INTRODUCTION

• The 29th Conference of the Parties (COP29) of the UNFCC will be held in Baku, Azerbaijan, from November 11 to 22.
• This conference is expected to focus significantly on climate finance issues.

VULNERABILITY OF DEVELOPING COUNTRIES

• Economic Dependence: Developing countries are particularly vulnerable to climate change due to their reliance on agriculture, which is sensitive to climate impacts.
• Cumulative Emissions:
  • Developed countries account for 57% of cumulative global emissions since 1850.
  • Developing countries have contributed relatively little to emissions but face pressing developmental needs.
• Commitments from Developed Nations:
  • The 2009 Copenhagen Accord committed developed countries to provide $100 billion annually in climate finance to developing nations by 2020, extended to 2025.
  • A new target for post-2025 is on the agenda at COP29.

DEFINITION OF CLIMATE FINANCE

• UNFCCC Definition:
  • Climate finance encompasses financing from public, private, and alternative sources to support climate mitigation and adaptation actions.
  • It includes sources (public or private) and end-uses (mitigation or adaptation).
• OECD Reports:
  • These reports analyze climate finance flows, covering international public finance, commercial and concessional loans, grants, and equity.
  • Loans constitute the largest share (69.4% in 2022), followed by grants (28%).

CRITIQUE OF OECD REPORTS

• Shortcomings Identified:
  • Reports should reflect actual disbursements, not just commitments.
  • Funds should be new and additional, not a reclassification of existing aid.
  • Only grants or grant-equivalents should be counted, excluding commercial finance.

NEED FOR CLIMATE FINANCE

• Access to Electricity:
  • In 2021, 675 million people in the developing world lacked access to electricity.
  • Developing countries need to increase electricity consumption and universalize access.
• Financial Limitations:
  • Developing nations have smaller financial systems and higher capital costs.
  • The cost of solar photovoltaic technologies is approximately double in developing countries compared to developed ones.

INDIA’S CLIMATE FINANCE REQUIREMENTS

• Short-term Targets (by 2030):
  • 500 GW from non-fossil fuel sources.
  • 5 million metric tonnes per annum of green hydrogen (GH2) production capacity.
  • Significant investments estimated:
    • ₹16.8 lakh crore for 450 GW of renewable energy.
    • ₹8 lakh crore for GH2 targets.
    • ₹16 lakh crore for Electric Vehicle (EV) purchases.
• Long-term Needs:
  • ₹850 lakh crore required between 2020 and 2070 to achieve net-zero emissions.

NEW COLLECTIVE QUANTIFIED GOAL (NCQG)

• Objectives:
  • Establish a new annual climate finance mobilisation target.
  • Should include actual disbursals, new and additional funding, and a mix of public and private capital.
  • Exclude organically flowing private finance to developing countries.
• Estimated Requirements:
  • An independent expert group has determined that developing countries (excluding China) will need around $1 trillion in external finance by 2030.

CONCLUSION

• The upcoming COP29 will be critical in addressing climate finance challenges for developing countries.
• There is an urgent need to establish clear, actionable targets for climate finance to meet the growing demands of these vulnerable nations.