‘Betrayal’: Climate Finance Battle Ends in Defeat at COP29
COP29 25/11/2024 •
COP 29 in Baku, Azerbaijan.

Baku’s Olympic stadium was always an unlikely arena for the world to strike a landmark climate agreement.

As the world’s first oil town, the Azerbaijani capital’s history is steeped in the fossil fuels driving the climate crisis. Its port launched the maiden voyage of the world’s first oil tanker, and Azerbaijan’s name, derived from ‘Azar,’ the Persian word for fire, is a reference to the natural oil and gas flares that have dotted its mountainous landscape for centuries.

Three flame-shaped skyscrapers tower over modern-day Baku as monuments to fossil fuels’ centrality in Azerbaijan’s story – symbolism reflected in President Ilham Aliyev’s opening declaration of fossil fuels as “a gift from God” and the country’s nickname: “The Land of Fire.”

With Azerbaijan being the third consecutive petrostate to host UN climate negotiations – following Egypt and the UAE – the odds were stacked against COP29 from the start.

The central challenge was finance – how much wealthy nations would pay, and which countries would contribute, to fund developing nations’ clean energy transition and climate disaster response. While previous UN climate summits focused on emissions targets and scientific goals, COP29 marked the first head-on negotiations over funding commitments, making it one of the hardest talks since the Paris Agreement was signed in 2015 in the eyes of veteran negotiators.

With climate change accelerating beyond scientists’ projections – driving global temperatures past 1.5°C for the first time, creating unending droughts in the Horn of Africa, devastating storms in the Caribbean, and floods displacing hundreds of thousands across South Asia – the talks forged ahead.

Debating the ‘quantum’

For two weeks, negotiators from over 200 countries debated the “quantum” – UN-speak for the new climate finance goal under the Paris Agreement – a term borrowed from physics where it describes the smallest possible unit of energy.

As negotiations unfolded, developing nations found “quantum” was darkly fitting: while its original Latin meaning asks “how much?”, wealthy nations’ proposed climate finance matched its scientific definition – the smallest amount possible.

Hours before the final gavel landed early Sunday morning, the entire process appeared on the brink of collapse. It had taken developed countries until the final day of the two-week summit to put their first number on the table – $250 billion per year by 2035.

The outrage from developing countries over the offer was swift. Representatives from small island nations, already watching their homelands disappear beneath rising seas, called it a “death sentence.” Civil society actors described it in terms ranging from “an absolute embarrassment” to “a cruel joke.”

Developing countries, who formed a united front at COP29, demanded a minimum of $1.3 trillion annually to assist countries’ transition away from fossil fuels, adapt to climate impacts, and recover from mounting damages they did little to cause. The figure, based on analysis presented at the summit by independent economists commissioned by previous COP presidencies, was far below what civil society groups demanded, arguing true climate reparations would cost between $5-7 trillion annually.

The final agreement, struck 24 hours after developing nations fiercely rejected the initial offer, barely moved: $300 billion per year by 2035, with the $1.3 trillion acknowledged only as an aspirational target.

COP29 President Mukhtar Babayev hailed it as a breakthrough that would “turn billions into trillions,” while UN climate chief Simon Stiell called it “an insurance policy for humanity” – but only if “premiums are paid in full, and on time.”

“No country got everything they wanted, and we leave Baku with a mountain of work to do,” said Stiell. “The UN Paris Agreement is humanity’s life-raft; there is nothing else.”

‘Betrayal’

June floods in Pakistan killed 1,717. The health impacts of the devastation are still unfolding.

The $300 billion offered to developing nations represents just 4% of global fossil fuel subsidies, which the International Monetary Fund estimates at $7 trillion. It is less than Apple’s 2023 revenue of $383 billion and roughly a third of the US military’s yearly budget. Fossil fuel companies have reaped $1 trillion in annual profits for half a century for extracting the oil, coal and gas fuelling the climate crisis.

“The gavel was hit way too fast and our heart goes out to all those nations that feel like they were walked over,” said Juan Carlos Monterrey Gómez, Panama’s special representative for climate change. “Developed nations always throw text at us at the last minute, shove it down our throat, and then, for the sake of multilateralism, we always have to accept it, otherwise the climate mechanisms will go into a horrible downward spiral, and no one needs that.”

The decade-long timeline for reaching even this modest goal raised concerns, given that the previous $100 billion annual target, set in 2009, was only met last year.

“This outcome is a travesty,” declared the least developed countries (LDC) negotiating bloc, which represents 45 nations and 1.1 billion people. “It sacrifices the needs of the world’s poorest and most vulnerable to protect the narrow interests of those who created this crisis.”

The world’s 46 least-developed countries, home to about 14% of the global population, contribute less than 1% of global emissions. The African continent, with 17% of the world’s population, accounts for just 4%.

