Following two weeks of discussions at COP29 in Baku, a consensus on climate finance was reached early Sunday morning. This funding is crucial for addressing climate change and adapting to its effects. Nevertheless, as delegates departed from the Azerbaijani capital, few expressed positive sentiments about whether the compromise would benefit Africa.
“We leave Baku without a meaningful climate finance target, without concrete strategies to limit global temperature rises to 1.5°C, and without the extensive support needed for adaptation and addressing loss and damage,” remarked Evans Njewa, chair of the Least Developed Countries bloc at COP29. “This isn’t simply a shortcoming; it is a betrayal.”
The agreed document establishes a commitment for developed nations to contribute at least $300 billion annually in climate finance to developing countries by 2035. While this suggests a tripling of current commitments, it is widely seen as just a small fraction of what is required to support nations that have contributed the least to climate change yet bear its most severe impacts.
The newly labeled “new collective quantified goal on climate finance” (NCQG) was meant to be focused on need. Governments undertook an extensive evaluation of their financial needs for both mitigation and adaptation. Using this evaluation, developing countries requested that the NCQG total $1.3 trillion per year.
However, the anticipation that global policymakers would adopt a stringent needs-based strategy clashed with the reality of budget limitations in developed nations, which initially suggested a target of only $250 billion. Following a walk-out by the Alliance of Small Island States, the proposed amount was raised to $300 billion, with a vague mention of “scaling up” financing to $1.3 trillion in the agreement.
“A genuine disaster”
The results of the NCQG negotiations ignited significant outrage among NGOs in Africa.
The $300 billion agreement is deemed “unserious and perilous,” stated David Abudho, climate justice lead for Oxfam in Africa, to African Business. He mentioned that poorer nations were “bullied” into this compromise, describing the text as “a soulless triumph for the wealthy, while it represents a true disaster for our planet and communities grappling with the repercussions of climate disruption, like flooding, hunger, and displacement.”
“As for any pledges of future funding? They are as void as the agreement itself.”
Indeed, there exists much uncertainty regarding how the goals outlined in Baku will be achieved. The resolution was an agreed text, rather than a legally binding instrument obliging specific parties to take designated actions.
The pathway to realizing $300 billion remains unclear, let alone the ambitious aim of $1.3 trillion. There is no clarity on how climate finance obligations will be divided among developed nations, and it remains ambiguous which countries fall under the category of “developed” and thus are responsible for providing climate finance. For example, Western governments argue that China, as the world’s largest emitter, should also participate. While the text claims that financing will derive “from a wide variety of sources,” including the private sector, it fails to specify how or through whom this private finance will be mobilized.
Oxfam estimates that the true climate finance necessities of the Global South reach $1.5 trillion annually by 2030. It argues that most of this funding should be granted, especially for adaptation, to prevent escalating debts in developing countries. Although the COP29 text acknowledges the importance of grant funding in certain circumstances, it does not exclude the possibility that interest-bearing loans may be categorized as climate finance.
COP-out?
Even before the discussions in Baku began, concerns were mounting regarding the continued relevance of the annual COP meetings. The situation became even more complicated by the recent re-election of Donald Trump, who previously pulled the U.S. out of the critical Paris Agreement aimed at regulating global temperature increases.
During the summit, a coalition of climate leaders made a prominent call for reforms to the COP process, including the introduction of a mechanism to track climate finance allocations. The dissatisfaction with the NCQG is likely to intensify demands for a reassessment of how global governments tackle climate change.
South African entrepreneur Ivor Ichikowitz labeled the COP29 agreement as a “complete con.” He communicated to African Business that nations with the highest emissions dominate the negotiations, creating a situation where climate finance is “unable to flow” due to blatant conflicts of interest.
Expressing frustration at hearing the “same rhetoric” in Baku as in past COP meetings, Ichikowitz asserted that governments in Africa and the Global South must take ownership of the process. “The only solution is for the affected countries to become vocal and refuse to comply, resisting coercion into unfavorable agreements and instead leading the way in shaping the process.”
Mobilising private finance
The discussions around the future of the climate agenda are set to heat up. However, for the time being, the obligation to deliver climate finance primarily falls on development finance institutions.
Marco Serena, chief sustainable impact officer at the Private Infrastructure Development Group (PIDG), a donor-supported infrastructure financing organization, recognizes that Africa “cannot treat COP as an unqualified success.”
Nonetheless, he views this agreement as “a foundation to build upon.” The $300 billion target, while inadequate to fulfill the needs of developing countries, “is a starting point,” he notes, stressing the importance of creating plans for the prompt deployment of these funds.
Serena states that PIDG—focused on climate action—aims to attract private finance for infrastructure by reducing risks throughout the project pipeline. This involves investing in blended capital structures and backing projects that are in their early, high-risk development phases.
Given the financial limits in Western nations, the outcome of COP29 suggests it is unrealistic to anticipate a significant influx of public finance channeled into climate projects in Africa.
Holger Rothenbusch, managing director and head of infrastructure and climate at British International Investment, the UK’s development finance institution (DFI), concurs that mobilizing private capital is critical for institutions intending to help Africa implement renewable energy solutions.
“Our focus is increasingly on how we can make efficient use of our balance sheet and capital to attract commercial investment alongside our contributions,” he states. While DFIs have traditionally adopted a “patient capital” approach, Rothenbusch mentions that BII is striving to “innovate in recycling capital more quickly, thereby maximizing the impact of the same dollar.”
However, Rothenbusch emphasizes that public funding must also play a role in adaptation initiatives.
“Adaptation is the area where scarcity will hit hardest, as it necessitates grants and heavily subsidized funding, which is alarmingly limited,” he suggests.
“This type of funding is not suited for commercial investment, since many needs pertain to public goods, like building sea walls, for example,” Rothenbusch concludes. “This requires donor funding and substantial public sector support at a large scale.”
