With only hours remaining on the clock at UN climate negotiations in Baku, talks are at risk of collapse as nations remain divided over where to find the money developing countries need to respond to the crisis.

Well before the summit began two weeks ago, it was clear that success at COP29 hinged on nations reaching an agreement on difficult questions: who will pay for climate finance, how much, and what types of funding count toward global finance targets?

Following last year’s landmark deal in Dubai to “transition away” from fossil fuels, the climate fight has shifted to securing the money to make that global transition possible.

Independent economists told negotiators this week that developing nations need at least $1.3 trillion per year to adapt to climate impacts and fund recovery efforts. Civil society groups pushed for a higher floor, demanding up to $5 trillion annually during the Baku talks.

As hopes rose ahead of the Friday deadline that countries would move towards compromise, negotiations instead began backsliding on Thursday when Azerbaijan, the summit’s host and president, released a decision text that failed to bridge the divide between wealthy and developing nations.

“The new finance text presents two extreme ends of the aisle without much in between,” said Li Shuo, a climate expert at the Asia Society Policy Institute. “We are far from the finish line.”

The Azerbaijani presidency’s core task of finding common ground appeared to falter as the text presented two opposing positions that had been clear since the talks began: developing nations demanding trillions per year in public grants, and wealthy nations offering hundreds of billions, insisting private investment and carbon markets must count toward the total.

Neither choice specifies actual funding figures, using “X” placeholders where funding numbers should be.

“This is the ‘finance COP’. We came here to talk about money. The way you measure money is with numbers,” said Mohammed Adow, director of the think tank Power Shift Africa. “We need a cheque but all we have right now is a blank piece of paper.”

Leadership vacuum

In nearly three decades of UN climate talks, Azerbaijan had never taken a leading role, until hosting this year’s summit. Now tasked with brokering a deal, the presidency’s inexperience threatens to derail the talks, drawing rare direct fire from veteran negotiators.

“We are confronted with a text on finance that is laid out to divide us, exactly at a time when the presidency should be working to unite us,” said German climate envoy Jennifer Morgan.

“The presidency has not delivered as we had expected,” Morgan added. “Instead of bridging divides, we see extreme positions.”

EU climate chief Woepke Hoekstra told reporters the text was “unacceptable.”

“There is not a single ambitious country who thinks this is nearly good enough,” Hoekstra said.

“We have two options,” said Andreas Sieber, Associate Director of Global Policy and Campaigns at African environmental group 350.org.

“One says there will be a core of money in grants in the scale of trillions,” Sieber said. “The other one doesn’t, and therefore doesn’t count as a viable option for real climate action.”

Overtime Ahead

While negotiations are slated to end Friday, veterans of UN climate summits are bracing for talks to extend well into the weekend.

The last time a major climate conference collapsed was COP6 in The Hague in 2000 although COP15 in Copenhagen in 2009 was also a major disappointment at the time, with no clear pathway for binding commitments on reducing emissions. But a more recent parallel emerged just 19 days ago, when UN biodiversity talks in Cali, Colombia, fell apart over similar finance disputes.

While the Conference of the Parties of the Convention on Biodiversity (COP16) struggled in Cali for two weeks over funding disagreements, talks ultimately had to stop when several developing nations’ delegations were forced to return home, unable to afford rebooking flights and extended hotel stays in Colombia. Without enough countries present to make decisions, negotiations over critical outcomes collapsed – laying bare the fundamental inequality at these summits.

If COP29 collapses, it would mark the failure of two consecutive UN environmental summits – which had been widely anticipated as watershed moments.

In comparison, both the accord on a Global Biodiversity Framework reached in Montreal in 2022, and the 2023 UN Climate Summit agreement in Dubai to “transition away” from fossil fuels dominated international headlines for weeks, with world leaders hailing them as turning points in humanity’s response to planetary environmental crises.

Current climate policies put the world on track for a 3.1°C temperature rise. The issues of ecosystem preservation that negotiated in Cali and other CBD summits also are crucial to slowing this warming, making both sets of talks interdependent.