“That the developed countries are saying that they are taking the lead with $300 billion by 2035 is a joke,” Mkiruka Maduekwe, Nigeria’s special envoy on climate change, said following the deal. “Let us tell ourselves the truth. It is 3am, and we’re going to clap our hands and say this is what we’re going to do? I don’t think so. We do not accept this.”

India’s lead negotiator, Chandni Raina, criticized the outcome as “abysmally poor,” calling the Baku deal “nothing more than an optical illusion.”

“This, in our opinion, will not address the enormity of the challenge we all face,” Raina said, with rousing applause from delegates in the room. “This has been stage-managed. We are extremely disappointed … [and] oppose the adoption of this document.”

The final text offered only to “note with concern the gap between climate finance flows and needs.” For vulnerable nations, this diplomatic language has run its course.

“We leave Baku without an ambitious climate finance goal, without concrete plans to limit global temperature rise to 1.5°C, and without the comprehensive support desperately needed for adaptation and loss and damage,” the LDC bloc said. “This is not just a failure; it is a betrayal.”

Objects in the future may be smaller than they appear

The Azerbaijani Presidency of COP29 centred the aspiration $1.3 trillion in their communications after the summit.

While the headline figure amounts to a tripling of climate finance – far short of developing nations’ request for 13 times the current amount – the true value of this pledge will be substantially lower when the full bill comes due in 2035.

Climate finance, it turns out, faces the same economic headwinds affecting households worldwide: debt, loans, interest rates and inflation. Combined, these factors have led some observers to view the deal as effectively a step backwards.

Inflation presents the first challenge. When accounting for expected price increases by 2035, the $300 billion target’s real value shrinks considerably. At typical inflation rates, it would be equivalent to roughly $230 billion today – closer to doubling rather than tripling the previous $100 billion goal set in 2009.

The $100 billion finance goal set in 2009 was not indexed to inflation, and developed countries at the negotiations made clear the new target would follow the same approach. 

Debt servicing costs were 20% higher than total energy investment in Africa between 2014 and 2022, according to the IAEA.

The agreement also sidesteps the critical issue of debt as climate change’s financial impacts continue to compound. As storms intensify, droughts lengthen, and countries struggle to repay loans from consecutive recovery efforts from increasingly extreme disasters, developing nations face an ever-deepening climate-driven financial trap.

Vulnerable countries borrow for disaster recovery, face higher interest rates, and lose the capacity to invest in climate resilience, making them more vulnerable to future disasters – a “vicious circle of climate and debt,” according to an expert review released last month.

“Those who are experiencing the worst climate impacts, and contributed the least to the crisis, are paying a double price,” said Sonia Kwami, a lead campaigner at African environmental group 350.org. “Not only is climate change on their doorsteps, but they are also faced with burdensome debts, interest rates, and transition costs that rich countries have evaded for far too long, through an unjust financial system.”

The final text eliminated a clause from earlier drafts requiring at least 50% of finance to be debt-free – a proportion already considered insufficient by developing nations, many facing their worst debt crises in decades. Over three billion people today live in nations spending more on debt financing than education and health budgets combined, according to UN figures.

Do loans count?

The Baku agreement left another critical question unresolved in the debt debate: whether loans should count equally with grants toward meeting the climate finance target. This ambiguity leaves the door open for loans to continue dominating climate finance, despite developing nations’ calls for debt-free support. Some countries heavily favor this approach – France, for instance, provides 86% of its climate finance through loans.

This creates significant discrepancies in accounting. Current climate finance flows measure between $28 billion according to Oxfam, which excludes loans from its calculations, and $116 billion by OECD figures, which count loans equally with grants.

Loans currently make up two-thirds of climate finance for the Global South. If this pattern continues, approximately $200 billion of the new annual target would come in the form of loans – which developing countries argue perpetuates rather than solves their financial challenges.

“COP29 has been a disaster for the developing world,” said Mohammed Adow, director of the climate think tank Power Shift Africa. “It’s a betrayal of both people and planet, by wealthy countries who claim to take climate change seriously.”

‘Some Rich Nations’

The Baku climate deal also leaves unresolved a question that has gained increasing urgency as UN climate talks shift from emissions pledges to financial commitments: who pays?

Countries classified as donors under the UN climate convention, known as “Annex I” countries, comprise about two dozen industrialized nations, including the US, European nations, and Canada. This roster stems from the economic landscape of 1992, when UN climate talks began.

The world’s economic and emissions realities have changed dramatically since. When these categories were drawn, China’s cumulative CO2 emissions were less than half of the European Union’s. Today, China has surpassed the EU in historical emissions while becoming the world’s second-largest economy. Oil-rich nations like Russia and Gulf states have also grown both their wealth and carbon footprints significantly.

