Almost a decade since the Paris Agreement, climate finance flows remain disappointing; with other pacts also faltering on the subject of economics, like the global plastics treaty. Tell us why it’s critical to boost climate finance urgently.

The Baku COP (Conference of the Parties, in Baku, Azerbaijan) was labelled as a finance COP, because a new global climate finance target called the new collective quantified goal was supposed to be set up here. There were basically three important issues that negotiators were grappling with. These were issues related to quantity, contributors and quality of climate finance.

On quantity, to give you a little bit of background, in 2009 developed countries pledged to provide $100 billion a year in climate finance to developing nations by 2020. They reached this target only in 2022, and as it was due to expire in 2025, there was a need for a new target, making the discussions at COP 29 critical.

In terms of the quantum of financing needed, an independent, high-level expert group on climate finance set up by the COP 26 and COP 27 presidencies found that emerging economies excluding China need about $1 trillion a year in climate investment through 2030. This number rises to $1.3 trillion per year when we go up to 2035.

And this is the amount from external sources. The total amount they think is required is $2.4 trillion a year up to 2030 — $1.4  trillion should come from domestic sources, they think.

So the discussion was mainly about this $1 trillion going up to $1.3 trillion. Of course, when you hear the number $300 billion that was agreed upon at COP 29, it seems disappointing compared to the need. Many developing nations expressed it as such too.

I actually see it as a glass half full. Obviously it's not the ideal outcome, but I do think it has a few positive aspects. First, up until the last minute, it was not even clear that a deal could materialise. But it did. To me, that is important. As we saw in the global plastics treaty, that did not happen yet. So these things should not be taken very lightly.

Second, this number is three times the previous target of $100 billion, and also higher than the $250 billion target being floated up until the penultimate day. Also, this target of $300 billion is an achievable target.

What about the quality of climate finance? Are grants and concessional finance more attractive than the ‘investment’ route for those who will receive this finance?

To me, the Achilles heel of climate finance is private funding.

On the $1 trillion per year that's needed for climate finance from external sources, the high-level panel estimates that roughly half must come from public sources. The other $500 billion should come from private sources. And this is the weak point.

The 2022 OECD data shows that the total funding that came from private sources was only $30 billion. That means private funding needs to go up more than 15 times. 

Then there is the issue of quality, which you can think of in three parts—access to climate finance, the concessions that countries get, and how much of this is allocated specifically for climate adaptation.

For least developed countries (LDCs) and small island developing states (SIDS), access to international climate finance is difficult, so they want to see that becoming easier. These are small, poor countries that do not have well-developed capital markets, so it is not easy for them to access this financing.

It is also important to see how much of this funding comes via high-quality sources, classified as funding that comes in the form of grants, or funding that has deep concession, including on the interest rate and the amount of time countries have to pay back these loans. For these countries, the  proportion that comes through these sources is almost as important as the total quantity of climate finance.

Now, adaptation is important because that is particularly difficult to fund. Mitigation projects are a little easier to finance, for they could be more easily bankable, for example due to the power purchase agreements in the construction of a solar plant or wind power plant, etc.

Adaptation and resilience requirements are more difficult to finance, because there is no easy source of revenue, at least not in the near term, that you can attach to that funding. So it is important to state how much of the funding from the $300 billion will go towards adaptation. The Baku agreement does not have such an estimate. Going into Belem, it's important to have  some agreed upon proportion that is specifically put aside to fund climate adaptation.

What role do you see emerging economies play in also contributing to climate finance? 

Article 9 of the Paris Agreement states that developed countries are obliged to provide climate finance to developing countries, while other countries are encouraged to do so voluntarily. Currently, there are 23 countries that fall under the ‘developed country’ umbrella who are obliged to contribute to climate finance.

Advanced economies have been arguing that many countries, such as China, countries in Gulf states, and then other small countries like Singapore, Korea, Israel, have become wealthy since the Paris agreement, and definitely since the 1992 UNFCCC treaty was signed. They are emitting a lot more carbon than they did in the past, so they should contribute as well, and it's a valid point.

The counterpoint is that one must factor in the size of the population as well—when you look at emissions or gross national income on a per capita basis, the numbers are low.

My view is that you should factor in both, the total wealth of the country and total emissions as well as the per capita contributions. Based on that, there should be some contributions coming from some of these countries as well.

Briefly, what will the Trump presidency mean for developing countries for whom international climate finance is key to undertake mitigation work?

The last time President Trump won the election, he announced a withdrawal from the Paris Agreement about six months into his presidency. This time around, it's very likely that when President Trump takes office, similar to last time, one of the first things he will do will be to withdraw the US from the Paris Agreement. So that should not come as a surprise to anybody, he has said it in his campaign, and he did it earlier.

The bigger risk is if the US were to withdraw from the UNFCCC treaty entirely. It may be very difficult for the US to re-enter if he were to take that step.

President Biden in 2021 announced the first US International Climate Finance Plan. Until that time, the US did not have anything similar. As part of this, the US could officially contribute towards climate finance. And the number went from something just over $1 billion in 2020 to almost $11 billion in 2024 so it's a big increase.

The World Bank was pushed to do more and it did; the Green Climate Fund contributions were made. All these efforts were made under President Biden.

President Trump is obviously not going to do that, and he may claw back some of these efforts. So that is a risk that we have.

Ultimately, I don't think these risks are significant in terms of actual climate investments, because those are a function of how the market works. To the extent that these technologies become more cost-effective, investments will happen, even from the US.

Besides, last time around when President Trump came to office, many of the US states and localities or municipalities continued to push for clean energy and a green agenda. So I see something similar happening. The risks are there, but I don't think we should significantly change the trajectory of investments in clean technologies.