COP29, the United Nations’ (UN) climate conference that is slated to end on Nov 22, is not expected to yield “significant” financial commitments due to ongoing geopolitical tensions, which will set back climate diplomacy, says BMI, a unit of Fitch Solutions.
The two-week summit in Baku, Azerbaijan, was touted as a “Finance COP” for its goal to seek consensus on a new collective quantified goal (NCQG) for climate finance to support developing countries.
A previous figure of US$100 billion ($133.35 billion) annually by 2020 was agreed at COP15 in 2009, but wealthier countries did not raise the money until 2022. This was likely due to higher spending during the Covid-19 pandemic.
Now, current contributors, including the European Union (EU), are asking countries like China — still technically classed as a developing economy — to pay a share.
Although BMI expects the fund to secure commitments “in the range of hundreds of billions of dollars”, the estimated financing needs of developing countries amount to approximately US$1 trillion per year through 2030, according to UN projections.
See also: COP29 deal: Inside the frantic manoeuvre that saved climate talks at a cost
“Meeting new financial needs will require not only pledges from international financial institutions and individual countries, but also private capital,” says BMI in a Nov 19 note.
Like COP29, global climate diplomacy and policy will be overshadowed by ongoing conflicts in Ukraine and the Middle East, in addition to the return of Donald Trump to the US presidency next year, says BMI.
“We maintain our view that the Russia-Ukraine war is heading towards a long-term stalemate, even with the recent deployment of North Korean troops to Ukraine and the latter using US-supplied longer-range missiles to strike deeper into Russia. Ukraine's military aid from the US is at risk, as we believe Trump is highly likely to curb new aid packages as part of a policy to compel Ukraine to accept a peace settlement. This would likely put pressure on the EU, as the US has been the largest military support provider to Ukraine,” says BMI, which was acquired in 2014 and integrated into Fitch Solutions in 2018.
See also: COP29 ends with deal on climate finance after bitter fight
China largest emitter, US highest per capita
While mainland China is the world’s largest greenhouse gas emitter, the US leads in emission per capita.
Under a Trump presidency, BMI anticipates “significant headwinds” to global climate policy. “Although the outgoing US Biden administration is expected to pressure mainland China and other developing countries to contribute to the climate fund, its influence is likely to be diminished, and Trump himself will be unlikely to advocate climate financing.”
Emissions per capita
Nevertheless, even with international pressure, China is unlikely to provide funding, citing its developing status. According to Reuters, China has requested that trade policies negatively impacting developing countries be included in the agenda for COP29, specifically targeting EU regulations such as the carbon border adjustment mechanism (CBAM) and the anti-deforestation regulation (EUDR).
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According to BMI, this signals that trade-related disagreements are “likely to further hamper” climate-related negotiations.
Fiscal tightening
In addition, most governments in developed markets are grappling with significantly higher debt than pre-pandemic times, says BMI. This burden is expected to continue into the medium term, thereby leaving limited fiscal space for climate financing commitments, add analysts.
“We expect a policy shift towards fiscal tightening and a focus on economic competitiveness rather than climate concerns, which will pose headwinds to global climate policy. The 2024 elections saw green parties losing seats, while right-wing parties gained ground in the European Parliament, Austria, Belgium, Germany and France. As a result, passing green-related policies will become more difficult, and climate issues will not be a policy priority,” says BMI.
Indeed, leaders from developed markets, including French President Emmanuel Macron, Canadian Prime Minister Justin Trudeau, Australian Prime Minister Anthony Albanese and German Chancellor Olaf Scholz, are skipping COP29.
On Nov 13, Argentinian President Javier Milei even ordered the country’s 80-odd officials to withdraw from COP29. The far-right leader has previously called the climate crisis a “socialist lie”, and during his election campaign threatened to withdraw from the Paris Agreement, a landmark deal among countries to cap global temperature rise at 1.5°C above pre-industrial times, and “well below” 2°C.
Already, the global average temperature this year till end-September reached 1.54°C above pre-industrial levels, according to the World Meteorological Organization.
Also on Nov 13, French Minister of Ecological Transition Agnès Pannier-Runacher announced she would skip COP29 after Azerbaijan criticised France’s lack of climate change concerns in its overseas territories.
The rising tensions stem from France’s strong support for Armenia, which is engaged in a territorial conflict with Azerbaijan. The Nagorno-Karabakh conflict, which began in 1988, only reached a ceasefire last year after Azerbaijan launched a large-scale offensive in September 2023.
Overall, this reflects weakened governance and declining electoral popularity of climate-friendly policies, says BMI.
Trump’s re-election may have also emboldened Argentina’s Milei, who is pushing to cut back environmental regulations. Experts fear both countries may withdraw from the Paris climate accord, as Trump did in 2017.
Still, John Podesta, the US’s senior adviser to the president for international climate policy, said the US will remain committed to climate policy throughout Trump’s second term.
Speaking at the start of COP29 on Nov 11, Podesta said: “The work to contain climate change is going to continue in the United States with commitment and passion and belief… The fight is bigger than one election, one political cycle and one country”.
Charts: BMI
Read more about COP29:
- Climate-hit nations wait years for US$370 mil fund to deliver (November)
- ‘Potential windfall’ for emerging markets as COP29 carbon market deal works to improve integrity: BMI (November)
- COP29 clash brews as Saudis resist restating fossil fuel pledge (November)
- Temasek-backed Pentagreen to manage Fast-P’s Green Investments partnership, seeking to deploy US$1 bil (November)
- BlackRock, MAS spearhead collaboration on blended finance debt initiative (November)
- US will stay in global climate fight despite Trump, says top official (November)
- COP29 begins with ‘breakthrough’ on carbon market rules, but climate groups criticise lack of scrutiny (November)
- What are COP meetings for? Will this one make a difference? (November)
- UN biodiversity summit COP16 ends in limbo as countries spar over funding (November)
- COP29 Presidency hosts Pre-COP discussions in Baku (October)
- COP29 Presidency to convene ministerial dialogue on climate finance goal today (September)
- Azerbaijan will fund four members of each Small Island Developing State to attend COP29 (September)
- COP29 to call for sixfold increase in global energy storage (September)
- Azerbaijan proposes US$1 bil Climate Finance Action Fund, replacing planned fossil fuel levy (July)
- COP29 Presidency aims to enhance ambition, enable action (July)
- COP29 Presidency sets out agenda, emphasises upcoming work on New Collective Quantified Goal (June)
- COP29 Presidency hosts climate finance dialogue in Washington (April)
