Fiona Ryan
15 October 2024
The nations of the world are remain divided over which countries should provide financial support for climate action to developing countries. This is in addition to debate about how much support should be provided by countries that have the capacity to do so. The 201509 Pari Copenhagen UNFCCC meeting s Agreement re-promised the payment of US$100 billion annually by 2020 as climate finance, a commitment that was enshrined in the 2015 Paris Agreement. The contributor countries claim to have belatedly met that target in 2022[i].
The negotiations to reset this target, known as the New Collective Quantitative Goal (NCQG), are now in their third year. have now been underway for three years to reset that target known as the New Collective Quantitative Goal (NCQG) in 2025. The fora for these negotiations are Part of that process was the Technical Expert Dialogues (TED) established in 2021. The four-day eleventh TED meeting was held 9 to11 September 2024. It is This was the last TED before the final NCQG decision scheduled at Conference of the Parties (COP29) in Baku, Azerbaijan in November 2024. Australia’s Minister for Climate Change and Energy, Chris Bowen and Egyptian Minister Yasmine Fouad were appointed by the COP29 President as a Ministerial Pair of the NCQG to facilitate a political agreement at COP29. The TED process was intended to find a basis for the creation of a negotiating text. Based on estimates of their needs developing country Parties have called for amounts ranging into the US$ trillions
There was much disagreement about which countries should contribute to the NCQG. Existing contributor countries have, however, repeatedly called on larger and richer middle-income developing countries economies such as China and the Gulf states with high Gross Domestic Products or with high emissions such as China, India and the Gulf states to contribute to the NCQG. Countries like the US and Australia Existing contributor countries argue that the lists of contributor countries established at the United Nations Framework Convention on Climate Change (UNFCCC) iI in 1992 are outdated as they exclude not only large high emissions economies but also high income countries such as Singapore and Brunei. Surprisingly, expanding This push to expand the list of contributors was not supported by any of the developing country negotiating groups, including Least Developing Countries (LDCs) in the TED. This was surprising despite given that LDCs were not being asked to contribute and being the least likely to be required to contribute. LDCs would also would benefit from the increased quantum that may result from a larger list of contributors.
Another related major impediment to the negotiations is that the contributor countries have not yet proposed a new quantum, that is, the amount of climate finance they propose to deliver through the NCQG. Admittedly, it is obviously is more difficult to determine the impact on contributor’s budgets if the list of contributor countries is still under contention and there is no agreed definition of what qualifies as climate finance.
The contributor countries have also countries argued for a multi-layer NCQG with for an outer layer that includes the inclusion of private finance and other innovative sources in the NCQG because they are theoretically available at much greater volumes than public finance. There were a variety views on what sources should be included in the layers. However, developing countries in particular have insisted on limiting the core NCQG to public finance. Australia advocates a two-layer approach but with a greater range of sources in the core, thus not limiting the core goal to public finance.
Fears that Official Development Assistance (ODA) will be diverted into climate finance was also an issue. Many countries and NGOs are dissatisfied with the lack of rules around the current US$100 billion goal governing climate finance. In the absence of an agreed definition of climate finance, contributor countries opted for the OECD Development Assistance Committee “Rio Mmarker” approach, an approach which is known to be easily manipulated. Most climate finance is also counted towards the UNGA UN’s Official Development Assistance (ODA) target of 0.7% Gross National Income, making it relatively easy for countries to merely “rebadge” ODA projects as climate finance. Revealingly As an example, a recent UK government report found that the UK has increased its reported climate finance commitments and disbursements by retrospectively marking pre-existing aid projects as climate finance using the Rio markers. The Paris Agreement explicitly stipulates support provided to developing countries be “new and additional”. Reclassification of existing projects is not considered new and additional by most reasonable stakeholders. However, Australia and other contributor countries makes the rather peculiar claim that all disbursements are new and additional because they are aid budget appropriations must be approved by parliament each year.
The predominance of loans over grants was a source of discontent. In addition, Most climate finance is in the form of loans rather than grants, thus adding to the financial stress of already debt burdened developing countries. The OECD ODA figures are reported in grant equivalence terms, rewarding loans with lower than the market interest rates and long grace periods with higher grant equivalence values. Oxfam found that if market rate loans were excluded, then the combined grant equivalent value of contributors is about one third of what they report now. In Australia and other countries which predominantly use grants, the grant equivalent values approximate reported climate finance. Those countries whose climate finance portfolios are dominated by loans have their efforts greatly exaggerated by the current accounting method. Oxfam, using their grant equivalence formula, calculated that the largest donor, Japan would have it's reported amount reduced from US$ 8,811 million to US$ 2,492 million while France the second biggest contributor would be reduced from US$ 5831 million to US$ 694 million, an almost 90% reduction. If grant equivalence reporting were part of the NCQG, as it is now for OECD DAC ODA reporting, contributors with grant-based programs such as Australia would ascend the NCQG contributor league table while contributors whose climate finance portfolios are dominated by loans will move down the league table. If Australia clearly advocated for grant equivalence it would be a sign of alignment with developing countries, thus aiding Australia’s bid to host COP31 in 2026.
Loss and damage refers to the negative effects of climate variability and climate events which cannot be avoided by adaptation. It was included in many submissions such as the Alliance of Small Islands Developing States and the Least Developed Countries Group as a sub-goal under the overall NCQG target. No and no opposition to the inclusion of loss and damage was expressed to this at TED11, given that a loss and damage fund has been established under the UNFCCC. The inclusion of loss and damage under the same overall goal would require a larger quantum, provided that subgoals for mitigation and adaptation prevented the shifting of those funds to loss and damage.
Access for small economies was also raised as an issue. Many developing countries, particularly Small Island Developing States (SIDS), have protested the difficulty of accessing climate finance. At TED11, Australia proposed a “friends of access” group, which other countries expressed interest in joining. Its job would be to find ways for smaller and less resourced entities, including LDCs and SIDS to gain access to funding. Pakistan preferred opening funding to vulnerable developing countries in general rather than prioritising only SIDS and LDCs. One member of the G77 and China group preferred opening funding to developing countries in general rather than prioritising SIDS and LDCs. There were also calls for recognition of the vulnerability of women, children, other marginalised groups, indigenous people and targeting finance for local communities. These considerations often involve reprioritisation of existing resources and so do not require an increase in overall funding. It is increases in funding requirements that attract with little effect on the quantum which results in little opposition from contributor countries. Other issues impacting the budgets of contributor countries will be more contentious for contributors, including the magnitude of the quantum, the inclusion of new countries in the contributor base, the definition of climate finance and grant equivalence.
TED11 resulted in little progress on reaching a clean negotiating text. Hopefully, countries positions will soften as a result of the 9 October 2024 High-level ministerial dialogue on the new collective quantified goal on climate finance, currently being held Baku. Let's hope Minister Bowen can avoid a last-minute A scramble to reach a final NCQG decision at COP29 in November 2024 that may result in a business-as-usual extension for the existing US$100 billion goal with only a marginally expanded quantum and without an agreed definition of climate finance or grant equivalence. This would further erode the confidence of developing countries in the fairness of multilateral climate negotiations and undermine meaningful collective action.
[i] The contributer countries are: https://unfccc.int/process/parties-non-party-stakeholders/parties-convention-and-observer-states?field_national_communications_target_id%5B515%5D=515 excluding those marked as economies in transition.
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