This COP was supposed to be an opportunity for rich countries to finally stump up the bill for their climate debt – to provide adequate, public, grants-based climate finance of at least $1 trillion a year to Global South countries. But this did not happen.
The COP29 outcome is desperately inadequate and will leave countries experiencing the worst impacts of the climate crisis picking up the tab for the costs. As a result, lower-income countries will be pushed further and further into debt.
Here’s everything you need to know about the debt-related climate finance outcome at COP29.
The amount of climate finance
Global South countries were calling for $1.3 trillion a year, with a majority of this provided as public, grants-based finance from rich, polluting countries. Research shows this is the least that is required to ensure countries can adequately respond to the climate emergency.
You might have seen media reports praising a $1.3 trillion deal as the outcome of COP29 – but this is a gross exaggeration. The final text does call on governments, multilateral development banks and the private sector to scale up financing to lower income countries to “at least” $1.3 trillion per year by 2035 (in ten years’ time!) – but it’s a vague, empty promise with no tangible or enforceable commitments to ensure this is actually reached.
Rich countries have only committed to “taking the lead” on providing $300 billion of this (who knows who will take the lead on the other $1 trillion), but even this finance can still be provided by private and multilateral sources. While $300 billion may sound like a significant step up from the $100bn a year goal rich countries committed to in 2009, when factoring in inflation, it is less than double that amount. Outrageously, contributions from Global South countries can be counted towards this goal (including multilateral climate finance attributed to lower-income countries’ contributions). This means that rich countries can wriggle out of their responsibilities to provide even this inadequate amount.
Grants or loans?
There were demands throughout the conference for grant-based finance, with leaders from countries such as Pakistan, Ghana and Grenada and activists from around the world firmly rejecting adding to the already staggering debt burdens of Global South countries.
But while the outcome text does acknowledge the need for more “public and grant-based resources and highly concessional finance”, it makes no commitment to deliver finance this way, keeping the door firmly open for more loans to Global South countries.
We only have to look at the way the previous $100 billion goal was met to see the threat of climate finance as loans – according to the most recent OECD data, only 28% of public climate finance was provided as grants, while 68% was provided as loans. And finance from the private sector will inevitably be loans or investments which send profits abroad.
What will count?
Based on trends in recent years, it will be no surprise that the decision placed a heavy emphasis on the provision of climate finance by multilateral development banks and the private sector, as rich countries continued to reiterate that there isn’t enough public money for them to pay up (despite much evidence to the contrary). The text clearly states that finance will be provided from “a wide variety of sources, public and private, bilateral and multilateral, including alternative sources”.
Multilateral development banks
During the conference, multilateral development banks (MDBs) issued a statement estimating that their climate finance provision will reach $120 billion per year by 2030. The Inter-American Development Bank also announced that it will be accelerating its provision of climate finance to $11.3 billion by 2030, including through mobilising funds from innovative sources, such as debt swaps. This is deeply concerning from a debt perspective as most climate finance provided by MDBs comes as loans – in 2023, 70% of MDB climate finance was provided as loans, while just 4% was grants. The decision text does invite MDBs to provide a greater share of grants and highly concessional loans but, again, there are no firm commitments or goals to achieve this. At the start of the conference, Recourse and allies published a report highlighting how inappropriate MDBs are as climate finance providers, demonstrating that the largest share of their climate finance goes to European countries, and how they continue to finance greenhouse gas-emitting and highly polluting projects.
Private sector
The emphasis on mobilising private sector finance will once again likely mean more loans for Global South countries. As outlined by Mariana Paoli, global advocacy lead at Christian Aid, “Private finance is guided by profits and is almost always loans, therefore worsening the debt crisis that many developing countries are facing.” A recent report by Oil Change International makes clear that private finance cannot be relied upon, while others have highlighted issues such as a lack of transparency, and that mobilised private finance often benefits rich countries and companies the most.
Indeed, on returning from COP29, the UK secretary of state for energy security and net zero Ed Miliband said that the new pledge does not mean the UK needs to contribute more to climate finance, but that it presented a “huge opportunity for British businesses”.
Debt swaps
A small saving grace is that debt swaps were not mentioned in the final text as a viable option for mobilising climate finance, despite being included in previous versions.
Debt and climate groups have highlighted the limited impact and potential harm that debt swaps can cause for participating countries. A number of organisations (including Debt Justice UK) published a brief at the start of the conference highlighting why debt swaps should not feature in the COP29 outcome.
What will it cover?
There is a gaping hole in the decision text that is Loss and Damage – the new goal will only cover adaptation and mitigation, not Loss and Damage. This will leave Global South countries picking up the tab for the billions, if not trillions, of damage the climate crisis is already causing around the world.
On top of this, rich countries’ financial commitments to the Loss and Damage Fund are paltry. Over the last two years only $730 million has been pledged to the fund, which doesn’t come close to the damage being caused by the climate crisis – estimated to be at least $400 billion per year.
Acknowledgement of the debt crisis
Global South leaders made powerful demands for debt to be addressed during the conference, including an explicit call for debt relief by Bola Ahmed Tinubu, the president of Nigeria, alongside demands from cardinal Petro Parolin, the Vatican secretary of state, and by Simon Stiell, the UN climate chief. However, although the decision did briefly recognise unsustainable debt levels as a barrier for climate action but made no mention of how to address it, or of debt cancellation.
The process
The conference ended with serious questions over the state of multilateralism. The outcome text was pushed through by the Azerbaijan presidency without the opportunity for country delegates to object. This provoked furious interventions from Bolivia, India, Pakistan, Cuba, Nigeria and Malawi, making it clear they did not agree it. Climate justice groups also rejected the text, including Climate Action Network and Demand Climate Justice.
Romina Khurshid Alam, the Pakistan prime minister’s coordinator on climate change, outlined that “The climate crisis is turning into a debt crisis because the means of implementation are not clear.”
The EU climate commissioner Wopke Hoekstra heralded the COP29 outcome the “start of a new era for climate finance”. However, there is nothing ambitious, new or just about this outcome. Once again, Global South countries have been left footing the bill for the crisis they did not create, which will lead to more debt, while rich countries have let themselves off the hook and sought investment opportunities for themselves and their companies.
This is not climate justice.
But despite the disappointment, rage, and exhaustion, climate justice groups and communities most affected by climate change have already said they will continue to fight for climate justice – for adequate, public grant-based climate finance that meets the needs of countries. We stand in solidarity with their fight.