Sylvan Lutz and Camila Cristancho Duarte are drawing attention to the critical necessity for COP29’s New Collective Quantified Goal (NCQG) to put in place unambiguous standards, enforce accountability, and ensure transparency. This initiative aims to effectively tackle the persistent climate finance deficit faced by developing nations and avert the uninspiring results of the initial $100 billion commitment made back in 2009.
In 2009, developed nations pledged an ambitious target of $100 billion annually by 2020 for climate finance aimed at supporting developing countries. Yet, more than a decade later, confusion stemming from inconsistent reporting and unclear definitions obscures whether this target has truly been achieved or if the financing provided is genuinely supplementary to other aid, all while ensuring alignment with the objectives of the Paris Agreement.
The UN Environment Programme’s most recent Emissions Gap and Adaptation Gap reports underscore a worrying increase in the climate finance shortfall. The New Collective Quantified Goal (NCQG), which is currently under discussion at COP29 in Baku, presents a pivotal chance to address this pressing issue. The first week of negotiations revealed lingering challenges concerning the total climate finance amount, which countries are responsible for contributions, and how funds should be allocated to recipient nations. This week’s negotiations must prioritize efforts to integrate clarity, accountability, and transparency into the NCQG framework.
The state of international climate finance
The insufficiency of the $100 billion target has recently been acknowledged by the Independent High-Level Expert Group on Climate Finance (IHLEG). They also bring attention to an alarming trend revealed in recent studies.
While OECD reports imply the goal was met in 2022—two years later than originally projected—contradictory findings exist indicating it remains unfulfilled. The United Nations Framework Convention on Climate Change (UNFCCC) Standing Committee on Finance reveals that only $67.1 billion was reported by Annex II[i] donor countries in 2022. Furthermore, applying a stricter definition of what qualifies as climate-relevant finance, Oxfam estimates that only $28–35 billion was actually extended in that same year.
These conflicting findings emphasize a pivotal concern: the glaring absence of clear and consistent criteria for defining ‘international climate finance’ (ICF) under the UNFCCC. Without standardized guidelines, evaluating whether contributions from donor countries genuinely fulfill the $100 billion goal and provide additional resources beyond prior aid commitments becomes an arduous task. This lack of clarity additionally raises doubts about the genuine effects of these funds in the recipient nations.
While ICF represents only a fraction of the global climate finance flows, it holds significant importance for recipient countries. Data from the Standing Committee on Finance illustrates that global climate finance averaged $1.3 trillion per year between 2021 and 2022—encompassing domestic public and private funding, cross-border private investments, and ICF. Projections by the IHLEG anticipate that by 2030, developing nations (excluding China) will require as much as $2.4 trillion annually to meet the ambitious targets set by the Paris Agreement. The NCQG’s co-chairs have suggested a baseline figure of $1–2 trillion per year in ICF, but even this projected increase falls short of the pressing needs expressed by recipient countries. As emphasized by the IHLEG, credible “country leadership will be crucial” in galvanizing additional forms of climate finance to close this widening gap.
Future commitments regarding ICF face the risk of repeating earlier mistakes. A recent publication from the Transition Pathway Initiative Centre for the Assessing Sovereign Climate Risks and Opportunities (ASCOR) indicates that the post-2024 commitments made by most assessed donor countries remain ambiguous and inadequate, rendering them incapable of meeting even the existing $100 billion objective. Consequently, it’s essential for all countries engaged in the NCQG negotiations to focus on both accountability and credibility as central tenets of their strategy.
The problem of credibility in climate finance
The foremost challenge lies in determining the expected contribution from each donor country. The UNFCCC’s financial objective seeks to amalgamate donor efforts without imposing specific obligations on individual donor nations; consequently, it lacks a defined framework for calculating proportional contributions. To resolve this issue, international commitments must be translated to more manageable, national levels. Proposals from the World Resources Institute (WRI) and the Overseas Development Institute (ODI) propose differing methodologies: WRI bases its proportional contributions on a nation’s gross domestic product while ODI includes considerations of economic capability and historical emissions in establishing fair sharing of the $100 billion target. These differences in contribution methodologies mirror the uncertainties encapsulated within the current UNFCCC framework regarding the anticipated sources and distribution of ICF. This ambiguity is further reflected in ASCOR’s analysis, revealing that of 21 assessed donor countries, merely four have credible, forward-looking commitments that correspond to a proportional share of the $100 billion goal (utilizing an adjusted version of WRI’s methodology based on publicly-stated targets for forthcoming ICF contributions).
A second major challenge revolves around the lack of a uniform understanding of what constitutes climate finance. In our ASCOR examination, it emerged that donor countries’ definitions of ICF show considerable variation within their UNFCCC Biennial Reports (BRs). For example, the Netherlands only reports disbursed grant-based finance, while Germany includes loans from state-run banks in its counts, and the UK focuses only on committed rather than disbursed funds. The European Union’s annual reporting system stands out for consistently providing comprehensive information on both publicly and privately mobilized finance. However, the data reported within this EU framework is confined to EU member states and frequently differs from the information reported in countries’ BRs and official communications.
