For Prelims

What:
The editorial critically examines the role of finance in climate change negotiations, specifically focusing on the global commitments made to mobilize finance for developing countries. It highlights the failure to meet climate finance targets and the ongoing debate over the financial needs of the developing world to combat climate change. The article reflects on the Paris Agreement, developed country promises, and the financial pledges made by the global North to support climate action in the global South.

Why:
Climate finance has been central to international climate change negotiations since the launch of the UNFCCC in 1992. The promise of financial support to developing countries is seen as vital for enabling them to take climate action while pursuing their developmental goals. The article also touches upon how the gap between the pledged finance and actual disbursements affects the ambitions and implementation of climate action plans in developing countries, particularly with respect to the funding needs outlined in their Nationally Determined Contributions (NDCs).

Who:
The editorial covers the following:

• Developed Countries' Role: These countries are primarily responsible for mobilizing climate finance for the developing world, as per the agreements made in the Paris Agreement and earlier climate negotiations.
• Developing Countries: They are the recipients of climate finance, with specific needs that align with their climate action plans and commitments under the UNFCCC and Paris Agreement.
• India: India’s response to the New Collective Quantified Goal (NCQG) on climate finance, its demands for increased financial support, and its objections to the NCQG’s final form are discussed.
• International Organizations: Bodies such as the UNFCCC and IPCC, along with contributions from global financial institutions like the World Bank, are central to the discussions on climate finance.

For Mains

GS III: Climate Change and Environment
GS II: International Relations and Policy

Highlights of the Article:

• The Paris Agreement and its financial commitments, particularly Article 9(1), which binds developed countries to mobilize finance for developing countries.
• The failure to meet the $100 billion annual finance target by the developed world and the inadequacy of this amount relative to the growing needs of the global South.
• The New Collective Quantified Goal (NCQG) on climate finance, which sets a new target but is deemed insufficient by developing countries like India.
• India’s demand for $1.3 trillion in climate finance by 2030, with a significant portion allocated as grants and concessional resources.
• The role of the developed North in ensuring that their financial commitments match the scale and ambition of climate actions taken by developing countries.

Context:
Climate finance is a critical element of global efforts to combat climate change. The United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement enshrine the principle of common but differentiated responsibilities, which emphasizes that developed countries must support developing countries with adequate finance and technology to mitigate and adapt to climate change. However, financial commitments have consistently fallen short of expectations. This gap in climate finance has raised concerns about the ability of developing countries to meet their climate goals and the overall success of global climate efforts. The editorial provides a comprehensive analysis of the financial dynamics in climate change negotiations, focusing on the tensions between the global North and South and the continuing struggle to meet climate finance goals.

UPSC EXAM NOTES ANALYSIS

1. COP29 and Climate Finance

• Since the inception of the United Nations-led climate negotiations in 1991, finance has been a crucial issue in climate change discussions, leading to the creation of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992.
• According to Article 4 (7) of the UNFCCC, the ability of developing countries to meet their climate action commitments depends on the financial and technological support they receive from developed countries.
• The Paris Agreement, in Article 9(1), reiterates this financial obligation, requiring developed nations to mobilize resources for developing countries. The Intergovernmental Panel on Climate Change (IPCC) in its sixth assessment report emphasizes that finance, capacity-building, and technology transfer are essential for enabling climate action in developing nations.
• This is particularly important in the context of anthropogenic greenhouse gas emissions, which have contributed to a 1.1°C rise in global temperatures between 2011 and 2020 compared to the 1850-1900 period.
• In 2009, developed countries committed to mobilizing $100 billion annually by 2020 to support climate action in developing countries. However, this target was only reached in 2022, and many reports indicate that the $100 billion is insufficient to meet the growing climate finance needs associated with the developing countries' Nationally Determined Contributions (NDCs). Furthermore, this amount falls short of the estimated financial requirements needed to limit global temperature rise to 1.5°C by the end of the century.
• At the 29th Conference of the Parties (COP 29) in Baku, Azerbaijan, in November 2024, discussions were held to establish a New Collective Quantified Goal (NCQG) on climate finance, which would replace the $100 billion floor. This new goal would take into account the priorities and needs of developing countries in addressing the climate crisis.
• Despite repeated demands from developing countries for $1.3 trillion by 2030, the developed nations have only agreed to provide $300 billion annually by 2035.
• This amount falls far short of the financial needs identified by the UNFCCC’s Standing Committee on Finance (SFC), which estimates that developing countries require between $455 billion and $584 billion annually, based on their NDCs. Even this estimated amount would only cover half of the 5,760 needs identified by 98 developing countries in their NDCs.
• The NCQG decision also acknowledges the financial needs of vulnerable groups, such as the Least Developed Countries (LDCs) and Small Island Developing States (SIDS), but does not set minimum financial allocations for them.
• The Alliance of Small Island States has demanded $39 billion for SIDS, while LDCs have requested at least $220 billion.
• Additionally, the first-ever Global Stocktake (GST) in 2023, aligned with the Paris Agreement, failed to address the financial concerns related to loss and damage, with economic costs expected to reach $447 billion to $894 billion per year by 2030