As COP29 unfolds in Baku, Azerbaijan, the conference is set to become a defining moment in global climate action. Climate finance—recognized as a critical enabler in both climate mitigation and adaptation efforts—is now at the top of the agenda. With discussions centering around the unprecedented financing gap facing developing countries, COP29 could mark a historic turning point in how the world funds the fight against climate change.
Why Climate Finance is Taking Center Stage at COP29
In Baku, the question is no longer whether climate finance is needed but how much is necessary to bridge the divide. Since the 2009 Copenhagen Accord, which first promised $100 billion annually to support developing nations, this target has consistently fallen short. The OECD‘s 2022 report showed that climate finance mobilized by developed nations reached $92.8 billion, still below the $100 billion goal, while transparency and allocation efficiency remain concerns. Preliminary estimates for 2023 suggest a modest increase, though comprehensive data is pending. COP29 is seen as an opportunity to set a realistic, actionable finance target that meets the increasing demands of climate action in vulnerable nations.
The new $1 trillion annual target, based on estimates from the Climate Policy Initiative (CPI) and other sources, addresses the escalating costs of climate adaptation and mitigation for developing nations. The UNFCCC’s Standing Committee on Finance further indicates that adaptation financing needs alone could reach between $140 billion to $300 billion per year by 2030. For developing nations, where budget priorities often favor immediate development, this external climate finance is essential for achieving ambitious climate targets.
India’s Pivotal Role in the Climate Finance Push
India, a rapidly growing economy and significant global emitter, arrives at COP29 as a prominent advocate for transformative climate finance reforms. Under its ambitious “Panchamrit” commitments, India’s Nationally Determined Contributions (NDCs) include a target to source 50% of electricity from non-fossil fuel sources by 2030. Representing the G77 and China, a coalition of over 130 developing nations, as well as the Like-Minded Developing Countries (LMDC) group, India calls for fair and accessible financial solutions to support climate action.
India has asserted that an annual international public finance commitment of $1 trillion is crucial to support developing nations contending with climate impacts and financial limitations. According to the International Energy Agency (IEA), while private investment has fueled India’s renewable energy growth, international public finance is indispensable for climate adaptation and resilience projects that require long-term support. This funding, especially from multilateral development banks and bilateral sources, is foundational for India to reach its climate targets. Additionally, India seeks Loss and Damage (L&D) funding or financing for initiatives like carbon capture that are less attractive to private investors, ensuring all aspects of its climate strategy are supported.
Unity, Accountability, and Distractions: Key Hurdles at COP29 The call for increased climate finance at COP29 underscores the enduring tension between developing and developed nations. The UNFCCC highlights that unity within the G77[1] is critical for impactful climate negotiations, as evidenced by the creation of the Loss and Damage Fund at COP27. According to the UNEP Emissions Gap Report, this fund emerged from the collective pressure of developing nations and sets a foundation for further financial reform.
However, maintaining unity within the G77 is challenging due to diverse economic needs. India’s climate agenda differs from that of small island states facing existential risks due to rising sea levels. Research from the Stockholm Environment Institute (SEI) shows that despite differences, a consolidated G77 and China coalition has historically secured critical climate finance commitments. COP29 will be a test of this unity, as developing nations push for the $1 trillion demand.
Meanwhile, developed countries, including the U.S. and EU, argue that wealthier emerging economies, like China and Gulf states, should also contribute to global climate finance. Analysis from the Center for Global Development (CGD) suggests that this perspective risks shifting focus away from the accountability of developed nations whose historic emissions have driven climate impacts.
International Public vs. Private Climate Finance: Who Should Bear the Financial Burden?
A core debate at COP29 concerns the roles of international public and private finance. Developed nations, cautious about additional public spending, are pushing for increased international private capital in climate action. However, CPI data indicate that while private investments have accelerated renewable energy and electric mobility, these initiatives often require the stability of international public finance for long-term resilience and adaptation projects. Both international public and private finance are complementary, critical components of a balanced climate finance framework.
The Global Environment Facility (GEF) highlights that public finance brings higher accountability and stability, making it more suited for projects that cannot depend on market fluctuations. While private capital can support certain mitigation activities, developing countries argue that international public finance—particularly from multilateral and bilateral channels—must remain the bedrock of a comprehensive climate finance strategy. The Intergovernmental Panel on Climate Change (IPCC) reiterates that any new framework emerging from COP29 should prioritize this public finance foundation.
From Pledges to Action: COP29’s Potential Outcomes
As COP29 progresses, the urgent goal is to establish a realistic and verifiable climate finance target. The $1 trillion target, championed by numerous developing nations, aligns with the needs identified in UN and IEA reports. For countries like India, where climate impacts are already affecting vulnerable populations and ecosystems, COP29 is an opportunity to secure stable support for both mitigation and adaptation.
COP29 must address robust accountability measures, equitable financing structures, and emphasize international public finance to succeed. The International Institute for Environment and Development (IIED) suggests that a binding, transparent finance mechanism could redefine global climate policy.
The Road Ahead: Renewing Climate Commitments Beyond COP29
The outcomes of COP29 will influence the future of the Paris Agreement. As nations prepare to update their NDCs, decisions made in Baku will shape the ambition of these commitments. The Grantham Research Institute on Climate Change and the Environment stresses that renewed pledges to limit warming to 1.5°C require unprecedented financial backing.
If COP29 delivers on the proposed $1 trillion framework, it could establish a stable foundation for future climate action. Failure, however, risks undermining trust between developed and developing nations, potentially weakening the Paris Agreement. Ultimately, COP29’s legacy will depend on its ability to implement fair, effective climate finance mechanisms that respond to a rapidly changing world.
