Azerbaijan has proposed a US$1 billion ($1.34 billion) Climate Finance Action Fund (CFAF) to invest in climate action in the developing world. CFAF will be capitalised with voluntary contributions from fossil fuel-producing countries and companies across oil, gas and coal, and Azerbaijan will be a founding contributor.
CFAF is one initiative within a package of 14 announced on July 19 in Azerbaijan as part of the 2024 United Nations Climate Change Conference (COP29) action agenda.
COP29 President-Designate Mukhtar Babayev has called for contributors to come forward at the 12-day conference in November. CFAF will be launched once the US$1 billion target is met with 10 contributing countries committed as shareholders.
According to the COP29 Presidency, members will commit to transfer annual contributions as a fixed-sum or based on volume of production. CFAF will be a “catalytic public-private partnership fund”, mobilising the private sector and de-risking investment. The fund will also contain special facilities with concessional and grant-based support to address the consequences of natural disasters in developing countries.
CFAF replaces a planned levy on fossil fuel production. Bloomberg reported in May that Azerbaijan was formulating an unprecedented levy on oil, gas and coal production, with the potential to raise at least US$6 billion annually, which was to be called the “North-South Financial Mechanism”.
However, the idea faced pushback from a number of countries, including the US, the world’s largest producer of fossil fuels.
See also: COP29 Presidency aims to enhance ambition, enable action
Fund disbursement
According to the COP29 Presidency, 50% of the capital will be directed towards climate projects in developing countries that rely on support, across mitigation, adaptation, and research and development.
Another 50% of the contributions will be allocated to helping members meet the “next generation” of Nationally Determined Contributions (NDCs) to keep the 1.5°C temperature target within reach.
See also: COP29 Presidency sets out agenda, emphasises upcoming work on New Collective Quantified Goal
Azerbaijan says it is working to submit a 1.5°C-aligned NDC, and the COP29 Presidency is encouraging all Parties to come forward with similar plans.
20% of the revenues generated from investments will be deposited in a Rapid Response Funding Facility (2R2F), providing “highly concessional and grant-based support” says the COP29 Presidency. “This facility will offer immediately accessible funding to address the consequences of natural disasters in Small Island Developing States, Least Developed Countries, and to other vulnerable developing communities as needed.”
The fund will be headquartered with its secretariat in Baku, Azerbaijan. Its board of directors will include representatives from contributors, and an independent audit committee will publish quarterly data, including financial reports and project evaluations.
According to the COP29 Presidency, shareholders will collectively make decisions and a working group is being established with international financial experts to further develop the management model and funding mechanism.
“Enabling action is an essential part of the COP29 agenda and we are committed to leading by example. I am grateful for the direction and support that I have received from the President of Azerbaijan, H.E. Mr. Ilham Aliyev, that countries rich in natural resources should be at the forefront of those addressing climate change,” says Babayev. “We have heard that communities want action not words, and today by launching the Climate Finance Action Fund we are taking a significant step. We are calling on donors to join us so that we can fulfil the COP29 plan to enhance ambition and enable action.”
“This process of inter-governmental cooperation, and each year’s COP, is of vast significance,” says UNFCCC executive secretary Simon Stiell. “It is humanity’s best hope to avert the global climate crisis, and spread the huge benefits of decarbonisation and climate resilience. A successful COP in Baku is more important than ever. But this process is not easy and there is much to do. I am grateful for the hard work of the incoming COP President, his team, and the initiatives they are spearheading to create the grounds for success.”
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COP29 chief negotiator Yalchin Rafiyev says: “We have assessed the shortcomings in financial markets and carefully listened to the concerns of communities. This will be the first fund with both fossil fuel-producing countries and companies across oil, gas and coal. It will be the first to both provide investment and to address the consequences of natural disasters. And it will be the first to receive annual transfers from its contributors.”
CFAF was launched within a package of 14 initiatives under the framework of the COP29 thematic days.
