Climate Finance Talks Face 'Hardest' Stage as COP29 Enters End-Game

As the United Nations' annual climate talks, COP29, enter their final stages in Baku, negotiators are grappling with the most contentious issue: climate finance. The challenge is to agree on a new, ambitious goal to replace the current $100 billion annual commitment, set in 2009, which is widely considered insufficient. The task is daunting, as developed and developing nations remain far apart on the amount of money needed and how it should be allocated.

Developing nations, led by the Alliance of Small Island States, are seeking $1.3 trillion to transition to clean energy, adapt to climate change, and compensate for damages. Experts agree that at least $1 trillion is needed, but developed countries have proposed figures ranging from $900 billion to $200 billion, far below the developing nations' demand. The key issues in these talks include the amount of money, the mix of grants and loans, and who contributes.



Developed nations justify their proposed climate finance contributions through the "power of leverage," where a small amount of public money can mobilize larger sums from private investment and loans. They argue that this approach can bridge the gap between their aid budgets and the $1.3 trillion sought by developing nations. However, developing nations fear this may lead to unsustainable debt. They advocate for more grants and low-interest loans, and some propose international taxes to fund climate finance.

The main concerns and fears of developing nations regarding the form and structure of climate finance revolve around debt and leverage. They worry that relying heavily on loans, even with leverage, could lead to unsustainable debt levels, as seen in the Alliance of Small Island States' (AOSIS) concerns. They advocate for grants and low-interest, long-term loans to ease the burden. Additionally, they fear that leveraged money may not materialize as promised, as highlighted by Avinash Persaud, climate adviser for the Inter-American Development Bank.

Developing nations plan to use climate finance to transition to clean energy, adapt to climate change, and compensate for damages. They propose allocating $1.3 trillion, with most in grants and low-interest loans. Developed nations, with aid budgets of $200 billion, aim to leverage this amount using multilateral development banks, aiming to mobilize $16 for every dollar invested. However, there's concern that this may lead to unsustainable debt for developing nations.



As the talks enter their final stages, negotiators face a daunting task. They must balance the need for ambitious climate action with the concerns of developing nations about debt burdens. The success of COP29 hinges on finding a compromise that ensures sufficient climate finance while mitigating the risks of unsustainable debt. The world watches as negotiators strive to reach an agreement that will help combat climate change and support vulnerable nations in their transition to a sustainable future.