COP29: Climbing towards $1 trillion, but stuck at $300 billion?

A COP finance staircase was being discussed among COP29 attendees, which outlines a multi-tiered approach to mobilising $1 trillion annually in climate finance by 2030. But the proposed numbers are unlikely to be accepted by developing nations 

On Tuesday, a “COP Finance Staircase” was doing the rounds at the venue in Baku, Azerbaijan. The staircase draws on insights from the Independent High-Level Expert Group on Climate Finance (IHLEG) report published on November 14 in Baku and outlines a multi-tiered approach to mobilising the $1 trillion in climate finance per year until 2030 that is being targeted at COP29. These are the five steps that the staircase suggests: 

Bilateral public finance from developed countries 

The foundation of climate finance, this involves grant-based funding from wealthy nations to developing countries. Contributions need to more than double, reaching $80–$100 billion annually by 2030, ensuring funds are easily accessible and aligned with recipient countries’ plans, according to the staircase. This step builds on the $100 billion annual goal, finally met in 2022 after years of delay. However, it is widely acknowledged that this amount is insufficient. Rich countries suggest increasing this “core finance” to $250 billion annually, describing it as “mobilised” finance—a combination of direct funding and private sector investments. Developing nations, however, argue for a larger contribution of $300 billion in public funds.

Finance from Multilateral Development Banks (MDBs) 

According to the staircase, MDBs should triple their contributions, delivering $240–$300 billion annually by 2030. Reforms, including more grants and debt relief mechanisms, are essential to maximise their impact and support low- and middle-income countries. Institutions such as the World Bank aim to provide $120 billion annually by 2030 to low and middle-income countries, with $42 billion allocated for adaptation efforts. However, experts suggest that MDBs could significantly increase their contributions without compromising their financial stability.

Expansion of contributor base

This step of the staircase calls for voluntary contributions from economically advanced nations like China, South Korea, and Saudi Arabia, which are not historically considered donors. It aims to generate $30–$50 billion annually by 2030. Some experts privy to the negotiations had told CarbonCopy that China “may have shown some willingness to report its existing voluntary climate finance provisions from developing countries under Article 9.2”. But this is still speculation. Saudi Arabia has held firm against being included as a donor country. 

Innovative sources 

The next step involves proposals including levies on shipping and aviation, Special Drawing Rights, and taxes on fossil fuels. These mechanisms could contribute $140–$160 billion annually by 2030, according to the break-up, but face significant political and logistical challenges.

Private finance 

The private sector, managing over $210 trillion in assets, is critical. Mobilisation could deliver $450–$550 billion annually by 2030, according to the analysis, with public institutions creating enabling conditions through blended finance and risk mitigation strategies. Developing countries have argued that this kind of finance is unsustainable in the long run. These regions face a high cost of capital and banks perceive investments here as high risk. This deters private finance, making it tougher for developing countries to raise funds through loans and investments.

Aside from this “staircase”, a figure of $300 billion of “core finance” — which is only from public funds in the form of grants from rich countries — was also being discussed at the COP29 venue. But if any of these figures are tabled during negotiations, they are expected to be immediately rejected by the developing country groups. 

At the start of the summit, the G77+China group had proposed the $1.3 trillion NCQG number — to be delivered completely in the form of low-cost, interest-free grants, to ease the debt burden that developing countries are grappling with. “How to expect $1 trillion to come as low-cost, interest-free grants. For negotiations it is okay, but practically we don’t expect that to happen,” said Vaibhav Chaturvedi, Senior Fellow at Delhi-based CEEW. 

“What could end up happening is the EU [on behalf of the Global North] saying $300 billion dollars. The developing world is clearly saying $1 trillion. Somewhere in the between you say $500-600 million dollars. It is always the incentive of the [COP] presidency and everyone else to show success. So they’ll say ‘$500 billion, which is 5 times compared to the earlier floor of $100 billion. This is not as good as what the developing world is asking but it is still a success’.” 

A proposed number is expected to appear in the draft climate finance text on Wednesday. The final agreed number will reveal whether COP29 can bridge the deep divides between rich and developing nations, but this seems to be increasingly unlikely. 

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Anushka Mohite

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