The goal was welcomed by global-north leaders and presented as a “tripling” of the previous target for international climate finance.
Yet it faced a strong backlash from many developing countries, with some branding it a “joke” and “betrayal”.
Closer analysis of the goal and climate-finance data helps to explain this response.
Analysts have shown that the target is achievable with virtually “no additional budgetary effort” from developed countries, beyond already-committed increases.
A combination of pre-existing national pledges and multilateral development bank (MDB) plans will bring climate finance up to around US$200 billion a year by the end of this decade.
Counting money already being distributed by emerging economies such as China – as “encouraged” under the new goal – could bring the total to US$265 billion by 2030. This could mean the target is well on its way to being met by that date, with minimal extra effort.
Moreover, as activists and academics have noted, the US$300 billion target does not account for inflation. When this is factored in, its “real” value could shrink by around a quarter.
The new target has emerged against a backdrop of financial strain and political uncertainty in developed countries.
At the same time, developing countries have stressed that they need climate finance to reach the “trillions of dollars” needed to cut emissions and protect themselves from climate change.
This article looks at three ways in which the US$300 billion goal could be met with little extra financial effort by developed countries – and provide fewer benefits for developing countries than the figure suggests.
1. Much of the goal will be met with ‘no additional effort’
The US$300 billion climate-finance target agreed at COP29 in Baku will be met with finance from a “wide variety of sources”, largely coming from developed countries.
This part of the “new collective quantified goal” (NCQG) for climate finance is likely to be made up of public finance provided directly by governments, as well as money from MDBs, specialised climate funds and private finance “mobilised” by public investments.
The wording of the US$300 billion goal frames it as an extension of the US$100 billion target. This was the amount that developed countries agreed in 2009 to raise for developing countries annually by 2020 – a goal that was extended through to 2025 by the Paris Agreement.
Beyond the central goal of US$300 billion, the NCQG also includes a much broader “aspirational” target of US$1.3 trillion a year in climate finance by 2035.
However, this is harder to assess, as the text of the deal is vague about who will be responsible for raising the funds, which could include various sources that are beyond the jurisdiction of the UN climate process.
Developed countries and MDBs had already committed to raising their climate-finance contributions before a deal was struck at COP29, as noted in a joint analysis by the Natural Resources Defense Council (NRDC), ODI, Germanwatch and ECCO.
The collective impact of these pre-existing commitments can be seen below, with climate finance from developed countries set to increase from US$115.9 billion in 2022 – the most recent year for which data is available – to US$197 billion in 2030. This can be seen in the chart below, which does not account for inflation.
Estimated climate finance in 2030, based on funds that have already been pledged, and target set at COP29 for 2035 (red). Dark blue bars show historical climate finance recorded by the Organisation for Economic Co-operation and Development (OECD), 2013-2022 (grey). The light blue bars indicate an estimated trajectory to reach the 2030 and 2035 levels. These figures do not account for inflation. Source: OECD, NRDC, NCQG text.
The expected increase between 2022 and 2030 comes from a few different sources.
The analysts calculated that climate finance distributed “bilaterally” – as grants or loans via overseas aid and other public funding – was already expected to increase US$6.6 billion annually by 2025, based on existing pledges, bringing the total to US$50 billion. (The chart above assumes that bilateral finance remains at this level up to 2030.)
They also estimated that existing pledges and reforms at specialised climate funds, such as the Green Climate Fund and Climate Investment Funds, would add another US$1.3 billion per year by 2030. This would bring their contribution to US$5 billion.
The biggest increase that was already locked in before the COP29 deal was a pledge by MDBs – which provide 40 per cent of existing climate finance – to increase their contributions further.
A joint statement by the World Bank, the Asian Development Bank and others in the first week of COP29 committed to raising US$120 billion of climate finance per year by 2030 for low- and middle-income countries. Of this, US$84 billion can be attributed to developed countries, based on their shareholdings in these banks.
On top of this, the climate-finance analysts estimated that US$58 billion of private finance would be mobilised by these bilateral and multilateral contributions in 2030 – up from US$21.9 billion in 2022.
The chart below shows the estimated breakdown, by source, of climate finance in 2030, compared to 2022.
Historical climate finance in 2022 and estimated climate finance in 2020, by source. Source: OECD, NRDC, NCQG text.
These expected increases over the course of this decade mean that with “no additional efforts”, beyond what had already been agreed prior to COP29, developed countries would have been on a trajectory to reach around US$200 billion per year by 2030, and US$250 billion per year by 2035. (The latter was the first numerical target proposed by developed countries at COP29, which was, ultimately, negotiated upwards to US$300 billion on the final day.)
NRDC climate-finance expert Joe Thwaites, one of the researchers who undertook the analysis, tells Carbon Brief that bilateral funding directly from governments is the “big constraint” in climate finance. COP29 came just after the re-election in the US of climate-sceptic Donald Trump and many European countries have cut their aid budgets. Thwaites says:
“The MDBs are growing and doing all kinds of reforms and getting bigger and better, but the bilaterals are what are politically very stuck.”
Moreover, the COP29 climate-finance deal contains no pledge by developed countries to provide a set amount of public, bilateral finance, despite strong pressure from developing countries to include such a goal.
Following COP29, Thwaites released updated modelling to calculate different ways of reaching the US$300 billion target. He wrote:
“What is clear is that US$300 billion by 2035 is eminently achievable, with little to no additional budgetary effort required from developed countries, let alone other contributors, to meet the goal.”
2. Developing-country contributions could cover part of the goal
Unlike the earlier US$100 billion target, contributions from developing countries could count towards the new climate finance goal.
Only developed countries are obliged to provide climate finance to developing countries under the Paris Agreement. But the NCQG outcome says that developing countries can “voluntarily” declare any climate-related funds they contribute, if they choose to do so.
