Why in news? The recent climate meeting in Bonn, Germany, failed to make significant progress on defining a new climate finance goal. By the end of 2024, countries are required to finalize a new monetary target, exceeding the current $100 billion per year, that developed nations must mobilize to support developing countries in combating climate change.

What’s in today’s article?

• New Collective Quantified Goal (NCQG)
• Centrality of money in climate action
• Outcome of the recently held Bonn Summit

New Collective Quantified Goal (NCQG)

• About
  • The NCQG is a forthcoming international climate finance target.
  • It is being developed to replace and build upon the current commitment of mobilizing $100 billion per year by developed countries to support climate action in developing countries.
  • The NCQG aims to establish a new, more ambitious financial target that reflects the evolving needs and challenges associated with addressing climate change, particularly in developing nations.
• Key aspects
  • Increased Financial Commitment - The NCQG is expected to surpass the existing $100 billion annual target, recognizing that the financial needs for climate mitigation, adaptation, and resilience have grown significantly.
  • Expanded Scope - The goal will address not only the quantum of financial resources but also associated issues such as sources of funding, types of projects to be funded, and effective mechanisms for financial disbursement and utilization.
  • Inclusivity and Fairness - The NCQG discussions involve ensuring that the contributions are equitable, with clear criteria on who should contribute based on capabilities and responsibilities.
  • Monitoring and Accountability - Establishing robust systems for tracking the flow and impact of the climate finance to ensure transparency and effectiveness.
• Finalization
  • The goal is expected to be finalized and adopted at upcoming climate conferences, such as COP29.

Centrality of money in climate action

• Need of developing and poor countries
  • Money is essential for climate action, needed for both mitigation and adaptation efforts and for tasks such as collecting and reporting climate data, as required by the 2015 Paris Agreement.
  • Developing and poor countries, which face significant capacity gaps, particularly struggle with funding these activities.
• Obligation under UN Framework Convention on Climate Change (UNFCCC)
  • Under the UNFCCC, rich and developed countries are obligated to provide financial support to developing nations to combat climate change, as they are primarily responsible for its causes.
  • In 2009, developed countries pledged to mobilize $100 billion annually from 2020 for this purpose.
• 2015 Paris Agreement
  • The 2015 Paris Agreement mandates that developed countries must periodically raise their climate finance contributions after 2025 to address the increasing demands for climate action.
  • The new target, known as the New Collective Quantified Goal (NCQG), is intended for the post-2025 period and is set to be finalized this year.
• Report of Organisation for Economic Cooperation and Development (OECD)
  • OECD recently reported that this $100 billion target was achieved for the first time in 2022.
  • However, developing countries dispute this claim, accusing developed nations of double-counting and using creative accounting methods, and often criticize them for not fulfilling their climate finance promises.

How much money is required?

• For the implementing the climate commitments
  • It is widely recognized that developing countries now need trillions of dollars annually for climate action, not just billions.
  • A UNFCCC assessment last year estimated that these countries require about $6 trillion by 2030 to implement their climate commitments.
• For adaptation
  • For adaptation needs, these countries need between $215 billion and $387 billion annually.
  • The global transition to clean energy demands approximately $4.3 trillion annually until 2030 and about $5 trillion annually until 2050 to achieve net-zero emissions.
• Demand by various countries
  • Recently, India proposed that developed countries should commit to providing at least $1 trillion annually after 2025.
  • The Arab countries suggested a minimum of $1.1 trillion, while African countries demanded $1.3 trillion.
  • However, developed countries have not made any public offers, merely acknowledging that the new target must exceed the current $100 billion per year.

Debate over contribution

• Annexure 2 countries of the UNFCCC
  • Under the UNFCCC and the Paris Agreement, only the 25 countries listed in Annexure 2 of the UNFCCC, along with the European Economic Community, are obligated to provide climate finance to developing nations.
• Responsibilities being shifted to other countries
  • The Annexure 2 countries have been attempting to shift some of the responsibility to other nations, arguing that many countries are now economically stronger than they were in the early 1990s when the list was created.
  • They also contend that the financial requirements for climate action are too large for the original group alone to meet.
  • Countries like China, the world's second-largest economy, oil-rich Gulf states, and South Korea are not part of Annexure 2.

Outcome of Bonn Summit

• Despite expectations that the Bonn talks would provide at least some indicative numbers to be refined before COP29 in November in Baku, Azerbaijan, this did not materialize.
• Instead, the outcome was a 35-page, 428-paragraph input paper.
• This document broadly outlines the wish lists of various countries, covering not only the amount of climate finance but also related issues such as:
  • Contributors: Identifying which countries should contribute to the climate finance pool.
  • Allocation: Determining what the funds should be spent on, including specific projects and initiatives.
  • Monitoring: Establishing mechanisms for tracking and managing the flow of finance.
• The input paper is anticipated to evolve into a formal negotiating draft, which will be the basis for discussions and potential agreements at COP29.