Why in news?

Climate experts believe that the focus of this year’s climate change conference in Baku, Azerbaijan (COP 29 scheduled for November 11-24) will be on finance.

As per them, the expression that is likely to be heard most frequently at COP29 is NCQG — or New Collective Quantitative Goal (on finance).

What’s in today’s article?

• Background
• New Collective Quantitative Goal (NCQG)
• Amount of money required to ensure effective climate action
• Challenges in climate financing
• India’s stand on climate financing
• Conclusion

Background

• 2022 Climate change conference (COP 27)
  • The 2022 climate change conference in Sharm el-Sheikh decided to set up a Loss and Damage Fund to help developing countries recover from climate disasters.
• Dubai conference 2023 (COP 28)
  • The last year conference was all about Global Stocktake (GST), a review of ongoing climate action.
  • This resulted in the first ever explicit acknowledgment of the need to transition away from fossil fuels, and a promise to triple global renewable energy capacity by 2030.
• COP29 at Baku, Azerbaijan
  • Experts believe this year’s focus will be on climate finance.

New Collective Quantitative Goal (NCQG)

• About
  • NCQG is a term for the extra money that rich countries need to gather each year starting from 2025. This money is meant to support actions against climate change in poorer countries.
  • It has to be more than the $100 billion that rich countries promised to collect each year starting from 2020, but didn't manage to do.
• Status of NCQG
  • NCQG is extremely important for developing countries, and discussions on this new amount have been ongoing for a couple of years at least.
  • At a recently concluded two-day meeting in Copenhagen, Denmark— the first minister-level climate meeting for this year — some technical work to arrive at the NCQG was finalised.

How much money is required to ensure effective climate action?

• Assessments of current financial requirements run into several trillions of dollars every year.
• Estimates by the secretariat of the UNFCCC
  • In 2021, the secretariat of the UNFCCC said in a report that developing countries would require a total of about $6 trillion annually between then and 2030 just to implement their climate action plans.
  • An updated version of that report is supposed to come out later this year, and is expected to raise this figure much higher.
• Final agreement at Sharm el-Sheikh (COP 27)
  • It estimated that a global transition to a low-carbon economy would likely require about $4-6 trillion every year until 2050.

Challenges in climate financing

• The biggest hurdle to a significant scale-up in global climate action is the unavailability of adequate finance, especially in developing countries.
• The scale of annual climate finance flows has always been considerably less than the $100 billion.
  • $100 billion is the amount that the developed countries had promised to mobilise every year from 2020 onward.
• But even if that amount were being made available, it would be only a small fraction of the money that is required to enable actions that would keep the world on the 1.5 degree Celsius pathway at least until 2030.
• Climate finance flows are currently heavily skewed in favour of mitigation actions.
• However, developing countries have been demanding that more money be made available for adaptation and other activities.

India’s stand on climate financing

• India has called for developed countries to provide at least $1 trillion per year in climate finance to developing countries from 2025, primarily in the form of grants and concessional finance.
• G-20 New Delhi Leader's Declaration also recognizes the substantial financial requirements essential for the world's successful transition to a renewable energy-driven economy.
• The Declaration notes the need for $ 5.8-5.9 trillion in the pre-2030 period.

Conclusion

Unlike the $100 billion figure, which was offered without any consultations, the NCQG will be the result of negotiations, and countries will have better control over compliance.

The way the new sum is distributed across different kinds of needs — mitigation, adaptation, loss and damage, and several others — will be a deciding factor in the fight against climate change.