This allowed negotiators at COP29 to skirt the controversial issue of formally expanding the list of official donors that are required to help with financial aid.
Developed countries had previously been pushing to enlist relatively wealthy developing nations, such as China and the Gulf states, to share the financial burden.
Several countries described since the early 1990s as “developing” under the UN’s climate convention are known to already make large, climate-related financial contributions to other developing countries. Examples include China’s Belt and Road initiative supporting clean-energy expansion and South Korea’s contributions to the GCF.
In fact, at COP29 China announced for the first time that it had “provided and mobilised” more than US$24.5 billion for climate projects in developing countries since 2017 – confirming that its contributions are comparable with those of many developed countries.
This roughly aligns with calculations by research groups that have placed China’s annual climate finance at around US$4 billion a year.
Both developed and developing countries pay money into MDBs. As well as “encouraging” developing countries to voluntarily contribute directly to climate finance, the NCQG outcome also specifies that these countries could start counting the share of climate-related money paid out of MDBs that can be traced back to their inputs.
Roughly, 30 per cent of the banks’ “outflows” can be attributed to developing countries in this way.
Counting the developing-country share of the projected increase in climate finance from MDBs by 2030 would add an extra US$36 billion to the global total, plus an extra US$20 billion of private finance mobilised by the funds.
It is not possible to say for sure how much climate finance new contributors such as China will choose to officially declare.
However, the chart below shows an estimate based on an “illustrative scenario”, by NRDC and others, of bilateral finance and multilateral climate funds, combined with expected MDB outflows and the associated private finance that this would mobilise. This could bring total annual climate finance up to US$265 billion by 2030.
Potential voluntary contributions of climate finance by developing countries, including bilateral finance, contributions to multilateral funds, outflows from MDBs allocated to developing countries and private finance mobilised by developing country contributions to MDBs (lighter red), on top of estimated climate finance from developed countries in 2030 (red). The second red bar indicates the NCQG climate-finance target agreed for 2035 at COP29. The light blue bars indicate an estimated trajectory to reach the 2030 and 2035 levels. These figures do not account for inflation. Source: OECD, NRDC, NCQG text.
Some observers at COP29 said they hoped that officially counting developing-country contributions towards UN “climate finance” targets would enable parties, such as the EU, to set more ambitious goals.
However, Michai Robertson, lead finance negotiator for the Alliance of Small Island States (AOSIS), dismissed this as an “accounting trick”, because these funds are already being provided.
Li Shuo, head of the China climate hub at the Asia Society Policy Institute (ASPI), tells Carbon Brief that the NCQG outcome could bring more attention to China’s climate-related aid and lead to “stronger and better climate support from Beijing”. However, he notes that this is in the context of a low-ambition global target that is a “far cry” from what is needed:
“I take this as a classic example of geopolitical competition weakening environmental ambition, namely, the geopolitical desire of including China as a donor without corresponding desire of developed countries to contribute more limited the overall scale of climate finance.”
3. Inflation wipes out much of the increase in climate finance
One issue that has surfaced in the wake of COP29 is the impact of inflation. Campaigners have noted that the failure to factor this into the 2035 climate-finance target means that, by the time it is met, the true value of the money pledged will be far lower than it is today.
In an article highlighting this issue, the Guardian reported that the US$300 billion goal was, therefore, “not the tripling of pledges that has been claimed”.
Researchers had flagged this before COP29, pointing out that the previous US$100 billion annually by 2020goal, which was first set in 2009, had also not accounted for inflation.
They noted that merely correcting the US$100 billion for inflation would bring it to between US$139 billion and around US$150 billion a year. (Such calculations depend on the rate of inflation applied to the starting figure, as well as the base year for the calculation.)
Civil-society groups at COP29, such as Power Shift Africa, estimated that the impact of inflation would cut the “real” value of the US$300 billion to US$175 billion in today’s money by 2035. This is based on an annual inflation rate of 5 per cent.
In its analysis, the Guardian opted for an inflation rate of 2.4 per cent – based on the average rate in the US over the past 15 years. This is taken to reflect the conditions for governments contributing climate finance and the currency much of it would be provided in.
The figure below shows the impact of an inflation rate of 3 per cent. This is based on input from economists and analysis by the Center for Global Development (CGD), which, in turn, is based on the World Bank’s global GDP deflator.
If inflation over the next decade follows this trend, the US$300 billion pledged in 2024 would only be worth US$217 billion in today’s money in 2035 – a 28 per cent reduction in value.
In order to offer climate finance with a real value of US$300 billion in 2035, countries would have needed to set a goal for that year of around US$415 billion.
Increase in climate finance between 2022 and 2035 under the NCQG commitment in nominal terms (red line), and based on the “real” value of the US$300 billion climate-finance pledge in 2024 value terms (blue dotted line). Source: Carbon Brief calculation based on a 3 per cent inflation rate, as used by CGD.
(The figures in the chart above cannot be directly compared with the existing pledges made by governments and MDBs, as those too would need to be adjusted for inflation.)
CGD modelling suggests that if developed countries’ climate-finance contributions simply increase in line with expected inflation and gross national income (GNI) growth, they would reach US$220 billion by 2035.
The CGD analysts write in a blog post that “by the time the new goal is met, beneficiary countries will find that the purchasing power of these resources has eroded significantly”.
Independent experts, as well as climate-vulnerable countries themselves, emphasised both before and during COP29 that more than US$1 trillion dollars will be needed each year to help developing countries deal with climate change. Many developing nations said that around US$600 billion of this should come directly from developed countries’ public coffers.
With such a relatively small amount of finance pledged for the NCQG, some developing countries have already indicated that they may scale back their future climate ambitions.
This story was published with permission from Carbon Brief.
