Climate finance at COP29: Everything you need to know about the NCQG

With COP29 now into its second and final week, observers are hoping for a breakthrough in the agreement of a new multi-billion – or even multi-trillion-dollar – climate finance pledge. We summarise everything you need to know about the New Collective Quantified Goal (NCQG).

Published 15th November 2024

The policy stall coincides with 2024 on track to set new global temperature records.

In the run-up to the climate summit in Baku, it had been dubbed ‘the finance COP’ by many veterans of the process.

Nations are this week striving to pin down a final agreement before 6pm local time on Friday (22 November). This will be no mean feat, given that there was a day-one scuffle over the overarching agenda, and given that talks have stalled in recent days on all manner of topics, from climate mitigation to finance and carbon markets.

A key agenda item is the agreement of a New Collective Quantified Goal (NCQG) – a time-bound, numerical commitment for the provision of climate finance to emerging and developing economies on the frontlines of the crisis, from wealthy nations in the Global North.

Here, edie demystifies this piece of jargon for our readers and summarises the state of play.

What activities does climate finance support?

There is no internationally agreed definition of climate finance, meaning that interpretations differ between countries and between organisations like multilateral development banks.

The UN takes a broad definition, using the term to refer to finance for activities aiming to mitigate the impacts of climate change (i.e. cut emissions) or enhance adaptation and resilience.

The NCQG’s top-line figure does not include moneys allocated to the Loss and Damage fund launched at COP27, which received its first funding pledges at COP28. This is a separate initiative. Loss and damage refers to the impact to economies, infrastructures and societies from climate-induced events. Related finance is a form of targeted disaster relief.

There is, however, a push for Loss and Damage to be incorporated into the NCQG more broadly. Pledges to the fund to date have not yet surpassed the billion-dollar mark.

What was the previous goal?

At the 2009 Copenhagen climate summit, wealthy nations signalled an intent to provide $100bn of climate finance to the Global South each year. The pledge was formalised at COP21 in Paris in 2015 and a deadline of 2020 was set.

According to the OECD, the $100bn was not delivered in a single year until 2022. Several rich nations citied challenges in stumping up their initially-committed share due to the economic downturn caused by the Covid-19 pandemic.

The $100bn was entirely accounted for by public finance.

The failure of wealthy nations to deliver the goal on time, and to agree upon a new goal sooner, has been a source of tension in global climate diplomacy workstreams.

What is the new goal likely to be?

The $100bn figure was designed by nations on the Global North and, this time around, the UN and COP29 Presidency have promised to better take into account the needs and priorities of developing countries.

The UN Standing Committee on Finance has stated that these nations collectively see a need for at least $5trn in climate finance over the next five years. This is likely an underestimate.

Lidy Nacpil, coordinator of the Asian Peoples’ Movement on Debt and Development, said: “It is unconscionable that Global North governments have continuously rejected their responsibility to deliver adequate climate finance for the global south.

“If they are serious about solving the problem of climate change, as they claim to be, they should agree to a climate finance target that covers the costs of mitigation, adaptation, just transition, and loss and damage. The Global South is owed trillions, not billions.”

Several figures are still on the table, with the least ambitious being around the $120bn mark but most nations agreeing that the figure should be in the trillions. The Arab Group, The African Group and the Like-Minded Developing Countries Group are pushing for between $1trn and $1.3trn per year.

Developing countries are pushing for a target largely accounted for by public finance. Most wealthy nations have stated that, while they are willing to target the trillions, they will only do so if private and alternative finance does most of the heavy lifting.

The Global Solidarity Levies Campaign is pushing for OECD countries to implement new taxes on the ultra-wealthy and on high-carbon industries to raise money to deliver an ambitious NCQG.

Other than the number, what are the key sticking points?

As already mentioned, there are differing opinions on how climate finance should be defined, and who should pay. Global South nations worry that, if most finance provided going forward is not coming in the form of grants from public sources, it will be low-quality, locking them into further debt and/or limiting them from allocating funds to the most urgent and impactful activities.

Of the 54 countries deemed to be facing severe debt by the UN, 28 are on the list of the UNDP’s 50 most climate-vulnerable nations globally.

This is fundamentally an issue of climate justice and of trust. Due to gaps in the quality of their financial provisions, and to accounting loopholes, Oxfam has argued, rich nations are largely overstating how much climate finance they provide.

Nations are also squabbling, at COP29, over which countries should have to pay in to the NCQG funding pot and which should be eligible to withdraw. Most wealthy nations want China to give rather than to receive, for example.

An additional key source of conflict concerns the timeframe for the provision of finance under the NCQG, which is not specified in the Paris Agreement and therefore up to debate.

The Alliance of Small Island States (AOSIS) and the Least Developed Countries (LDC) alliance have supported a ten-year timeframe with a review after five years. The EU has stated that it would accept this approach and leave wiggle room for delivery before 2035 if possible.

The Arab Group, the LMDCs and some others have argued for a five-year timeframe to a) align with existing Paris Agreement monitoring timeframes and b) allow for frequent reviews and pivoting where needed.

What’s the state of play at COP29?

Observers have noted that nations have been slow to reach agreements on the NCQG and narrow down options in the final text.

However, as week two began, Australia and Egypt were confirmed by the COP29 Presidency as the pair of nations steering negotiations. Brazil and the UK are also stepping in to support the frought process.

It is hoped that this, plus signals of support for a strong deal from the G20 world leaders summit, can help to get an ambitious agreement over the line.

The G20 communique from this week’s meeting in Rio states that world leaders “recognise the need for rapidly and substantially scaling up climate finance from billions to trillions from all sources”. Private finance is mentioned directly, as you would expect from wealthy nations.