Ahead of the COP29 conference, the Energy Transitions Commission (ETC) has published a briefing paper on what is expected to be one of the key talking points in Baku – climate finance.
The ETC’s paper, NDCs, NCQG, and Financing the Transition, addresses the wide range of financing needs and outlines strategies to clarify the types and sources of climate finance, noting that Nationally Determined Contributions (NDCs) can play an essential role in unlocking these financial flows.
Much of the discussion at COP29 will focus on establishing the New Collective Quantified Goal (NCQG) to channel significant financial resources from high-income to low-income countries.
This will replace the $100 billion annual target from 2009, and aims to boost support for climate mitigation, adaptation, and other critical needs. It will also be a key element of climate finance discussions over the remainder of the decade.
Defining ‘climate finance’
“COP29 debates on the NCQG need to start with a clear definition of the very different categories of ‘climate finance’ and recognition of the different appropriate funding sources,” commented Adair Turner, chair, Energy Transitions Commission.
“However the NCQG debates conclude, countries should use updated and more ambitious NDCs to help unleash the private finance that will play the primary role in funding capital investment for mitigation. But it is also essential for development banks to play an increased and more effective role in supporting financial flows to middle and low-income countries.”
Four categories of climate finance
The ETC outlines four categories of climate finance, each of which will require diverse funding requirements.
Capital investment in zero-carbon energy systems and mitigation systems is expected to require around $3 trillion annually, much of which will be covered by private finance, while multilateral development banks (MDBs) are also likely to play a supporting role.
Concessional or grant payments, totalling approximately $300 billion annually, are aimed at activities that do not generate returns, such as halting deforestation and closing coal plants.
Investments in adaptation, estimated at $250 billion per year, will address the unavoidable impacts of climate change by funding projects like coastal protection and flood management, especially in vulnerable regions.
Finally, loss and damage payments, projected to reach $200 billion to $400 billion annually by 2030, are intended to help low-income nations cope with the irreversible effects of climate change.
‘Ambitious goals’
“Through frameworks like the NCQG and NDCs, countries can set ambitious goals backed by policies that attract large-scale investments from the private sector and can meet the majority of finance needs for climate mitigation and adaptation,” added Nicholas Stern, chair, Grantham Research Institute on Climate Change.
“Multilateral development banks are crucial to providing affordable finance for decarbonising energy systems and building climate resilience in developing nations while ensuring that economic growth aligns with the clean energy transition.”
The ETC suggests that a well-structured NCQG, combined with ambitious NDCs, can position COP29 to foster significant investment in climate resilience, especially in developing regions – ultimately aligning economic growth with a sustainable, resilient, low-carbon transition. Read more here.
