Climate 411

Climate Finance and Accountability at COP29

COP29 sign in Baku

COP29 sign in Baku. Photo by UNclimatechange via Flickr

 

Today, November 14, is Finance Day at COP29. We caught up with Leslie Labruto, EDF’s Managing Director for Sustainable Finance, about what she’s watching for at COP29, the United Nations’ climate change talks in Baku, Azerbaijan. Follow Leslie on LinkedIn.

Q: You’re in Baku for COP29. What key issues are on your radar?

A: The spotlight here this year is on scaling up climate finance for developing countries, and a need for redoubled global cooperation to achieve our shared climate goals. My team and I, along with the rest of the +Business team at EDF, are laser focused on working with the private sector to ensure climate and nature wins. A major focus at COP will be the establishment of a climate finance goal, called the New Collective Quantified Goal (NCQG), which will replace the $100 billion annual commitment that high-income countries pledged to deliver under the Paris Agreement. The NCQG could reach at least $1 trillion a year—a figure that better aligns with the financial gap that needs to be closed to address the climate crisis.

Developing countries need these funds to tackle climate change, transition to clean energy, and adapt to the impacts of climate change, and it’s crucial that the finance be provided in a way that’s just, equitable, and effective. Let’s not forget that those ‘wins’ in developing countries are good for everyone everywhere, since climate impacts are felt globally. Successful climate finance means more forests still standing, a larger climate workforce, more resilient food systems, more methane abated, and greater global renewable energy capacity. Because climate-related investments are needed to meet global goals and address inequitable impacts from past emissions, low-income borrowers should have access to concessional finance. The NCQG will not only scale up ambition but also support countries as they prepare to submit their updated climate commitments in 2025.

Q: You’ve emphasized both the quantity and quality of climate finance. What do you mean by “quality”?

A: While the amount of climate finance is essential, its effectiveness — its quality — is equally important. When we talk about quality, we mean ensuring that climate finance is structured to be concessional, accessible, and impactful. In the private sector, finance is tracked with metrics like profits and losses that communicate shareholder value. In climate finance, however, there is less accountability in terms of impact metrics.

Climate finance should leverage public and private investment to make rapid progress toward net zero emissions and benefit local communities. To make sure financing achieves this, we need a system that is accountable for being easy to access, impactful in tackling climate-related challenges, and affordable for borrowers.

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At COP29, Article 6 must deliver on urgent finance for forests and Indigenous communities

This blog was authored by Pedro Martins Barata, Associate Vice President, Carbon Markets and Private Sector Decarbonization and Santiago García Lloré, Senior Manager, IPLC & Conservation Partnerships, Forests

UN Climate Change, Kamran-Guliyev/ Flickr

At the start of COP29, negotiators in Baku secured a major breakthrough by agreeing on new standards for a UN-led global carbon market under Article 6 of the Paris Agreement, potentially unlocking billions in funding for climate projects.

But the terms of the standards are still flexible, meaning there’s a real chance to shape them to make sure the money goes where it’s needed most – like Indigenous Peoples and local communities who are fighting to conserve the planet’s last intact forests, known as high forest, low deforestation (HFLD) regions.

The stakes are higher now than ever, especially after the recent US election, which casts doubt on future public climate funding from one of the world’s biggest economies. In this uncertain landscape, carbon markets must step up to fund critical climate solutions, especially nature-based projects like forest conservation.

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From Cali to Belèm: Finding Common Ground for Nature and Climate

This blog was authored by Milloni Doshi, Project Manager, Global Engagement and Partnerships and Annie Mark, Senior Director, Global Partnerships.

Photo by Milloni Doshi at COP16

The Conference of the Parties (COP) of the UN Convention on Biological Diversity (CBD) is a global meeting focused on conserving nature. Unlike the United Nations’ larger annual climate conferences, CBD meetings are usually smaller and have a specific focus: conserving and restoring biodiversity. In 2022, countries adopted the Kunming-Montreal Global Biodiversity Framework (GBF), a landmark plan aimed at halting and reversing biodiversity loss by 2030. Many call it the “Paris Agreement” for nature.  

This year’s COP16 took place in Cali, Colombia and was the largest yet. Although discussions moved slowly and ended without a final agreement, COP16 sparked important conversations about how nature and climate are deeply connected. This was a positive development on the “Rio Trio” —a partnership between the leadership of the UN three conventions on biodiversity, climate, and desertification. These pathway ideas may help shape future climate talks, including next week’s COP29 in Baku, Azerbaijan, and COP30 next year in Belem, Brazil.  

Pathway 1: Recognizing Indigenous Peoples and Local Communities (IPLCs) and Their Vital Role Read More »

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Beyond numbers: strengthening climate finance through evidence-based impact

As countries discuss a new goal on climate finance at the UN climate conference, COP29, we have an opportunity to boost the impact of every dollar we invest in climate action.  

In climate finance, impact represents the measurable, positive outcomes achieved through climate action—determined by tracking specific metrics like emissions reductions, adaptation results, co-benefits, and the timeliness of fund disbursement. In a recent report on quality climate finance, we argue that we need better evidence to ensure every dollar of finance has better climate impact.  

To measure impact well, we need measurable ways to track contributions to national climate plans (called Nationally Determined Contributions (NDCs), capture both immediate and long-term transformational change, enable learning for future interventions, and help identify scalable successful approaches.  

