By Dr Venkatachalam Anbumozhi, Senior Research Fellow for Innovation: The 29th Conference of the Parties to the UN Framework Convention on Climate Change (COP29), scheduled to take place in Baku, Azerbaijan, from 11 to 22 November 2024, is a pivotal opportunity to accelerate climate action. With record-high global temperatures affecting the developing countries of the Global South and extreme weather events impacting communities worldwide, COP29 will bring together leaders from governments, businesses, and civil society to advance concrete solutions to the defining crisis of our time.

Known as the ‘Finance COP,’ COP29 will see 198 parties convene for the first time in 15 years to set a new global climate finance target. Central discussions in Baku will focus on enhancing climate ambitions for the Global South and enabling finance flows from the Global North to support these efforts.

A New Climate Finance Goal for the Global South

Low-income economies across Asia, Africa, and Latin America contribute to just one-tenth of global greenhouse gas emissions but are the most heavily impacted by climate change. Meanwhile, middle-income emerging economies like China, India, Indonesia, Brazil, and South Africa will likely increase their global share of emissions as populations grow and infrastructure developmental needs intensify across energy, transportation, and agriculture sectors.

The funding for climate-resilient growth in the Global South is expected to come in the form of a New Collective Quantified Goal (NCQG), a successor to the US$100 billion finance target set in 2009, which was only recently met in 2022. However, even this amount is grossly inadequate. Studies estimate that, even after deploying their own resources, developing countries require an additional US$500 billion to US$1 trillion annually in climate finance from international sources for both mitigation and adaptation – at least five times the current commitment. With current finance gaps projected to reach nearly US$200 trillion, COP29 must strive to secure a combination of conventional public financing, reformed multilateral development bank (MDB) contributions, and market-based private financing.

Rebalancing Adaptation Finance with Climate Mitigation

The US$100 billion climate finance target currently covers both climate mitigation and adaptation. Under the Paris Agreement, countries agreed to submit updated national commitments on climate mitigation, known as Nationally Determined Contributions (NDCs), every five years, with the next round due shortly after COP29. Baku offers a final major opportunity to set clear financing expectations for the Global South’s NDC aspirations.

Delegates at COP29 should strive to achieve a balanced approach to mitigation and adaptation, improving the quality of investments through strategic public financial instruments that help developing countries access advanced green technologies. Building resilience to climate impacts includes activities like planting drought-tolerant crops and strengthening infrastructure against floods and extreme weather. However, the UN Environment Programme has found that progress on adaptation is slowing, with the financial gap estimated at US$190–360 billion per year. Doubling adaptation finance by 2030 and engaging the private sector to help bridge this gap is essential, as is greater financial predictability for the newly established Loss and Damage Fund.

Building High-Integrity Carbon Markets for the Global South

Operationalising Article 6 of the Paris Agreement is crucial to financing climate actions and achieving the 1.5°C target. Article 6 focuses on carbon markets, where countries and companies in the Global South can sell greenhouse gas emission reduction credits to entities in advanced economies. These markets could generate critical cash flows for green projects, allowing private sector contributions to finance climate actions.

However, the Global South currently represents less than one-tenth of emissions covered by carbon pricing schemes, and emerging carbon markets remain fragmented with low credit prices. Questions about transparency and effectiveness in driving real emission reductions persist. COP29 has the potential to improve this framework by establishing robust guidelines to ensure that private finance reaches the right projects and benefits local communities in the Global South.

The Path Forward

COP29 President Mukhtar Babayev faces the task of bridging divides between countries following polarised discussions at COP28 in Dubai. Success at COP29 depends on the collective commitment of countries to embrace climate justice, equity in resilient development, and market transparency, ensuring that the burden of addressing climate vulnerabilities does not fall solely on those least responsible – the Global South.

COP29 represents a historic opportunity for transformative action, requiring strong political leadership, climate diplomacy, and creative solutions from all negotiating parties to rapidly scale up climate finance. Otherwise, the Baku Summit risks becoming yet another annual gathering without meaningful progress.

This opinion piece was written by ERIA's Senior Research Fellow for Innovation, Dr Venkatachalam Anbumozhi, and has been published in The Jakarta Post and Bangkok Post. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.