CLIMATE FINANCE: Countries agree $300 billion by 2035 for new climate finance goal – what next?

Here’s a deeper look at the new target for post-2025 climate finance and what more the international community needs to do to deliver concrete progress.

In the early hours of 24 November, countries at the United Nations climate change conference COP29 agreed a New Collective Quantified Goal on climate finance (NCQG) that will shape talks for the next 10 years.

The new goal calls on developed countries to take the lead in mobilizing at least $300 billion per year for developing countries, within the context of a wider goal involving all actors to scale up financing to developing countries to at least $1.3 trillion per year by 2035.

Is it enough?
UN Trade and Development (UNCTAD) recently estimated that the NCQG target should be closer to $900 billion from 2025, reaching $1.46 trillion by 2030.

It makes the case that meeting financing needs now prevents rising costs in the coming years whether in dollars, lives or livelihoods. Timely climate action can have manifold benefits; planting mangrove forests protects 18 million people from coastal flooding and shifting away from fossil fuels could prevent 1.2 million deaths a year.

Compared to the $100 billion goal which had a specific mandate for developed countries, this new goal only commits them to take the lead. Furthermore, considering inflation since the 2009 goal and the new flows counting towards this target, what at first appears like a tripled goal may in fact not require a bigger fiscal effort from developed countries. For perspective, fossil fuel subsidies in 2022 accounted for 3.6% of developed countries’ GDP, while a target of $300 billion represents only 0.46%.

Nevertheless, the agreed goal can form a foundation for scaling up ambition in the coming years.

Improving the quality of finance flows
Alongside an adequate quantum, UNCTAD has underscored the importance of addressing shortcomings of the previous $100 billion goal by improving the quality of finance.

The new agreement made some progress by improving transparency and access, acknowledging challenges facing developing countries such as debt distress and costs of capital, recognising the importance of grants and concessional support, and calling on international financial institutions to be fit for purpose to address global climate change, development and poverty.

On the other hand, there remains room for progress on accountability of climate finance flows.

The final agreement made no commitment to how much would come in the form of grants and highly concessional finance, which risks climate finance contributing to debt distress and means market-rate financing will continue to be counted the same as grant-based support. Furthermore, subgoals for mitigation and adaptation were not established, meaning no concrete progress to address the imbalance whereby only 6% of global climate finance goes towards adaptation. A key demand from small island developing states and least developed countries for a minimum support target has yet to be met, underscoring the critical importance of dedicated future action to support these economies .

A review in 2030 will be a critical opportunity to address these issues.

First test of the new goal
The real first insights into the impact of the decision will emerge as early as February 2025, when countries are expected to submit updated climate plans, known as Nationally Determined Contributions. The ambition of climate plans is directly influenced by the finance available to deliver them, so this deadline will be a stress test for whether countries have the confidence to raise ambition.

Complementary efforts have been set in place to foster cooperation and support countries’ climate plans despite challenges with finance. For instance, the BICFIT Dialogue co-facilitated by UNCTAD is a global platform to foster partnerships and leverage shared solutions, ensuring that climate finance, investment, and trade are fully embedded in national climate policies and development plans.

Getting to the $1.3 trillion
All eyes now turn towards the “Baku to Belém Roadmap to 1.3T”, which will see COP 29 and 30 Presidencies, Azerbaijan and Brazil, work together through 2025 to present a menu of options at COP 30 to raise resources to get to $1.3 trillion for developing countries.

With no time to lose to increase support for developing countries, expectations are high for what this process can deliver. This roadmap presents a timely opportunity to advance innovative approaches to resource generation and strengthen international collaboration. After several years of agreement on the need for international financial architecture reform and new revenue raising ideas being mooted, it is crucial to align global ambitions with practical actions to meet financing needs. With this process running alongside UNCTAD’s 16th quadrennial conference and the 4th International Conference on Financing for Development, 2025 offers a transformative opportunity to raise financing ambition.

The difficult path to the adoption of the decision is testament to the incredibly complex geopolitical moment and the pressures multilateralism faces. While far short of developing countries’ needs, countries must be applauded for their determination to find an outcome, and with sustained momentum, this foundation can help ensure that 2025 becomes a pivotal year for financing climate and development goals.