Will the “Finance COP” live up to the expectations? A critical analysis of the stakes at COP29

As COP29 approaches in Baku, the summit billed as the “Finance COP” raises critical questions about the global commitment to climate finance. Despite calls for “maximum ambition,” entrenched inequities and the influence of powerful interests continue to stall progress on meaningful climate action. CESR examines the stakes, from financing adaptation and loss to reforming global debt structures and taxing climate damage.

By: Matt Forgette, CESR Fellow

For nearly three decades, the Conference of the Parties (COP) under the UNFCCC has convened world leaders and civil society to tackle the escalating climate crisis. As COP29 approaches in Baku, Azerbaijan, hopes and tensions are high for meaningful action next week amidst ongoing negotiations and unfulfilled promises. In June, UN Secretary-General António Guterres urged that the upcoming COP29 must be one of “maximum action.” Now, a few days from its start, maximum ambition appears far from expectations. For the second year in a row, the world’s foremost climate conference will take place in a country whose leading export is oil and gas and is often accused of systematically violating human rights. But even more pressing than the location are the limited expectations for the summit’s flagship initiative.

COP29 has been dubbed the “finance COP” for its focus on setting a new target regarding climate finance flows for developing countries: the New Collective Quantified Goal (NCQG). Yet, mere days out from the conference, wealthy Global North states have failed to make any concrete climate finance proposals. As articulated by Liane Schalatek on behalf of the Women and Gender Constituency: “​​Just weeks before COP29 and after three years of process and engagements, we don’t even have an inkling of what developed countries will bring to the table for the New Collective Quantified Goal.”

But there is still space for transformation. CESR is committed to advocating for maximum action at COP29. Our forthcoming Key Concepts piece will examine crucial topics in climate finance, including loss and damage, climate reparations, and the need for cross-cutting, gender-responsive advocacy.

 “We advocate for public climate finance based on grants rather than loans, supplemented by concessional finance,” states our Executive Director, Dr. Maria Ron Balsera. Additionally, we call on countries to honor the Common but Differentiated Responsibilities and Respective Capabilities (CBDR–RC) human rights framework, ensuring that richer countries fulfill their obligations under the Paris Agreement with genuine financing for adaptation and mitigation, including overdue contributions to the $100 billion per year goal pledged in 2009. Debt cancellation is also essential to unlock climate funds for adaptation and mitigation, removing a key barrier for many nations. Fiscal reforms, including progressive tax measures at both global and national levels, can curb illicit financial flows and tax avoidance, while green taxes can generate climate funds and help reduce inequality.

For now, here is a quick preview of the key debates to follow at next week’s COP:

1. New Collective Quantified Goal negotiations

Deliberations around the New Collective Quantified Goal (NCQG) are at the top of the agenda. They are a crucial opportunity to scale global climate finance to a level commensurate with the severity of the crisis. As a core element of the 2016 Paris Agreement, the NCQG sets targets for global climate finance, intended to support developing countries in reducing emissions (mitigation) and adapting to climate impacts.

An ambitious NCQG is especially critical given past shortfalls. In 2009, developed nations promised $100 billion annually by 2020, but this amount, while inadequate, was only met two years late and without independent verification. 

Global South countries are championing green finance, with the African Union proposing $1.3 trillion annually by 2025 to meet the projected $1.8 trillion needed by 2030. Equally important to an ambitious amount is the quality of climate finance. Global South countries urgently need adaptation and loss-and-damage funding to address the current and future impacts of climate change. Yet, most funds have been directed to mitigation, which, while important, is not the immediate priority for countries facing ongoing climate emergencies.

Next week’s NCQG discussions should also approach the issue of access to climate funding. Developing countries have received just a fraction of previous finance flows, mostly as loans rather than grants, compounding debt pressures. Current reliance on ‘blended finance’ to attract private investment has proven risky, diverting crucial public funds to for-profit investors with limited benefits for public goods.

The push to ‘financialize’ climate action, driven by multilateral development banks (MDBs) and other institutions, prioritizes market-friendly solutions like blended finance and green bonds, which often fail to meet the needs of Global South countries. MDBs must undergo reforms to promote transparency, accountability, and human rights compliance, ensuring accessible funding to meet NCQG targets and support a just transition.

2. Loss and Damage

The formal launch of the Loss and Damage Fund at COP28 marked a crucial step toward the Global North acknowledging its responsibility for climate degradation, aiming to support vulnerable communities, especially rural and indigenous populations, facing climate disasters. Despite its promise, the Loss and Damage Fund remains severely underfunded, with just $700 million pledged against an estimated need of over $1 trillion for developing countries. For instance, African countries are losing an average of 2–5 percent of their gross domestic product (GDP), and many are sacrificing up to 9 percent of their budgets in response to climate emergencies. 

Despite the Global South’s climate distress, wealthy countries remain reluctant to assume their fair share of responsibility. COP29 host Azerbaijan’s President Aliyev called for ‘common ground’ rather than blame. Yet the culprit is clear: the United States and Europe account for two-thirds of historic emissions, while low-income countries today contribute less than a tenth. Policymakers, world leaders and the media need to understand and highlight that the Global South is subsidizing the Global North, absorbing the losses of climate emergencies, and forefronting the costs while awaiting the funds they are owed, which is one of the reasons why reparations approach is critical to understanding climate finance. 

Human rights principles, including common but differentiated responsibilities and the polluter pays principle, demand that wealthier nations increase their climate contributions. Ensuring real support for loss and damage at COP29 will require strong advocacy for these standards.

3. Carbon markets

This year’s summit seeks to operationalize Article 6 of the Paris Agreement—which hones in on carbon markets as a promising opportunity to finance green projects and manage the world’s remaining carbon budget. The idea is to push for standardization to prevent “carbon leakage”—the risk that polluting companies may shift to countries with looser regulations.

In practice, mechanisms like carbon cap-and-trade have largely failed to curb pollution and have disadvantaged Global South countries by concentrating wealth in regions with established carbon markets, such as the EU, while imposing financial burdens on poorer countries. When Global South countries participate, they often receive lower carbon credit prices than wealthier nations. Additionally, polluting companies sometimes relocate operations to countries with weaker regulations or lower carbon pricing, leading to higher emissions in these regions, where regulatory safeguards are often limited.

One prime example is the EU’s recent carbon border adjustment mechanism (CBAM), enacted without exceptions for low-income nations, risks costing African countries billions.  CESR has argued for more equitable carbon taxation proposals. A robust framework for international carbon limits is desirable, but it requires intelligent planning, implementation, and protections for lower-income countries. Carbon markets must support a just transition grounded in human rights standards, and COP29 discussions will be crucial in shaping their future.

Our proposals

Will COP29 achieve Guterres’ vision of “maximum ambition”? The answer remains uncertain and will rely on sustained, organized advocacy around the key issues highlighted above. To make the New Collective Quantified Goal (NCQG) meaningful, we need ambitious targets, a strong commitment to adaptation, and reforms to improve both access to and governance of climate finance. Loss and damage must be prioritized, not treated as an afterthought, and carbon markets must be aligned with human rights to ensure an equitable climate response. Achieving these goals will require significant new funding, making green tax policies and progressive tax reform vital parts of the climate finance movement. While we will discuss these in detail in upcoming publications, take a look at the table below for human rights-aligned ways to raise, mobilize, and improve climate finance.

CESR will continue fighting for a human rights-aligned approach to climate finance and participate in the “Finance COP”. Follow us on social media for more updates.