The evidence gap  Read More »

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To increase NDC ambition, we need to change how we think about money

As we approach the United Nations climate talks, COP29 in Baku, Azerbaijan, UN agencies have published several reports highlighting both our progress to-date and the gaps in global climate action. The findings are concerning, but unsurprising: countries’ current climate plans, called Nationally Determined Contributions (NDCs), have a long way to go.  

To keep global temperature rise below 1.5°C, we need to see a 42% reduction in emissions by 2030 compared to 2019 levels – while current NDCs would only lead to 5.9% cut. But there is good news. Countries are currently writing new plans for climate action, to be submitted in 2025. Updated NDCs offer an opportunity to course correct, and turn ambitious targets into real action. 

But new targets alone aren’t a silver bullet. For countries to successfully set and implement aggressive plans, they will need climate finance to back them up. And alongside getting more money to where it is most needed, we also need to ensure that the money is quality: that countries can depend on fair, accessible and impactful finance to help them deliver results.  

In EDF’s new report ‘Quality Matters: Strengthening Climate Finance to Drive Climate Action,’ we have identified key reforms to the international climate finance system which can better enable countries to transform their NDCs into real action and put us back on track to meet the Paris Agreement goals.  

Finance as a Key to Action and Implementation 

According to the UNFCCC’s new NDC Synthesis Report, most Parties to the Paris Agreement say that finance is mission-critical to turning their NDCs into real action. 91% of Parties include specific information on finance in their NDCs, and 69% acknowledge that international climate finance is necessary to meet targets. Moreover, 76% of Parties identify stronger capacity building as key for implementation, which includes support in accessing climate finance. Many NDCs also include targets which are conditional upon receiving international financial support, meaning their goals can’t be met without the money. 

Financial support for climate action is especially important for developing countries, where underlying barriers can make climate action more expensive and challenging. For example, the costs of building a solar project in African countries is two to three times higher than in developed countries, due to high risk and low credit ratings. Additionally, more than half of low-income developing countries are currently facing some degree of debt distress, which can trap them in a vicious cycle of rising interest payments, less money to dedicate to climate action, and persisting vulnerability to climate disasters. 

[source: https://www.weforum.org/agenda/2021/06/5-ways-align-debt-climate-development-goals/] 

The cost of climate action in developing countries is estimated to reach $2.4 trillion annually by 2030 – and NDCs have room for improvement in detailing just where that money needs to go. Just 46% of Parties provide quantitative estimates of their financial support needs, and these needs are often expressed simply as “total amounts over the time frame of the NDC.” This lack of specificity can make it a challenge to properly align finance flows – domestic and international – with climate solutions. 

Quality Finance can Enable Ambitious NDCs 

For developing countries to implement their NDCs, they will require significant financial support from donor countries and multilateral institutions. Unfortunately, current international climate finance flows often fall short – finance can be inaccessible, ineffective, or overly burdensome for countries that need it most, inhibiting their ability to meet their climate objectives. 

For example, in recent years only 23% of climate loans from Multilateral Development Banks (MDBs) to developing countries were concessional, meaning they had more favorable terms than market loans. Higher proportions of non-concessional finance can drive up debt burdens and risk of economic instability, reducing the effectiveness of climate finance. Funding also often fails to reach local communities, and there is a lack of evaluation of impact when it does.  

These concerns have dangerous repercussions for the upcoming NDC updates – if countries lack trust that finance will be available or affordable, they may preemptively limit their ambition as they revise plans. Accordingly, climate finance must be high-quality to effectively support NDCs and deliver climate action.  

EDF’s new report presents key metrics of climate finance quality, including concessionality, or the terms of delivery of finance; access, or how easily finance can be secured and utilized; and impact, or how well finance results in measurable, positive outcomes. These quality considerations need to be incorporated into the New Collective Quantified Goal (NCQG) on climate finance at COP29, which will help scale resources for climate action in developing countries.  

Multilateral institutions will also play an important role in improving the effectiveness of finance. They must do more to improve access to resources and mobilize private investment in support of climate objectives to enable successful NDCs. These institutions can also align quality finance directly with the NDC process, by supporting countries with NDC investment planning approaches. Multilateral institutions should help countries to integrate climate objectives directly into national planning and budgeting processes, realign existing financial flows toward climate action, and create clear pipelines of bankable projects that support NDC targets. 

By improving the quality of finance, both through the NCQG at COP29 and structural reform beyond, we can encourage more ambitious NDC updates in 2025 and ensure that countries can successfully implement their plans. 

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North Carolina can still avoid huge amounts of emissions (and stranded carbon emitting assets) under the state’s Carbon Plan Law. Here’s how.

On November 1, the North Carolina Utilities Commission issued an order in the Carbon Plan docket, almost two months ahead of schedule. It largely ratifies an agreement reached by Duke Energy and the state’s Public Staff, who are charged with protecting the state’s ratepayers. While the Commission drops the requirement for Duke Energy to model hitting the 70% carbon emission reduction by 2030 in state law, largely due to a boom in electricity demand, the utility is still required to take “all reasonable steps” to hit the target by the “earliest possible date.” Which begs the question, what is the earliest possible date? A new white paper from EDF comes to the conclusion that North Carolina can still hit the target by 2032, even with the new carbon-emitting resources moving forward under this order.

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