Sylvan Lutz and Camila Cristancho Duarte emphasize the urgent necessity for the New Collective Quantified Goal (NCQG) at COP29 to create explicit standards along with mechanisms for accountability and transparency. This framework is crucial for addressing the climate finance shortfall faced by developing nations and is essential in preventing a repeat of the disappointing outcomes associated with the $100 billion commitment made in 2009.
In 2009, developed nations collectively pledged to provide $100 billion annually by 2020 in climate financing directed toward developing countries. A decade later, the situation remains uncertain, with inconsistent reporting practices and ambiguous definitions obscuring the reality of whether this goal has been accomplished, whether the funding provided is genuinely additional, and whether it aligns with the objectives set forth in the Paris Agreement.
The UN Environment Programme’s recent Emissions Gap Report and Adaptation Gap Report reveal a troubling trend of increasing climate finance shortages. The New Collective Quantified Goal (NCQG), currently under negotiation at COP29 in Baku, presents a crucial opportunity to confront this challenge effectively. The initial week of discussions, however, left unresolved key issues, such as the total amount of climate finance required, which countries are expected to contribute, and which nations stand to receive these funds. This week, negotiators are required to integrate clear definitions, accountability measures, and transparency protocols within the NCQG structure.
The State of International Climate Finance
The commitment of $100 billion is now widely regarded as inadequate to effectively bridge both the mitigation and adaptation gaps, as highlighted by the Independent High-Level Expert Group on Climate Finance (IHLEG). Additionally, recent studies underscore another concerning trend.
While OECD analysis indicates that the original goal was ostensibly reached in 2022—albeit two years past the original deadline—other investigations contend that it remains unfulfilled. According to the United Nations Framework Convention on Climate Change (UNFCCC) Standing Committee on Finance, a mere $67.1 billion was reported by Annex II donor countries in 2022. By applying a more stringent definition of climate-relevant finance to the OECD’s findings, Oxfam asserts that only $28–35 billion was actually provided that same year.
The stark differences in these findings illuminate a critical issue: the lack of clear and consistent criteria for defining ‘international climate finance’ (ICF) under the UNFCCC regime. In the absence of standardized guidelines, it becomes exceedingly difficult to evaluate whether the contributions from donor nations genuinely satisfy the $100 billion obligation and offer funding that is genuinely additional to other aid commitments. Moreover, this ambiguity raises valid concerns regarding the actual impact of these funds on recipient countries.
While ICF constitutes a small fraction of the total climate finance flows, it remains vital for the recipient nations seeking to strengthen their climate resilience. The data from the Standing Committee on Finance reveals that global climate finance flows averaged approximately $1.3 trillion annually during 2021–2022, encompassing domestic public and private funding, cross-border private investments, and ICF. Furthermore, the IHLEG projects that by 2030, developing countries (excluding China) will require up to $2.4 trillion each year to meet the objectives set forth in the Paris Agreement. Although the NCQG co-chairs have suggested a baseline of $1–2 trillion annually in ICF, even this proposed increase does not suffice to meet the demands of recipient countries. The IHLEG further stresses that substantial “country leadership will be essential” to mobilize other forms of climate finance that can effectively close this gap.
Future commitments for ICF are at risk of mirroring the failures of past promises. A recent report by the Transition Pathway Initiative Centre for the Assessing Sovereign Climate Risks and Opportunities (ASCOR) project indicates that the commitments made by most evaluated donor countries for post-2024 projects are vague and inadequate to fulfill even the existing $100 billion target. As the NCQG negotiations unfold, it is imperative that contributor countries take accountability and the principle of credibility seriously.
The Problem of Credibility in Climate Finance
One prominent challenge lies in determining how much each donor nation should be expected to contribute. The UNFCCC finance goal seeks to pool resources from donors without delineating specific obligations for individual countries; consequently, there is no clear framework for determining contribution levels. To address this issue, it is necessary to translate international commitments into actionable national obligations. Proposals from the World Resources Institute (WRI) and the Overseas Development Institute (ODI) offer differing methodologies: WRI uses a country’s gross domestic product to determine proportional contributions, while ODI includes economic capacity and historical emissions in their assessments to pinpoint fair shares for the $100 billion commitment. These varying methodologies reflect the uncertainty present in the current UNFCCC framework regarding the anticipated sources and distribution of ICF. This uncertainty is echoed in ASCOR’s findings, which reveal that only four out of 21 assessed donor countries have made credible, forward-looking commitments that align with a proportional share of the $100 billion goal.
A second major challenge is the absence of a common understanding of what constitutes ‘climate finance’. During our analysis, we discovered that the definitions of ICF utilized by donor nations vary significantly within UNFCCC Biennial Reports (BRs). For example, the Netherlands reports only on disbursed grant-based finance, while Germany accounts for loans from state-run banks, and the UK only includes committed funds, which may not have been disbursed. The reporting system used by the European Union stands out as a more consistent approach, providing reliable data on both publicly and privately mobilized funds; however, it is limited to EU countries and may differ from each country’s BRs and official communications.
It remains ambiguous what exactly donor nations are financing. While countries like Germany meticulously report how funds are allocated, others, like the United States, provide minimal details beyond the recipient region, amount, and sector. Reuters has indicated that some donor countries have claimed their ‘climate finance’ allocations have supported initiatives such as a hotel expansion in Haiti, a new coal plant in Bangladesh, and an airport expansion in Egypt. While the donor nations referenced in the Reuters report defended their actions, the current state of definitions regarding ICF enables donor countries to assert a broad spectrum of activities that may only loosely align with the objectives of the Paris Agreement yet are not necessarily additional to their other aid commitments.
