[CAIRO] New finance targets to be agreed at the UN’s COP29 climate summit must include funding to cover climate-related losses as well as adaptation and mitigation, to protect the poorest nations, specialists urge.

Climate financing will be the central focus of negotiations at what has been dubbed “the climate COP”, taking place in Baku, Azerbaijan, from 11 to 22 November.

Countries will aim to establish a new climate finance target, replacing the goal set in 2009 to raise US$100 billion a year for developing countries by 2020 – a target which has never been met.

Climate financing comes from public sources, such as governments, and from the private sector. These funds are directed towards projects aimed at mitigating carbon emissions or helping developing countries and vulnerable communities adapt to climate damage, but also need to help poor countries recover from losses already sustained as a result of climate change – known as loss and damage.

“Climate finance will undoubtedly be a major issue at COP29, serving as a cornerstone for advancing trust and action,” says Ritu Bharadwaj, director of climate resilience, finance and loss and damage, at the International Institute for Environment and Development (IIED), a research organisation.

“This summit arrives at a critical moment as the world transitions beyond the long-standing US$100 billion per year goal established 15 years ago—a target that has proven insufficient for addressing the current scale of climate challenges.”

A study published by the Climate Policy Initiative, a not-for-profit research group, last month (31 October) reveals that annual climate finance needs to increase by at least five times before 2030, to meet the goals of the Paris Agreement to limit global warming to 1.5 degrees Celsius above pre-industrial levels.

Although climate finance flows have reached almost US$1.5 trillion, after doubling between 2018 and 2022, this only represents one per cent of global GDP and developing economies may need around 6.5 per cent of their GDP by 2030 to meet climate goals, according to the analysis.

The impacts of rising temperatures, including severe water scarcity, the spread of infectious diseases, and increasingly intense flooding and storms, are already widespread and being felt acutely in low- and middle-income countries.

“To address the current scale of climate impacts, particularly in Small Island Developing States and Least Developed Countries, more than US$2-3 trillion will be needed,” says Bharadwaj.

“The updated target must incorporate comprehensive support for mitigation, adaptation, and, crucially, loss and damage,” she says.

Last year’s COP28 in Dubai ended with an agreement which included targets for climate adaptation, but failed to stipulate how these would be funded.

There was also an historic agreement to put the long-awaited Fund for Responding to Loss and Damage into operation, to support vulnerable countries to repair the harm wrought by climate change. Since then, a new board has been established to move forward with this.

However, only US$700 million has been pledged to the fund so far, while developing countries say at least US$100 billion a year is needed.

Unless reliable financial contributions are forthcoming, the fund risks becoming little more than a “symbolic effort”, rather than an effective tool for climate justice, warns Bharadwaj.

New analysis from The ONE Campaign, a not-for-profit advocacy group, shows that rich countries spent US$2.7 trillion on domestic fossil fuel subsidies between 2010 and 2022 – six times more than the US$437 billion they pledged for international climate finance.

Hanen Keskes, political campaigns lead for Greenpeace Middle East and North Africa, tells SciDev.Net: “There is an urgent need for a structured financial framework that guarantees significant and predictable funding, while not adding to the debt problems faced by developing countries.

“The costs of climate change should be borne by those with the most responsibility for causing it – the most polluting countries, corporations, and individuals – and those most able to pay.”

She says any agreement at COP29 must ensure adequate capitalization of the Loss and Damage Fund.

“The costs of loss and damage in developing countries are rising, estimated to be in the region of US$400 billion by 2030, while the amount currently pledged to the Fund for Responding to Loss and Damage is just US$702 million,” explains Keskes.

She says that many countries in the MENA region still lack critical information regarding eligibility criteria and fund allocation processes, hindering access to funds.

Bharadwaj also highlights problems around accessing money. “A significant portion of the financing remains inaccessible due to complex procedures and limited reach at the local level,” she explains.

“Aligning finance with actual needs, simplifying access, and prioritising grants over loans are essential steps to ensure that funds reach those on the front lines of the crisis.”

New data confirms that the climate crisis has escalated to an unprecedented level and shows little sign of easing.

The Copernicus Climate Change Service announced this week (7 November) that it is now virtually certain that 2024 will be the warmest year on record and the first year in which temperatures exceed the 1.5 degrees Celsius target.

Meanwhile, climate action does not seem to be progressing at the necessary pace. The UN Environment Programme’s Emissions Gap Report 2024 found that greenhouse gases must fall 42 per cent by 2030 compared with 2019 levels and 57 per cent by 2035 to get on track for 1.5 degrees.

At COP28, nations adopted a roadmap for transitioning away from fossil fuels, a historic first for a UN climate conference. However, the agreement failed to commit to a full phase-out of oil, coal, and gas.

Some analysts believe that developing discussions about the operation of carbon markets – which allow companies to offset their greenhouse gas emissions by buying carbon credits – will help expand the scope of climate finance.

“It’s important to complete the discussions on Article 6 of the Paris Agreement, that’s related to the trading of carbon,” says Michael Wilkins, executive director and professor of practice at the Centre for Climate Finance and Investment at Imperial College London’s Business School.

“Operation of Article 6 will allow for this to mobilise substantial capital from the private sector, estimated to be well over one trillion dollars per annum,” he adds.

This piece was produced by SciDev.Net’s Global desk.