are highly complex. Methods that simplify procedures and speed up the flow of funds would be helpful. Such methods could include permitting reasonable access to complex reviews, simplifying the access model for small-scale activities, and supporting the capacity development of bank guaranteed projects.
  • How to assess whether funds are adequate for the needs and priorities of developing countries? The needs and priorities of developing countries will change over time. How does the NCQG framework effectively respond to regular and dynamic adjustment of the demand? And how to embed a reasonable evaluation mechanism given the reality of dynamic adjustment?
  • How to comply with the important principles of the Paris Agreement and promote inclusiveness in the process of climate financing? The core of this issue is how NCQG enables governments at all levels, local communities, indigenous people, and non-state entities to access climate finance in an equitable way.

Although developing countries share a common goal, they have varying priorities, which embody their current needs and the major challenges they face in coping with climate change. To meet these challenges, developing countries must promote domestic resource mobilization and international support to provide funds for the required “transformation.” Otherwise, developing countries will struggle to achieve the objectives of their NDCs, further risking achievement of the 1.5Degree target.

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