The COP29 thematic days are as follows:
Nov 11: COP29 Opening
Nov 12: World Leaders Climate Action Summit
Nov 13: World Leaders Climate Action Summit
Nov 14: Finance, Investment and Trade
Nov 15: Energy / Peace, Relief and Recovery
Nov 16: Science, Technology and Innovation / Digitalisation
Nov 17: Rest day and no thematic programming
Nov 18: Human Capital / Children and Youth / Health /Education
Nov 19: Food, Agriculture and Water
Nov 20: Urbanisation / Transport / Tourism
Nov 21: Nature and Biodiversity / Indigenous People / Gender Equality / Oceans and Coastal Zones
Nov 22: Final negotiations
The COP29 action agenda initiatives are as follows:
- Climate Finance Action Fund – CFAF: The establishment of a fund, capitalised with voluntary contributions from fossil fuel-producing countries and companies. The fund will catalyse the public and private sectors across mitigation, adaptation, and research and development, and also provide highly concessional and grant-based funding.
- Baku Initiative for Climate Finance, Investment and Trade Dialogue (BICFIT Dialogue): The establishment of a collaborative environment and long-term dialogue platform for the international community to bring increased focus to the nexus of climate finance, investment and trade.
- Just Transition Investment Partnership (JTIP) 4 Jobs and Skills: The creation of a collaborative platform to connect financing needs arising from the integration of skills development in NDCs, national adaptation plans (NAPs), long-term low emission development strategies (LT-LEDS) with available financing instruments of multilateral development banks (MDB), as well as explore establishing linkages and synergies with other sources of financing.
- Green Energy Pledge: Signatories to this Ministerial Pledge will commit to green energy corridors, zones and grids. This initiative will also help to establish the necessary regulatory and institutional frameworks and identify the enabling financing to create the infrastructure to fulfill the Pledge.
- Green Energy Storage Pledge: Pledge to make energy storage one of the cornerstones of global energy systems, aiming to increase resilience and efficiency with global targets to increase capacity six times from 2022 levels, reaching 1,500 gigawatts by 2030.
- Clean Hydrogen Initiative: Pledge and implementation tracks to deliver action from both the public and private sectors to unlock the potential of a global market for low-emissions hydrogen uptake through setting guiding principles and priorities, and addressing regulatory, technological, financing and standardisation barriers.
- COP Truce Appeal: Addressing the climate-conflict nexus, COP29 aims to promote peace, dialogue and reconciliation more broadly and to mobilise all political attention and diplomatic efforts for climate action.
- Digital Action Path 4 Green World: Accelerating the green transition through digitalisation and the reduction of GHG emissions in the information and communications technology (ICT) sector and a Ministerial Declaration.
- Investing in Human Capital, Health and Jobs for Climate Resilient Future: Ensuring investments in education, skills, health and well-being, in particular for children and youth, and strengthening synergy across these areas. Also integration of learning and assessment framework on environmental literacy into the Programme for International Student Assesment (PISA).
- HARMONIYA 4 Climate Resilience: Empowering Farmers, Villages and Rural Communities: The Harmoniya Initiative will serve as an aggregator, bringing together various initiatives, coalitions, networks and partnerships during COP29 to share experiences, identify synergies and gaps, and foster collaborative efforts concentrated on the agriculture, food and water nexus, including empowerment of local communities and women in the rural zones.
- Baku Dialogue on Water and Climate: Enhancing Action on Climate Change and Water Nexus: Building on the Global Goal on Adaptation, the Dialogue will bring together governments, UN organisations, academia and the private sector to work collectively on water-related climate change adaptation.
- Multisectoral Actions Partnership (MAP) for Sustainable, Climate Resilient and Healthy Cities: Enhancing multisectoral national actions in cities and encouraging stronger partnerships to scale up global urban climate finance and global coherence on climate and urban development and resilience.
- Global Partnership for Enhanced Climate Action in Tourism (GPECAT): The GPECAT aims to mitigate the trend of growing global emissions from tourism by advancing a paradigm shift in global tourism policymaking.
- Partnership 4 Reducing Organic Waste (ROW): Cutting Methane and Enriching Soil: The Partnership aims to reduce methane emissions from the waste sector while also addressing global challenges such as food waste, sustainable urbanisation, and soil management and enrichment. The partnership will seek 1.5°C-aligned NDC commitments in the waste sector, increased finance and investment, data for action, and innovative partnerships and stakeholder engagement.
Babayev announced that the COP29 Presidency will send a formal communication to Parties and Constituencies to the UNFCCC containing further information on the COP29 action agenda and its initiatives in due course.
Photos: COP29/X, formerly Twitter
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