The record-breaking Hurricane Beryl in June and July this year marked the earliest and strongest Category 5 hurricane to form in the Atlantic basin. It also left a swathe of destruction across several Caribbean small island developing states (SIDS). Throughout the region, reconstruction will be costly. Grenada is grappling with how to fund rebuilding efforts in its smaller northern island dependencies without unduly worsening its debt burden in the face of loss and damages equivalent to 16.5 percent of the country’s 2023 GDP. The smaller southern islands of St. Vincent and the Grenadines were hit badly, with total economic damages estimated at over one-fifth of the country’s 2023 GDP. Jamaica suffered considerable devastation to property and infrastructure along its southern coast, but did not receive any payout from its catastrophe (CAT) bond, even though the instrument was supposedly designed to transfer the risk of natural hazards from the country to the capital market investors, and the government had to tap its own scarce fiscal resources to fund emergency response and recovery spending.
Caribbean and other world leaders are meeting Nov. 11-22 at the 2024 United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, against a backdrop of growing frustration amongst SIDS about the die-hard reluctance of major players in the global financial system to urgently mobilize grants and highly concessional finance to help them tackle climate change, especially in the face of increasingly frequent and powerful extreme climate events such as Hurricane Beryl. SIDS account for less than 1 percent of global emissions, yet are home to some of the world’s most climate-vulnerable populations and ecosystems. Indeed, Papua New Guinea’s Prime Minister James Marape has decided to not attend COP29, stating emphatically, “We are protesting to those who are always coming in to these COP meetings, making pronouncements and pledges, yet the financing of these pledges seem distant from victims of climate change and those like PNG who hold substantial forests.”
Setting the Stage: Finance at COP29
Many issues are set to be discussed at COP29, but one item will likely dominate the agenda: finance. Countries are seeking agreement on a new global climate finance goal, referred to as the New Collective Quantified Goal, or NCQG, which aims to mobilise the trillions of dollars that SIDS and other climate vulnerable countries across the Global South urgently require to tackle the existential risks posed by climate change. The NCQG has the potential to shape the future of international climate policy, finance, and politics for at least the next decade.
The new global climate finance goal will replace the pledge made by developed countries at COP15 in 2009 and which they simply re-affirmed at COP21 in 2015, to collectively provide $100 billion a year to help developing countries fund their climate mitigation and adaptation efforts until 2025. After more than a decade of falling short of their promise, Global North countries finally met their commitment in 2022, with funding reaching $115.9 billion. The persistent failure, however, has damaged trust between both developed and developing countries and undoubtedly will influence negotiations on the NCQG at COP29.
To make matters worse, SIDS, which are among the world’s most climate-vulnerable countries, have very limited access to the climate financing coming from the Global North, receiving less than 2 percent of the total flows. About 70 percent of public climate finance coming from the developed world is delivered in the form of loans, adding to the debt burdens of developing countries. In 2015, with the adoption of the Paris Agreement, States agreed to replace the $100 billion promise with a new climate finance goal that must be agreed to before 2025, making COP29 the last opportunity to find consensus on a new target.
Since 2022, countries have been formally discussing the new goal’s technical and substantive elements, finding agreement on only two areas: first, that the NCQG must be set from a floor of $100 billion a year, and second, that it must consider the needs and priorities of Global South countries. All other elements of the new global climate finance goal are up for contentious debate at COP29. The two main negotiating issues are how big should the new goal be, and who should pay for it.
How Big Should the New Goal Be?
Estimates on the size of the NCQG vary in scope. In 2009, the agreed-upon figure of $100 billion resulted from suggestions that countries in the Global North provide 1 percent of their GDP per year in climate finance to developing countries, or around $400 billion on a grant-equivalent basis. Now, at COP29, the new figure cannot be arbitrary; it must be adequate and robust, based on the important and immediate needs of developing countries. The Second Needs Determination Report of the United Nations Framework Convention on Climate Change (UNFCCC) Standing Committee on Finance estimates that developing countries require between $455-584 billion of climate finance a year until 2030, but acknowledges that this is a conservative estimate. Different countries have proposed different targets for the NCGQ. India, Saudi Arabia on behalf of the Arab Group, and the African Group have proposed between $1-1.3 trillion a year until 2030, while Pakistan has proposed the highest so far, at $2 trillion a year. On the other hand, the United States has proposed identification of the factors that would enable the quantum to move beyond the floor of $100 billion without identifying a specific figure. The Alliance of Small Island States (AOSIS), which represents the interests of 39 small island and low-lying coastal developing states in global climate negotiations, has also not proposed a specific figure. However, it has urged the international community to commit to an NCQG that provides financial flows in the trillions, considering the special circumstances of SIDS, and that the amount provided must be new and additional to existing aid commitments.