This shift has created a paradox at the negotiating table. The EU now finds itself responsible for a smaller share of historical emissions than China while facing pressure to provide more finance. Early drafts of the Baku text proposed expanding the donor list to include wealthy nations like Singapore, China, Saudi Arabia, South Korea, and the UAE. That language was quietly dropped.

The final agreement keeps these nations out of the line of fire. It does not require contributions from China, Russia or Gulf nations – they instead fall in the voluntary category.

Political earthquake

The money problem was further complicated by the political earthquake in the US this month, which loomed over the talks from the get-go. Donald Trump’s return to the presidency in January, along with promises to again withdraw from the Paris Agreement, made current US commitments effectively moot.

The absence of both the world’s largest historical polluter and its biggest economy, the US, alongside its largest current emitter and second-biggest economy, China, creates a massive hole in the global climate finance deal struck in Baku, leaving a small pool of donor countries attempting to shoulder a burden that economists say requires far broader participation.

German Foreign Minister Annalena Baerbock captured the EU’s frustration: “We are in the midst of a geopolitical power play by a few fossil fuel states. Their playing board is the backs of the poorest and most vulnerable countries.”

“What we are seeing here is the last stand by the old fossil fuel world,” Baerbock said, stating that the EU was increasing its financing commitments through 2035. “We are living up to our responsibilities, including as historical CO2 emitters.”

While developed nations point to budgets stretched by war, COVID-19, and inflation, critics question why governments can find money for military spending but not climate action, and why fossil fuel subsidies persist while green energy funding lags.

As promised climate finance from wealthy nations fails to materialise, developing nations are already committing significant portions of their limited budgets to this fight, spending $1 trillion annually from their own resources on adaptation and disaster recovery, according to the United Nations Development Programme (UNDP).

“Developing countries are actually investing hundreds of billions of dollars a year already from their own taxpayers’ revenue,” UNDP chief Achim Steiner told the Guardian this week. “It wouldn’t hurt or harm anyone on the other side of the table to acknowledge that.”

‘Collective amnesia’ on fossil fuels

Following a historic agreement to transition away from fossil fuels a year ago, Baku’s outcome fell silent on the hydrocarbons at the root of the climate crisis.

Just one year after a historic agreement to “transition away from fossil fuels” at Dubai’s COP28, the Baku summit failed to reaffirm that commitment.

The setback comes as 2024 is on track to be the warmest year on record with temperatures temporarily breaching 1.5°C of warming for the first time, and the world tracks toward 3.1°C of heating by century’s end, far exceeding the Paris Agreement’s targets. Scientists warn such warming would trigger catastrophic climate impacts.

“The world made a deal at COP28 to end the fossil fuel era. Now, at COP29, countries seem to have been struck with collective amnesia,” said Shady Khalil, Oil Change International Global Policy Senior Strategist. “With each new iteration of the texts, oil and gas producers managed to dilute the urgent commitment.”

Swiss representatives complained that the draft text had been so “watered down” as to effectively “backtrack from the commitments taken last year.” 

Saudi Arabia, long known as a “wrecking ball” at UN climate negotiations, vocally opposed any document that mentioned fossil fuels in Baku: “The Arab group will not accept any text that targets any specific sectors, including fossil fuels.” 

The fossil fuel industry’s influence was evident throughout the talks. At least 1,773 fossil fuel lobbyists received access to the COP29 summit, according to analysis from the Kick Big Polluters Out coalition. This contingent outnumbered the combined delegations from the ten most climate-vulnerable nations, which totaled 1,033 representatives.

Only three delegations were larger: host country Azerbaijan with 2,229 representatives, next year’s host Brazil with 1,914, and Turkey with 1,862.

Small islands’ voices drown

For small island nations watching their territories disappear beneath rising seas, the stakes of climate negotiations are existential. Many are already losing land to flooding, with some Pacific islands projected to become uninhabitable within decades.

Ahead of the summit, Papua New Guinea’s foreign minister, Justin Tkatchenko, explained his country’s decision to stay away, calling COP29 a “total waste of time” that would produce “no tangible results for small island states.” By the summit’s end, the voices of island nations that made the journey to Baku were drowned out in the rush to reach a deal.

Island countries on the frontlines of the climate crisis, which receive just 1% of current climate finance, had requested dedicated funding to help them access climate finance – a critical need for small states that lack the capacity to navigate complex application processes that often see climate aid flow to better-resourced middle-income nations. Instead, even these minimum allocations were stripped from the final text.

“We had more hope that the process would protect the interests of the most vulnerable and those with the least capacity,” the Alliance of Small Island States, representing 44 low-lying and coastal nations, said in their closing statement. said in their closing statement. “The level of ambition for taking climate action needs to be much, much higher.”

For these disappearing nations, the UN climate talks, however flawed, remain the only path to advocate for their survival. With no other global forum to turn to, they must continue fighting through a process that keeps forgetting them — even as waters continue to rise.”

Image Credits: OXFAM.

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