World faces critical need of $2T in annual climate financing

Securing agreement on new climate financing target tops COP29 agenda, says OECD spokesperson

The climate financing needs of low and middle-income countries, which are projected to exceed $2 trillion per year by 2030, are among the key topics at the 2024 UN Climate Change Conference (COP29) which began Monday in Azerbaijan's capital, Baku. COP29, which runs until Nov. 22, will be a platform for discussing a new climate financing target, the New Collective Quantified Goal (NCQG) on climate finance. Harry Boyd-Carpenter, managing director of green economy and climate action at the European Bank for Reconstruction and Development (EBRD), told Anadolu that the priority at COP29 is to agree on a framework structure for climate finance under the NCQG, with international development banks playing an important role. “Excluding China, low and middle-income countries need $2.4 trillion a year by 2030,” said Boyd-Carpenter. He said that while financing is available, it often doesn’t reach the necessary areas due to insufficient plans to combat climate change, the lack of investment plans, and inadequate regulatory systems in some countries. Economic instability also hinders investments. “Countries that make a green shift will have more stable economies, will have lower-cost energy. But in the short run, you have to spend a lot of money because green investment is capital-intensive, and that creates affordability barriers. And to do that, they need more grant and concessional money, and that should flow from developed countries,” he said. “The most important thing is having an agreement on the NCQG, and that agreement comes against a very difficult political backdrop,” he added. Boyd-Carpenter also emphasized that providing financing will be easier if developing countries set ambitious climate targets, which he considers an “economically wise thing to do.” “You will have a healthier economy and you will make more money if you are more green, and finance is really good at finding a profit,” he said. “The world is full of very smart people running banks and investment funds who are good at sniffing out profitable investments, and therefore, if you make economically wise choices, a bit of money will fall, but you need to make sure that developing countries really need to feel that,” he added. Boyd-Carpenter warned that each year of delay in climate financing will lead to more challenges, and multinational development banks will provide a realistic perspective on climate financing needs at COP29.  ‘NCQG decision needs to address issues over global financial architecture’ A spokesperson for the Organization for Economic Cooperation and Development (OECD) told Anadolu that while current financial volumes are sufficient to meet climate action needs, financial flows are not aligned with climate goals, particularly in developing countries. “Bridging the gap between climate projects in these regions and capital from investors and financial institutions in advanced economies requires using public finance (notably international support) as a lever, improving domestic investment conditions, and rethinking aspects of the global financial system,” they said. They noted that high debt and risk premiums limit the poorest countries’ access to finance and hinder the achievement of long-term climate goals. They emphasized that reaching a solid agreement on the NCQG is COP29’s primary objective. While public finance remains essential for long-term climate goals, it is insufficient to close the financing gap. “The NCQG decision would further need to explicitly link to ongoing efforts to address issues and barriers relating to the global financial architecture, such as access and cost of capital in developing countries,” they added.