Furthermore, even when data is considered reliable, it often arrives late. The Biennial Report and the incoming Biennial Transparency Report frameworks currently operate on a lag of two years or more.
The lack of timeliness poses significant challenges for recipient countries attempting to implement their existing mitigation and adaptation strategies. This delay could thwart ambitions related to upcoming Nationally Determined Contributions (NDCs) and impede the attraction of private investments that are essential for climate transitions. Successful mobilization depends on clear policy signals and the timely availability of transparent data, along with factors such as capital costs and perceived risks in developing regions.
Lessons for the New Collective Quantified Goal
Throughout the first week of NCQG negotiations, the initial draft put forth by the co-chairs was deemed unbalanced by both donor and recipient stakeholders. The newly proposed draft text is considerably more extensive, capturing the diverse perspectives of negotiators and the existing lack of consensus on pivotal issues. Nonetheless, COP29 provides a crucial opportunity to enhance credibility in ICF by establishing clear commitments from donors backed by transparent and consistent reporting practices. Failure to achieve this would undermine the credibility of any numerical targets established in Baku as well as the broader goals set forth in the Paris Agreement.
The provisional outline of the NCQG includes potential criteria for the contributor base (donor countries). Ideally, it should feature explicit commitments from donor nations detailing their contributions and timelines. Such clarity would empower recipient countries to formulate effective national climate strategies and signal positively to private sector investors. While the challenge of reaching a consensus on the design of an equitable proportioning mechanism should not be underestimated, the absence of such a mechanism could significantly result in further under-contributions.
Determining what donor nations should finance while ensuring effective tracking of these contributions remains a significant hurdle in UNFCCC negotiations. The Standing Committee on Finance has initiated efforts to systematically monitor climate finance; however, it emphasizes that the lack of coherent definitions surrounding climate finance constitutes a notable limitation, even within the Enhanced Transparency Framework (ETF) and forthcoming BTR data. The Committee recently asserted that climate finance should correlate with the actions outlined in national NDCs, national adaptation plans, or other relevant national strategies.
The NCQG framework must prioritize accountability. Through transparent commitments, robust reporting practices, and well-defined standards, ICF can provide developing countries with the consistent support needed to mobilize private finance critical for achieving the objectives of the Paris Agreement.
Without a transparent mechanism for proportioning commitments and a coherent reporting framework for climate finance, any new agreement is likely to replicate the tepid results witnessed under the original $100 billion pledge.
The authors would like to thank Eléonore Soubeyran, Antonina Scheer, Carmen Nuzzo, Georgina Kyriacou, and Jodi-Ann Wang for their invaluable feedback on this commentary.
Authors’ note on methodology
This commentary encompasses details from the COP29 proceedings up to the morning of November 19, 2024.
[i] Annex II countries are: Australia, Austria, Belgium, Canada, Denmark, European Economic Community, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom of Great Britain and Northern Ireland, United States of America.
How can the establishment of standardized definitions and criteria for international climate finance improve accountability among donor countries?
Ts to address this by recommending improved methodologies and a unified definition of climate finance. Establishing such frameworks is essential for enhancing accountability and transparency in how international climate finance is calculated, reported, and allocated.
In light of the pressing need for funding to meet climate targets, the next steps in the NCQG negotiations should include:
1. **Standardizing Definitions and Criteria**: The creation of a clear, universally accepted definition of what constitutes international climate finance is necessary to ensure uniform reporting from donor countries. A common framework would help to eliminate discrepancies in how funds are classified and reported, thereby providing a more accurate picture of financial flows.
2. **Setting Specific Contribution Targets**: The establishment of clear, country-specific targets based on economic capacity, historical emissions, and other relevant factors can help clarify expectations for donor nations. This would not only provide transparency but also an incentive for countries to fulfill their commitments.
3. **Enhancing Reporting Mechanisms**: Timely and comprehensive reporting on ICF can vastly improve the ability of recipient countries to plan and implement their climate strategies. Regular updates and consistent formats for data reporting will support better accountability and facilitate tracking of funding effectiveness.
4. **Strengthening Accountability Mechanisms**: It is critical to develop systems that hold donor countries accountable for their commitments. This could include periodic reviews and assessments, where stakeholders can evaluate progress against established targets and commitments.
5. **Fostering Engagement Between Stakeholders**: Engaging both donor and recipient countries in ongoing dialog can ensure that the needs and capacities of recipient nations are considered in the design and delivery of climate finance. Facilitating exchanges can also build trust and encourage collaboration towards shared goals.
6. **Leveraging Private Sector Participation**: Encouraging private sector investment is essential for scaling up climate finance beyond governmental contributions. Clear signals from donor countries regarding their commitments can foster an environment conducive to private investments in climate actions.
7. **Learning from Past Experiences**: Analyzing previous successes and failures in climate finance provision can offer valuable lessons for the new commitments. This includes understanding what works in terms of mobilizing funds effectively and ensuring that they have a meaningful impact on recipient countries.
credibility in international climate finance requires concerted efforts to align contributions, standardize definitions, enhance transparency, and engage stakeholders. As the NCQG negotiations progress, it is vital that parties emphasize accountability and clarity in financing commitments to ensure that climate finance meets the urgent needs of developing countries while advancing global climate goals.