Apart from the promised $100 billion target falling woefully short of the trillion-dollar needs of Global South countries, this goal prioritised climate mitigation, left adaptation underfunded, and neglected loss and damage. A related flashpoint during COP29 negotiations is likely to be the proposal by AOSIS to now include loss and damage finance as a third pillar in the NCQG, alongside mitigation and adaptation. Over the last 30 years, Caribbean SIDS have suffered over $45 billion in loss and damage from tropical storms and hurricanes, pushing these small islands further into debt and making them amongst the most heavily indebted SIDS in the world. Consequently, it is important to include loss and damage in the new climate goal, especially since the $720 million of resources pledged to the recently established Fund for Responding to Loss and Damage is insufficient to address the scale of the climate crisis. Between 2000 and 2019, the world suffered at least $2.8 trillion in loss and damage from climate change.
Who Should Pay for the New Goal?
A key guiding principle of the 1992 UNFCCC and the 2015 Paris Agreement is that of common but differentiated responsibilities and respective capabilities (CBDR-RC). This simply means that all countries have a shared responsibility to tackle climate change, but their level of responsibility and capability to act varies, based on their historical contributions to global emissions and current economic capacities.
In line with the fundamental notion of climate justice, CBDR-RC translates into requiring Global North countries to finance climate efforts in developing countries. Today’s wealthy developed countries are responsible for a large proportion of the historical cumulative and ongoing greenhouse gas emissions, contributing the most to the present climate crisis. In practice, this means that only 43 developed countries (the “Annex II” countries) who were Parties to the 1992 UNFCCC are obligated to provide climate finance. These include the United States, most Western European countries, Japan, Australia, Canada and New Zealand. However, the world has indeed changed dramatically since 1992 when the UNFCCC came into force. An estimated 40 percent of all global emissions have been produced over the past three decades, and two-thirds have come from developing countries.
For this reason, Global North countries want the new climate finance goal’s contributions to also include countries like key Gulf States, China, and South Korea — all of which are now considered developed countries, with high carbon emissions. China is already providing substantial climate finance to developing countries in the context of South-South cooperation, but might not want to make such support obligatory. Nevertheless, there does exist a valid argument for some large, rich “polluting” developing countries to also contribute to the new climate goal. However, widening the contributor base can be negotiated after reaching agreement on the climate finance share of Annex II developed countries. While some developed countries have cited harsh budget constraints to explain their reluctance to expand climate contributions, political realities suggest otherwise. For instance, the Global North spent six times more to subsidise harmful fossil fuels between 2010-2022 than they invested into climate finance.
The Trump Effect
The negotiations on the NCQG at COP29 will occur against the backdrop of a new Trump administration entering office in January 2025 and a possible shifting of U.S. climate policy landscape. The United States is responsible for the greatest share of historical greenhouse gas emissions in the world. It remains to be seen whether President-elect Donald Trump, whose stated views on climate change often seem mixed and contradictory, will make good on his promises to withdraw the United States from the Paris Agreement, as he did in his first term of office, and reduce climate finance assistance to vulnerable countries; drive more domestic oil and gas production; and repeal the Inflation Reduction Act, President Joe Biden’s major anti-global warming initiative that has increased U.S. private sector climate investments, particularly in clean energy (and at least some of which enjoy broad bipartisan support). These prospects may induce other countries and regions, such as the UK and Europe, to reach agreement on many of the major outstanding climate finance issues this year before the end of the Biden administration. It may even reinvigorate the multilateral system which has been dealing with heightened geopolitical tensions and this renewed partnership with the international community would benefit Caribbean SIDS and other Global South countries.
Conclusion
Caribbean SIDS are caught in a vicious cycle. The resources they need to invest in education and health, as well as to build climate resilience to more frequent and ferocious hurricanes such as Hurricane Beryl, are increasingly being diverted to repay their rising debts. This pattern reflects the injustice of the current global financial architecture. A breakthrough outcome for the NCQG at COP29 is therefore crucial to help Caribbean SIDS and other developing countries unlock climate finance at scale to the climate crisis within this decade. COP29 marks an opportunity for the Global North to demonstrate courage and true leadership while paying for their fair share of global climate finance.