After a week of negotiations and disagreements, the delegates from across the world gathered in Baku for COP29, released a draft outlining the climate finance goal — New Collective Quantified Goal — but several revisions are expected before an agreement is reached, if any.

The bone of contention is where the finance will come from, as the Global South, including Pakistan, demands money from the developed countries for the damage they caused to the environment since the industrial age began.

In his speech at the World Leaders Climate Action Summit last week, Prime Minister Shehbaz Sharif highlighted the unmet pledges made at previous climate conferences and called out the loan-laden climate finance instead of aid to build resilience. In its stance at the ongoing negotiations, the G-77 Group, of which Pakistan is a part, and other blocks comprising developing countries, argued for easy access to climate finance and aid instead of loans.

These negotiations, after almost a week of efforts, seemingly resulted in a small win for the Global South as, for the first time, ‘aid’ made its way to the draft for the new climate finance.

The bone of contention is where the finance will come from, as the Global South demands money for the damage caused by the developed countries

This document has at least six options for the new climate goal, ranging from $100 billion to $2 trillion annually. The $100bn target adds nothing to the equation, as it is similar to the fund announced at COP15 in Copenhagen and then reaffirmed in the 2015 Paris Agreement. More and more changes to these drafts are expected, especially after the ministers arrive in Baku in the second week of COP.

Arif Goheer, who is representing the Pakistan climate ministry at negotiations, said there is a “huge finance gap” since the overall spending in this regard is minimal, but the countries require trillions to cope with the vagaries of climate.

The new finance accord, or New Collective Quantified Goal (NCQG), is direly needed to bridge this gap and address the needs of developing and most vulnerable countries, he said, adding that the Global South was not here to seek loans because it did not want another debt trap.

Dr Abid Sulehri, executive director of the Sustainable Development Policy Institute, underscored the urgency of the new climate goal, saying $1 trillion was not just ambitious but an essential benchmark to meet the ballooning costs of mitigation and adaptation, especially in developing countries already facing the brunt of climate impacts.

He also agreed that debt should not be a part of this new goal as NCQG must be able to provide resources on favourable terms. “Ideas like reallocating Special Drawing Rights, issuing new SDRs, adjusting equity-to-loan ratios for multilateral banks, and redirecting fuel subsidies toward climate initiatives require the political will of wealthy nations,” he added.

As countries stand pole apart on new finance goals, Stephane Hallegatte, senior climate change adviser at World Bank, claimed there was “no silver bullet which will just fix everything”. In response to a question about low-income states, he said there was a need to increase the efficiency of spending and “mobilise domestic resources, especially in countries with high debt [like Pakistan]. You need cost of addition of finance, and part of that is to raise more resources”.

“Having a tax system that is efficient and can raise resources without killing economic growth is really important,” he said, adding that proposing more energy taxes is, he believed, “politically complicated”.

The World Bank official also dismissed the loan versus aid debate surrounding climate finance, saying it completely depended on the nature of the project. “If your project is power generation, which is a project that will raise revenue, a part of that revenue will pay back the loan.” However, if the project were, for instance, sanitation, that didn’t raise revenue, then such a project would add to the country’s debt since it did not have financial inflows, he said.

Pakistan and other developing, however, find this approach of ‘concessionary loans’ problematic and ask the Global North to cough up the funds. Mr Goheer, representing the climate change ministry, said there was no mechanism for climate funds and instead of going through red tape, money should come instantly in case of a climate disaster.

But where will the money — for loans or aid — come from? The developed world is in no mood to shoulder fiscal responsibility as they point to climate disasters in their own countries. The recent floods in Spain are an example, which has eaten up a chunk of their finance.

According to them, developing countries such as China also bear the responsibility for being one of the big emitters. Though developing countries have no obligation to contribute to climate funds, China provided $4.5bn per year between 2013 and 2022, according to the World Resources Institute, in its study released ahead of COP29. Beijing is not historically responsible for emissions.

With Donald Trump, a climate denier, set to take charge as the US president, there is little hope that Washington will play its role in this finance. The White House Climate Adviser Ali Zaidi hoped that the US under the outgoing Biden administration would be able to meet its $11bn climate finance target this year and also pinned hopes on the private sector and the state administration to take the lead if the federal government under Donald Trump takes a backseat.

Time is running out, however, and to reduce emissions and keep temperatures under 1.5 Celsius in line with the Paris Agreement, all countries will need to deliver on the finance goal before the COP curtains draw on Nov 22. It’s one week to go, and lots needs to be done to evolve consensus.

This story was produced as part of the 2024 Climate Change Media Partnership, a journalism fellowship organised by Internews’ Earth Journalism Network and the Stanley Center for Peace and Security.

Join DawnMedia’s Breathe Pakistan initiative to combat climate change.

Published in Dawn, The Business and Finance Weekly, November 18th, 2024