By Student Delegate Logan Keen
The uncertainties surrounding climate finance—who pays for the impacts of climate change, how much they ought to pay, and what that money ought to be used for—remain among the most important questions on the table as the world approaches the COP27 summit in Sharm el-Sheikh, Egypt. In a key decision accompanying the momentous 2015 Paris Agreement, parties committed to answering these questions by determining a new collective quantified goal (NCQG) for climate finance before 2025 that considers the “needs and priorities of developing countries,” and with a “floor of USD 100 billion per year.” Conceptually, the NCQG must be both collective and quantified, meaning that all parties must agree on the terms and that those terms be finite and tangible.
At COP26 in Glasgow in 2021, delegates formed an ad hoc work program to kick-start deliberations on the NCQG, to run until COP29 in 2024. The program includes four technical expert dialogues per year and is led by one chair from a developed country and one from a developing country, both of whom will collaborate annually to produce a report on the program’s progress. Paragraph 15 of the decision declares the aim of the NCQG is to accelerate the achievement of Article 2 of the Paris Agreement, and paragraph 16 states that development of the NCQG shall take into account the needs and priorities of developing countries, in line with the Paris Agreement and decision 14/CMA.1.
As part of the 2009 Copenhagen Accord, developed countries committed to “mobiliz[ing]” $100 billion per year by 2020 to help developing countries improve their sustainability in anticipation of worsening climate change effects. At the time, the U.S. wanted India and China—two fast-growing countries with increasing emissions but hundreds of millions of people still living in poverty—to join the $100B pledge, but the two nations balked at the idea of joining what they viewed as a pact among rich nations. Since that promise, donor countries have collectively failed to meet that target, and the Organization for Economic Cooperation and Development’s most recent estimate for contributions adds up to USD $83 billion.
With these commitments in the background, the goals of developed countries during the ad hoc work program will likely prioritize avoiding direct accountability for loss and damage. Based on the United States’ and other developed nations’ collective refusal at COP26 to support a proposed financing mechanism for loss and damage, however, the future of climate finance under the NCQG remains murky. One concern was that the proposal would mandate de facto climate reparations from historically significant contributors to emissions, as opposed to all the current major emitters, such as China; another was that it would open up developed countries to binding obligations or never-ending streams of litigation.
Holding China, India, South Africa, and Brazil—collectively the ‘BASIC’ negotiating bloc—equally accountable for their ongoing emissions remains another priority for developed nations. The U.S. and other rich nations likely considered the Paris Agreement’s abandonment of the bifurcated UNFCCC Annexation model (“developed” and “developing”) to be a win, but in many senses, there remains a dichotomy between historically wealthy countries like the US and emerging ones like China and India. Expanding the “donor base,” though, would relieve developed countries of at least some of their expected contributions. The issue of how to sort countries into those who pay and those who do not, then, seems certain to play a major role in climate finance discussions at COP27 in Sharm el-Sheikh.
Another sticking point may well be the structure of the NCQG itself, including whether to set separate goals for financing in various areas such as mitigation, adaptation, and loss and damage. The Glasgow Pact includes a commitment to double adaptation finance for developing countries by 2025, reflecting a recognition of the need to accelerate adaptation. To date, climate finance has primarily supported mitigation efforts—aimed at lessening the severity of climate change by reducing GHG emissions—rather than on adaptation financing aimed at preparing for the unavoidable effects of climate change.
Determining which types of financial commitments qualify as climate finance under the NCQG will also be a key issue, raising the question of whether all climate finance should be considered equally or whether there should be a meaningful distinction between grants and loans. For developed countries, there is obvious incentive to count all forms of aid as climate finance; it makes it easier to reach the current $100B goal, along with any future mandates, if loans count the same as grants. Developing countries, many of whom suffer from high debt burdens already, are often reluctant to take on more debt, and thus overwhelmingly prefer grants to loans. Thus, a top priority for them will be to distinguish loans from grants when actually defining climate finance.
Meanwhile, the tangible repercussions of the failure by developed countries to help developing countries adapt become more prominent each year, exemplified by the devastating floods in Pakistan earlier this year; thus, the debate intensifies. It remains to be seen whether and how the wealthy nations will accept responsibility for the effects of having produced the lion’s share of historical emissions. What is certain is that the central issues of climate finance—who pays, how much, and for what?—promise to be points of contention at COP27 and potentially beyond.