“All of this is turning into a tragic spectacle,” Panama’s lead negotiator Juan Carlos Monterrey Gómez told Reuters. “When we get to the last minute, we always get a text that is just so weak.”

The Debt Burden

For many developing nations, a weak deal could be worse than no deal at all.

The current text proposes that “more than 50% of climate finance” come through “non-debt instruments” – implying that up to half could still be loans.

To date, two-thirds of climate finance for the Global South has been loans, even as 60 countries face crippling debt while bearing the brunt of climate impacts.

According to the World Bank, the world’s poorest countries face the worst debt crises in decades, with over 3 billion people living in nations spending more on debt financing than education and health budgets combined, according to UN figures.

For these countries, already bearing the brunt of climate impacts, the prospect of financing an energy transition through more loans appears impossible when basic necessities like electricity, healthcare, and education remain out of reach.

“Leaving with no decision is better than a bad decision that stays with us forever,” said Uganda’s lead negotiator Bob Natifu.

Who pays?

The new text also sidesteps another contentious issue: which countries have a responsibility to pay for climate finance.

A section in the Baku text proposing to expand the list of donor countries – targeting wealthy nations like Singapore, China, Saudi Arabia, South Korea, and the UAE – has been quietly dropped.

This debate strikes at the heart of a 30-year-old framework that no longer reflects economic reality. When the UN climate convention established its categories in 1992, it split countries into donor “Annex I” nations — primarily wealthy industrialized countries — and recipient “developing” countries.

Singapore, now with one of the world’s highest per capita incomes, remains classified as “developing” alongside nations like Somalia and Haiti.

When negotiations drew these lines, China’s cumulative CO2 emissions were less than half of the European Union’s. When the Paris Agreement was signed in 2015, China still trailed the EU by 20%.

Today, China has overtaken the EU in historical emissions, according to both the UN Environment Programme and Carbon Brief analysis. This shift has become a major sticking point for EU negotiators, who now find themselves responsible for a smaller share of historical emissions than China while facing pressure to provide more finance.

While developing nations are projected to surpass wealthy countries in cumulative emissions within six years, this shift masks stark inequalities. Africa, home to 17% of the world’s population, contributes just 4% of global emissions, with the world’s 46 least developed countries collectively responsible for less than 1%.

Many nations classified as “developing” are now drawing clear distinctions between themselves and major emitters like China, currently the world’s largest polluter.

“China and India cannot be classified in the same category as Nigeria and other African countries,” Nigeria’s environment minister Balarabe Abbas Lawal told the Guardian this week.

“Those that actually deserve this support are African countries, poor Asian countries and small island states that are facing devastating climate impacts.”

G20 declaration a warning signal – no reference to transition away from fossil fuels 

Early warning signs emerged this week when the G20’s Rio declaration omitted any reference to transitioning away from fossil fuels – language that had been supported by the group’s ministers just months earlier and formed a cornerstone of last year’s COP28 agreement in Dubai.

And while dozens of heads of state attended the G20 summit, many skipped the Baku climate talks entirely.

The G20 nations, comprising most of the world’s largest economies, responsible for around 80% of global emissions, struggled to find common ground amid escalating global tensions.

Russia, a G20 member, struck Ukraine with an intercontinental ballistic missile during the meetings. Europe verified the presence of Chinese-provided weapons among Russian troops. North Korea – a Chinese satellite state – sent troops into Ukraine as European Union nations and the United States gave the green light for long-range missiles to strike within Russian territory.

“[COP29] is a fragile enough process as it is,” one G7 negotiator in Baku told the FT. “The gradient of the climb we have this week just got steeper.”

Meanwhile, at the COP29 summit, Azerbaijan’s President Ilham Aliyev has twice referred to fossil fuels as “a gift from God”. Oil comprises 90% of the country’s exports and 60% of state revenues.

The selection of Azerbaijan as host itself reflects broader regional complexities. Although this year’s climate conference was due to rotate to a European nation, Russia vetoed EU member states from hosting climate conference, leaving only Armenia or Azerbaijan as options. Armenia withdrew its bid following a prisoner exchange with Azerbaijan in December 2023, just as COP28 was concluding in Dubai.