The recent COP 29 United Nations (UN) Climate Change Conference in Baku was challenging from the start, but despite various disagreements, policymakers and negotiators persisted with the final agreement, which was struck 35 hours later than planned. A few countries – including the UK – strengthened their targets for decarbonising.
Collectively, countries signed up to a policy that committed developed countries to increasing their payments to nations in the rest of the world. It was increased from around $100bn a year to a ten-year target of $300bn, however this is much less than the requested $1.3trillion. Therefore, it is likely that there will be pressure to go even further at future COP conferences
The pattern established by the original treaty is clear. Countries need to get on with their own national plans and, collectively, the richer countries need to help the others to a much greater extent. There was always the danger that the developed countries would bring their carbon dioxide output down, but the developing countries would increase their output as they needed to burn more energy to boost living standards.
It would not be fair for an advanced world enjoying petrol cars, gas boilers, and jet travel to say to others that they cannot have those things. There needs to be more work on good substitute products that work both in the developed and the emerging world. Practical solutions are needed for emerging economies.
Big political change is occurring
It was notable that only four of the G20 countries sent their head of state or government. It implied they did not want to have to make big financial commitments, as many are struggling with large budget deficits and plenty of domestic spending needs. It may also have reflected their worry about political development likely to come in the US.
The election of President Trump changes a lot. He has repeated in an interview after the election that he regards the climate change theory and policies as a scam. He will pull the US out of the Paris Treaty framework and will not be setting carbon dioxide reduction targets to drive his policies. His economic policy rests in part on ‘drill, baby, drill’. This policy aims to maximise US output of domestic gas and oil and to export it as well as consuming at home.
The Trump administration is committed to spending cuts. It also believes charity begins at home, so the US is unlikely to want to step up its contributions to net-zero transfers. It was reluctant to lead this initiative even before Mr Trump’s re-election.
The big emitters
In 2023, according to the Emissions Database for Global Atmospheric Research the following were the top producers as a percentage of the world annual output:
- China: 34%
- US: 12%
- India: 7.6%
- EU: 6.4%
- Russia: 5.3%
The UK is well down the list with 0.8%, a substantial reduction on 1990 levels.
China last year increased its output by 3%. Some think the country will now start to edge its output down, as more renewable power comes on stream. Others disagree, pointing out that China plans to go on expanding its fleet of coal power stations up to 2030 and remains very dependent on coal.
The US under Donald Trump is not going to follow a policy of reduction and will encourage a substantial increase in its oil and gas output.
India last year increased its carbon dioxide emissions by 7.8% and is likely to carry on increasing output as the economy rapidly grows. Coal represents 44% of India’s total energy used.
The European Union (EU) has policies in place to cut its output, but countries such as Poland and Germany still use a lot of coal.
Russia does not regard cutting carbon dioxide emissions as a key policy and is looking for ways to expand output and sales of fossil fuels.
This means four countries accounting for over half of world’s carbon dioxide output are likely to produce even more carbon dioxide over the next few years, setting back achievement of the world targets.
Finding the money for the big transition
It took the 43 developed countries from 2015 to 2022 to get their financial transfers up to the $100bn a year initially promised. The Centre for Global Development has set out their estimates of how the 2022 total was reached:
- Development Banks: $46.3bn
- Bilateral grants and loans from countries: $44.2bn
- Private finance: $14.4bn
- Export Credits: $2.0bn
The bulk of the money has taken the form of loans, and many of the loans are on commercial terms. Some of the bilateral loans and grants provided by individual countries have been found out of existing aid budgets, by increasing the number of projects that qualify as green. This is why such a large annual sum has not caused more stress within national budgets and has been acceptable to most shades of political opinion.
Some think this is a bad way to behave. Others point out that the aid money being spent on green projects is not being spent on fossil-fuel related projects, so this is good news.
Future funding
The developing world is adamant it cannot start to plateau or bring down its carbon dioxide output without much more financial assistance. It wants to catch up with advanced country living standards.
If these countries are not allowed to move through the relatively cheap oil and gas phase developed nations used to grow their economies then they will need extra subsidy to use renewables, develop enlarged and smart grids, as well as the new battery and heat pumps products. They also need a lot of help for transition of its basic industries where more of the energy-intensive processes such as steelmaking now take place in developing countries.
The developing world says that $300bn is not enough. It wants more of it in the form of grants or soft loans and less as commercial loans. More debt for heavily indebted countries brings more risks. There are worries that some countries are just shuffling around their existing aid budget payments or offering tough loans.
There is still likely to be an emphasis on loans, not grants.
With the US unlikely to make much of an improved financial offer for the next four years – and with EU budgets under considerable pressure – it is going to be difficult making progress towards the trebling of money by 2035.
There is still likely to be an emphasis on loans, not grants. The international development banks will be expected to make a major contribution. Aid budgets will become ever more directed to green projects as the easiest source of finance. Finance Ministers can find ways of delaying or reducing the impact of what looks like a big increase in spending.
China undertakes some project finance of its own, often by loans through Beijing’s ‘Belt-and-Road’ initiative. China did not pledge to join the developed countries and treble funding for developing nations but could make a useful addition to the total.
Climate goals will not be met until China materially scales back its coal-fire electricity generation and relies more heavily on renewables. Many developing countries such as India also have reasons to carry on increasing their use of fossil fuels to raise living standards. It is difficult to see how world emissions will fall sharply enough to meet long-term targets.
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