Developing nations slammed the deal as woefully inadequate but rich countries set to pay the bill praised it as ambitious.
At COP29, developed nations pledged $300 billion (€285 billion) a year by 2035 for developing countries.
Leaders from the Global North touted the deal as a tripling of the previous finance pledge made in 2009. Developing nations slammed it as being a woefully inadequate “joke”.
Chants of “No deal is better than a bad deal” rang through the makeshift corridors of the summit.
But is the new deal really a new deal at all and who is going to pay the money?
Who is paying what?
Rich, developed nations committed to paying $300 billion a year by 2035 to poorer nations to help them tackle the impacts of climate change. In total, there are 23 economies – including the UK, EU and US – that are thought to be resilient enough to contribute funds to help developing nations.
No country has yet committed a specific amount towards the new pledge.
Rich countries generally hailed the agreement as a positive step in the right direction. EU Climate Commissioner Wopke Hoekstra said it was a “new era on climate finance” that set an “ambitious and realistic goal”. US President Joe Biden called the deal “ambitious”.
There are, though, still questions from rich countries about tripling what was previously being paid.
Swiss environment minister Albert Rösti told public broadcaster SRF that Switzerland will not be committing any extra public funds.
“I think it is smarter to name an amount that will actually be paid out later, rather than setting utopian figures where nothing will happen,” he said.
Rösti further added that the country is currently working on restructuring its finances and does not expect to use more public funds for the goal. This means any potential funding increase from Switzerland would have to come from private sources.
A climate funding COP-out?
According to analysts from the Center for Global Development (CGD), the new climate finance goal is “barely above business as usual” for Global North countries.
They say the $300 billion a year target is achievable with almost no additional budgetary efforts beyond commitments to increase the funding they have already made. Pre-existing national pledges and funding from multilateral development banks will already be up to around $200 billion (€190 billion) a year by 2030.
Based on existing pledges, sources like grants or loans from overseas aid and other public funding were expected to increase by $6.6 billion (€6.3 billion) a year by 2025 bringing their total to $50 billion (€47.5 billion).
Money from specialised climate funds would add an estimated $1.3 billion (€1.2 billion) by 2030 bringing their contribution to $5 billion (€4.7 billion). Multilateral development banks pledged to increase their contributions – adding around $84 billion (€80 billion) from developed nations. Around $58 billion (€55 billion) is expected to come from private finance contributions too.
In total, this would see climate finance from developed countries reach $197 billion (€187 billion) in 2030 from these pre-existing commitments. That’s without any additional efforts from rich countries or voluntary contributions from developing nations.
Add to this money from emerging economies such as China that were “encouraged” as part of the deal, and the total will reach around $265 billion (€252 billion) by 2030.
Redirecting existing aid to meet climate finance goals
The absence of the words “new and additional” in the COP29 finance deal is also worrying.
The 2009 target was set with the expectation that the money pledged by countries would supplement any contributions they were already making.
A CGD analysis, which was difficult to put together because of vague metrics and baselines, estimates that this goal was met but only because around a third of the total came from redirecting or rebranding existing finance.
Another report from the humanitarian organisation CARE Denmark in 2022 found that most of the public climate finance reported by rich countries from 2011 to 2018 was taken directly from existing development aid budgets.
In the new climate finance deal, there is no requirement whatsoever for this funding to come entirely from additional pledges. This is despite Intergovernmental Panel on Climate Change scientists noting that climate finance must come from “new and additional sources”, not at the cost of other UN sustainable development goals.
All this analysis comes before we consider the impact of inflation on the ‘real’ value of these commitments. Already significantly lower than the amount developing countries have said they need, the cash pledged will continue to lose its value over time.
Inflation: Is $300 billion really more money?
In the first week of COP29, leading economists said that developed countries would need to provide climate finance of at least $300 billion a year by 2030 and $390 billion (€370 billion) a year by 2035.
But they noted that these numbers were calculated based on the value of a dollar in 2022 and would, therefore, need to be updated.
Executive secretary of the UN’s independent high-level group on climate finance, Amar Bhattacharya said, “Targets will need to adjust for inflation over time”.
An analysis from civil society group Power Shift Africa during COP29 found that inflation would cut the real terms value of this $300 billion a year goal to $175 billion (€166 billion) in today’s money by the 2035 target date – based on an annual inflation rate of 5 per cent.
CDG says that if inflation follows the same trends over the next decade as it has before, $300 billion would be $217 billion (€206 billion) in today’s money by 2035.
If the original $100 billion (€95 billion) a year pledge had been set in real terms, it would be more like $150 billion (€142 billion) a year today. Existing provisions, if they grow in line with expected inflation and gross national income, would be around $220 billion (€209 billion) a year by 2035, leaving developed countries with only an additional $80 billion (€76 billion) in additional sources to find.
By 2035, CGD says, the countries receiving climate finance will find that the purchasing power of the money pledged in this deal has significantly eroded.