Today's Edition
Rahaf Abdulhadi Alkhazraji
The writer is a researcher at TRENDS Research & Advisory
With climate change increasingly impacting daily life and economies, world leaders convene annually at the United Nations Conference of the Parties (COP) to assess the state of the planet.
They face pressing challenges of rising global temperatures, the need for sustainable economic growth, and the urgency to build capacity to combat climate change in an era of advanced technology and artificial intelligence.
While hopes remain high for achieving the goals necessary to prevent further repercussions of climate change, climate finance often dominates negotiations at these summits.
In Baku, faltering climate negotiations at COP29 concluded with an agreement to allocate about $300 billion annually to developing countries until 2035.
Although this falls significantly short of what poor countries had hoped to get from wealthy countries-such as EU members, the US, Canada, Australia, Japan, and New Zealand, it represents an improvement over the previous $100 billion annual climate finance goal.
While developing countries urgently need substantial funding to combat climate change, this limited commitment by wealthy countries is seen as a step forward, ensuring that climate finance will remain at the center of the upcoming COP30 summit.
The summit in Azerbaijan marked the full operationalisation of the "Loss and Damage Fund," initially agreed upon at COP27 in Egypt to assist countries most vulnerable to climate change.
The fund became operational at COP28 in the UAE, where its activation was formalized.
Following COP29, the fund is now fully functional, with its own board of directors and oversight provided by the World Bank.
However, the Baku summit failed to build on previous agreements, such as the gradual phase-out of fossil fuels adopted at COP28 in Dubai, and did not outline clear plans to limit the rise in global temperatures.
The summit also adopted a mechanism for launching a global carbon market.
This mechanism allows wealthy countries to meet their climate goals by financing green projects in Africa and Asia, such as afforestation, transitioning from traditional fuel-powered vehicles to electric ones, and reducing the use of coal - instead of directly cutting greenhouse gas emissions from their industrial sectors.
This system enables the achievement of climate goals through purchasing carbon credits from developing countries under UN supervision, ensuring transparency and preventing manipulation of the carbon credits.
In the end, negotiators agreed to raise $1.3 trillion annually until 2035 from a wide range of sources, including private investment.
A cornerstone of this effort is a commitment to allocate at least $300 billion in annual funding, with multilateral development banks expected to make more contributions.
These banks aim to increase their annual contributions to $120 billion by 2030, up from $75 billion in 2023, benefiting from lower financing costs resulting from credit risks.
Climate finance remains the most significant challenge as the gap between what is needed to combat climate change and the available resources continues to widen.
The burden falls disproportionately on developing countries, which face increasing climate-related impacts and limited investment in clean energy and green technologies.
Rising global inflation and the high costs of climate adaptation aggravate this issue.
Industrialised countries, which are responsible for the majority of greenhouse gas emissions, continue to fall short in providing adequate support to poor countries.
This lack of funding undermines the ability of these nations to combat the effects of climate change, which they largely did not cause.
The world urgently needs to ensure that the financial system, including the private sector, international financial institutions, domestic resources, and national banks, is capable of expanding the scope of its financial flows.
These flows must be aligned with mitigation, adaptation, and global climate goals.
The ultimate goal will only be achieved by accelerating the pace of carbon reduction, enhancing the ability to contain climate-induced disasters, and ensuring sustainable development.
