COP29: How $300 billion climate funding is an ‘optical illusion’

The curtains fell on COP29 in Baku, Azerbaijan, on November 24, leaving in its wake a divisive $300 billion annual climate finance pledge. Developed nations hailed it as a historic step, yet for the vulnerable developing nations, it is another chapter in a story of broken promises and unfulfilled obligations. This summit, meant to bridge the financial chasm in climate action, instead amplified the glaring divides between the Global North and South.

A Tale of Two Worlds: The Funding Gap

In the months leading up to COP29, the stakes had never been higher. The Independent High-Level Expert Group (IHLEG) had laid bare the grim reality—developing countries would need $1.3 trillion annually by 2035 to cope with the impacts of climate change and transition to greener economies. The $300 billion pledge finalised at COP29 was meant to address this need, yet it covers less than a quarter of the requirement.

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For developing nations, this was a bitter pill to swallow. In countries like the Marshall Islands and Malawi, rising sea levels and recurrent floods threaten lives, livelihoods, and cultures. These nations came to Baku not with outstretched hands but with urgent pleas for survival. The outcome, many say, fell far short of their expectations. Without sufficient adaptation funding, communities cannot build resilient infrastructure to withstand intensifying storms or droughts. The transition to renewable energy remains an elusive dream for nations struggling to fund basic services.

Historical Responsibility: A Broken Promise

The principle of “common but differentiated responsibilities” (CBDR) has long been the cornerstone of international climate negotiations. It recognises that developed countries, through centuries of industrialisation, bear a disproportionate responsibility for the climate crisis. COP29, however, reflected an erosion of this principle.

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Developed nations celebrated the $300 billion commitment as a significant increase from the $100 billion annual target agreed upon in 2009. Yet, the promise rings hollow for developing countries. Much of the funding relies on mobilising private finance, which often translates to loans rather than grants. Nations already grappling with crippling debt burdens face the prospect of trading financial solvency for climate action.

As the African Group of Negotiators declared, the deal feels like “too little, too late”. The frustration stems from a growing sense that wealthier nations are shirking their historical responsibilities. For instance, the US and European Union have contributed disproportionately to cumulative greenhouse gas emissions. Yet, their financial commitments often fail to reflect this reality.

Geopolitical Shadows over Baku

The COP29 negotiations unfolded against a complex geopolitical backdrop. Donald Trump’s re-election in the US cast a long shadow, with fears that the incoming administration would undermine international climate cooperation. Meanwhile, Europe, battling domestic inflation and energy crises, was reluctant to stretch its commitments.

Emerging economies like China further complicated the narrative. Although now the largest annual emitter, China’s per capita emissions remain lower than those of developed nations. Nevertheless, calls for Beijing to contribute to climate finance blurred the lines between responsibilities, creating divisions between countries that should be allies in the fight against climate change.

Broken Systems: The Operational Challenges of Climate Finance

Beyond the pledged amounts, the mechanisms of climate finance remained deeply flawed. Developing nations recall the $100 billion annual target agreed upon in 2009. That goal was reached only in 2022—and even then, much of the funding was in the form of loans.

The inefficiencies are staggering. According to the OECD, every dollar of public climate finance mobilised just 24 cents of private investment in 2022—a stark decline from 51 cents in 2013. This diminishing catalytic effect exposes a critical flaw in the current model. Without systemic reforms, the promised $300 billion risks being another symbolic gesture rather than a transformative force.

The Roadmap from Baku to Belém

COP29 introduced the “Baku to Belém Roadmap”, a plan to explore pathways to raise $1.3 trillion annually by 2035. Yet, for many, this roadmap lacks substance. The absence of binding commitments and enforceable timelines leaves developing nations sceptical of its efficacy. There is growing consensus that multilateral development banks (MDBs) must play a larger role in catalysing private investments. Injecting additional capital and revising their mandates to prioritise climate action could be a game-changer. But these reforms remain aspirational, with no clear path to implementation.

Carbon Markets: A Double-Edged Sword

COP29 also finalised rules for international carbon trading, aiming to channel funds into climate projects. While this could generate new revenues, developing nations remain cautious. Carbon markets, critics argue, allow wealthy nations to offset their emissions rather than reduce them domestically. Without stringent safeguards, these mechanisms risk perpetuating inequities rather than addressing them.

Frustration and Defiance

The closing moments of COP29 were marked by palpable frustration. Delegates from nations like India and Nigeria expressed anger over the “paltry sum” and the rushed adoption of the agreement. Least Developed Countries (LDCs) and small island states walked out of negotiations, citing a lack of inclusion in the process.

Chandni Raina, representing India, labelled the deal an “optical illusion”. For her country, which faces both escalating climate impacts and development challenges, the $300 billion pledge is a symbolic gesture that fails to address the enormity of the crisis.

A Fragile Foundation for COP30

As attention shifts to COP30 in Belém, Brazil, the challenges of Baku will haunt the negotiations. The divisions between developed and developing nations have deepened, and the trust deficit has widened. Developing nations are clear in their demands: binding commitments, greater reliance on grants over loans, and inclusive negotiations.

Brazil’s President Luiz Inácio Lula da Silva has promised that COP30 will be a turning point, calling it the “COP of COPs”. Yet, the path to restoring trust and achieving meaningful progress is fraught with obstacles.

Conclusion: A Call for Systemic Change

The outcomes of COP29 underscore a painful reality: the world remains far from the transformative change required to address the climate crisis. For developing nations, the $300 billion pledge is a start, but it falls woefully short of the urgent needs.

As the climate clock ticks, the global community must rise above incrementalism. Systemic reforms in climate finance, deeper cooperation, and an unwavering commitment to justice are essential to ensuring a future where no nation is left behind. COP29 was a missed opportunity; COP30 must not be.

Simarjeet Singh is an assistant professor, and Kirti Sharma is an associate professor at the Great Lakes Institute of Management, Gurgaon. Views expressed in the above piece are personal and solely those of the authors. They do not necessarily reflect Firstpost’s views.