Moreover, it remains unclear what specific projects donor countries are funding. Our review highlighted that while some nations (for instance, Germany) provided explicit tagging detailing their expenditures, others (such as the United States) offered minimal information beyond stating the recipient region, amount, and sector. Reporting by Reuters outlined instances where donor nations classified funds associated with diverse projects—such as hotel expansions in Haiti, new coal plants in Bangladesh, and airport developments in Egypt—as ‘climate finance.’ While those countries defended their funding allocations, the ambiguity in climate finance definitions permits donor nations to categorize an extensive array of activities that may tenuously align with the intent of the Paris Agreement and risk being non-additional to their pre-existing aid commitments.
Lastly, even when data is verifiable, it arrives too late. The BRs and incoming Biennial Transparency Report (BTR) frameworks are marred by a two-year-plus delay in their reporting.
The prevalent inadequacies in transparency and timeliness regarding ICF impede recipient nations’ capabilities to advance their adaptation and mitigation strategies. This deficit of clear data may result in diminished ambition in the upcoming Nationally Determined Contributions (NDCs) and obstruct the essential mobilization of additional private investment. Such mobilization is deeply reliant on delivering explicit policy signals and transparent data, as well as addressing other influential elements like the cost of capital and perceived risks prevalent in developing countries.
Lessons for the New Collective Quantified Goal
During the inaugural week of NCQG discussions, the initial draft text presented by co-chairs attracted criticism for being imbalanced by both donor and recipient countries. The new draft text expands significantly, reflecting the diverse perspectives of the negotiators and the lack of consensus surrounding pivotal issues. Despite these challenges, COP29 still has the potential to restore credibility pertaining to ICF through explicit commitments from donors alongside transparent and consistent reporting practices. A failure to achieve this would hinder not just the feasibility of any numerical target agreed upon in Baku, but also the overarching aspirations of the Paris Agreement.
The provisional outline of the NCQG incorporates possible criteria for the contributor base (donor countries). Ideally, it would also encompass definitive measures from donor nations outlining their contributions and timelines. This framework would allow recipient countries to strategically plan their national climate directives while signaling positively to potential private sector investors. Although reaching a consensus on such a proportioning mechanism presents considerable challenges, lacking one could perpetuate under-contributions significantly.
Furthermore, determining what donor nations should fund and monitoring those contributions is vital and continues to be a critical bottleneck within UNFCCC negotiations. The Standing Committee on Finance has initiated systematic efforts to monitor climate finance, yet it highlights in a recent report that the absence of a coherent definition of climate finance poses a substantial obstacle, even within the Enhanced Transparency Framework (ETF) and the forthcoming BTR data. The Committee’s latest proposition stipulates that climate finance should align with the actions delineated in a nation’s NDC, national adaptation plan, or relevant national planning documents.
The NCQG framework must prioritize accountability. Only through transparent commitments, robust reporting practices, and clear definitions can ICF provide developing nations with a dependable foundation and successfully mobilize the necessary private finance to fulfill the goals outlined in the Paris Agreement.
Without a transparent proportioning mechanism and a cohesive climate finance reporting framework, any new agreement risks replicating the disappointing outcomes seen with the previous $100 billion commitment.
The authors would like to thank Eléonore Soubeyran, Antonina Scheer, Carmen Nuzzo, Georgina Kyriacou, and Jodi-Ann Wang for their insightful reviews of this commentary.
Authors’ note on methodology
This commentary contains information on the COP29 proceedings as of the morning of 19 November 2024.
[i] Annex II countries include Australia, Austria, Belgium, Canada, Denmark, and various others committed to supporting developing nations in their climate finance efforts.
What are the current challenges in ensuring accountability and transparency in climate finance reporting among donor countries?
_blank” class=”link link–external” rel=”noopener” href=”https://unfccc.int/standing-committee-on-finance” aria-describedby=”link-description-new-window” target=”_blank” title=””>recent report that the current frameworks in place are insufficient to ensure comprehensive oversight. There is a growing need to standardize the criteria for what constitutes climate finance, which would help mitigate the inconsistencies seen in donor country reports and improve accountability.
To address these challenges, the NCQG negotiations must prioritize the establishment of a robust framework for climate finance that encompasses clarity on contribution calculations, uniform definitions of climate finance, and timely reporting mechanisms. This effort could restore trust among both donor and recipient countries and ensure that climate finance is allocated effectively and transparently.
addressing the pressing issues of accountability and credibility in international climate finance is essential for the successful implementation of the Paris Agreement and the achievement of the NCQG goals. By fostering a collaborative environment that encourages transparency, establishes common definitions, and promotes timely data sharing, the global community can better meet the urgent needs of developing nations and enhance the overall effectiveness of climate finance efforts.
