• The negotiating dialogue resumes in Bonn for the definition of the new quantitative finance objective to be approved by 2024
  • Two compact and contrasting visions emerge on some fundamental issues for the negotiation
  • The interventions of China and Pakistan are particularly harsh, as they claim the obligatory nature of financial mobilization from developed countries to developing countries

2024 is considered to be the year of climate finance, and at the Bonn intermediate meetings, which began only a few days ago, we are having confirmation of this. Already in the first negotiations, the Parties appear compactly divided into two ranks: on one side developing countries and on the other side developed countries. The sources of financing to be included in the new climate objective, its quantification and the methods of disbursement of financial resources are the focal points of the discussion.

In fact, negotiations have resumed on the definition of a new quantitative finance objective, the New Collective Quantified Goal (NCQG), to be approved within this year. The meetings we are witnessing here in Bonn are preparatory to the creation of a negotiating text for the next COP29 in Baku. In particular, the Parties expressed their opinion on the first version of the input paper (which you can find here), prepared by the Co-chairs on the basis of the positions that emerged in the Cartagena meeting held on 25 and 26 April. The Parties’ interventions were recursive in reference to the text, considered too long (around sixty pages), full of repetitions and difficult to use as a working tool.

The clash between the Parties, divided compactly between developed and developing countries, seems to be centered on a series of focal points: what types of financing will be included in the new financial objective, what is the quantitative value of the new objective, and what are the methods of providing resources to developing countries?

In their interventions, developed countries shared and underlined the urgency of defining an objective that allows to keep the temperature increase below 1.5°C. Consensus was expressed by New Zealand, the United States and Russia on the possibility of broadening as much as possible the financial sources that contribute to achieving the new NCQG, also opening the way to private, public, domestic and international sources. The reason behind this proposal appears to be the difficulty of developed countries in reaching the previous financial target, set at 100 billion dollars a year. A difficulty that could be further exacerbated by the foreseeable increase in the quantitative objective envisaged to cover the growing needs of developing countries (estimated in the order of 1,000 billion dollars). Let us remember, in fact, that developed states have mobilized sufficient funds (115.9 billion dollars) to exceed the goal only in 2022. In that year, approximately 80% of these funds came from public sources, both through bilateral and multilateral agreements, and was mainly disbursed (around 70%) in the form of loans*.

Developing countries’ interventions have placed great emphasis on the urgency of climate action and the necessary increase in financial ambition to reach the 1.5°C target. Particular importance was given to the considerable impacts that climate change is already having on the economy, population and ecosystems of these countries. For this reason, the financial objective is considered a fundamental tool, not only to cover the need to make a just transition, but also to adapt to the changes taking place, and to address the losses and damage resulting from them.

To respond to one of the weak points of the last NCQG, it was proposed to identify and include in the negotiation text the methods with which to divide the funding, taking into consideration principles of equality and specific needs. Furthermore, the definition of methods that allow all countries to access resources quickly and efficiently will be fundamental. The opinion is widely shared that market rate loans should not fall within the definition of climate finance, as they cause an increase in the debt of future generations. The resources of the NCQG should, therefore, largely, if not entirely, come from public sources and be given in the form of subsidized financing (concessional grants) without further conditionality. Furthermore, almost all of the interventions underlined the expectation, in line with Article 9 of the Paris Agreement, that developed countries take on an increasingly key role in mobilizing financing towards developing countries, on the basis of the historical responsibilities they hold.

The interventions of China and Pakistan, in particular, were characterized by their harshness.

For China, the failure to achieve climate finance targets for many consecutive years demonstrates the limited interest of developed countries in carrying out the commitments set out in the United Nations Climate Change Convention and the Paris Agreement. To reinforce the message, the Chinese delegate read to all Parties the following paragraph of Article 4.3 of the Convention: “The developed country Parties and other developed Parties included in Annex II shall provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in complying with their obligations.” It was also underlined that these commitments are of a mandatory and non-voluntary nature for developed countries, which were therefore invited to take a leadership role in this process.

For Pakistan, the ideas currently discussed by developed countries would allude to the possibility that developing countries themselves will have to mobilize the financial resources to be included in the NCQG, in complete contradiction to the obligations and responsibilities of developed countries. Financial resources should, instead, come directly from the gross domestic product (GDP) and gross national product (GNP) of developed countries. They shouldn’t have an economic return, contrary to what currently happens. Finally, Pakistan has also exposed the possibility of no longer participating in the Convention and the Paris Agreement if the financing offered is not made available to the necessary extent.

We therefore await the next iteration of the negotiation process, which will lead to a version of the input paper revised on the basis of the interventions collected in this article.

Article by Claudia Concaro and Cecilia Consalvo, Italian Climate Network volunteers

*Source: https://www.oecd.org/climate-change/finance-usd-100-billion-goal/

Cover image: Flickr

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