The COP29 climate summit in Baku, Azerbaijan, was expected to be a platform for the unveiling of one of the presidency's flagship initiatives – a climate fund designed primarily for developing countries. However, the highly anticipated Climate Finance Action Fund (CFAF) has been temporarily sidelined, as the presidency grapples with the complexities of establishing a new financial mechanism amidst the ongoing negotiations over the post-2025 climate finance goal.

Unlocking Climate Funding: Azerbaijan's Ambitious Vision Faces Roadblocks

The Unveiling of the Climate Finance Action Fund

At the outset of COP29, the Azerbaijan presidency was poised to introduce the CFAF, a novel initiative that aimed to channel funding from fossil fuel-producing countries and companies to support developing nations in their transition to clean energy, improve energy efficiency, and bolster climate resilience. The fund was envisioned as a "significant step" towards addressing the pressing needs of vulnerable communities, as expressed by COP president Mukhtar Babayev earlier this year.

Postponement and Concerns

However, when the much-anticipated "finance day" arrived, the CFAF all but disappeared from the agenda. The high-level event to launch the financial mechanism was scrapped, and the presidency decided to put the idea on the backburner. According to the COP29 lead negotiator, Yalchin Rafiyev, the presidency has established a working group to refine the concept and make it "workable and acceptable" for potential donor countries.The decision to temporarily deprioritize the CFAF was influenced by several factors, as revealed by a COP29 source who spoke to Climate Home. Developing countries were particularly concerned that contributing to Azerbaijan's fund could be seen as a precedent that could be used to push them to contribute to the post-2025 climate finance goal (NCQG), the primary outcome of this year's summit. Additionally, developed countries might have counted any contributions to the CFAF towards their existing climate finance commitments, further complicating the negotiations.

Reactions and Concerns

Climate campaigners have reacted positively to the postponement of the CFAF, with Andreas Sieber of 350.org describing it as a "distraction and a greenwashing fund." The concern is that the fund could be used by fossil fuel producers to deflect responsibility for the climate crisis they have primarily contributed to, rather than addressing the need for adequate reparations.The COP29 presidency, however, remains committed to the CFAF, stating that it will go ahead soon. The fund aims to raise at least $1 billion, with a structure that would channel the majority of its funding at commercial lending rates, and only a fifth of its revenues being reinvested into a facility providing "highly concessional and grant-based support" to vulnerable countries.

Navigating the Post-2025 Climate Finance Goal

Alongside the CFAF, the COP29 presidency has also been expected to announce a new national climate plan, known as a nationally determined contribution (NDC), but this has yet to materialize.The headline outcome of COP29, the new post-2025 climate finance goal (NCQG), has also faced significant challenges. After pre-COP talks had streamlined the negotiation text, negotiators in Baku asked the co-chairs to reintroduce all the options, resulting in a 34-page document. The co-chairs have been tasked with further consolidation, focusing on technical issues like transparency and reporting, in preparation for the arrival of government ministers on Monday.

Experts Weigh In: Mobilizing $1 Trillion Annually for Climate Action

In a timely move, a new UN-commissioned report by top economists Nicholas Stern, Vera Songwe, and Amar Bhattacharya was released in Baku. The report calls for a focus on mobilizing $1 trillion a year by 2030 to developing countries, excluding China, and increasing this to $1.3 trillion by 2035.To demonstrate their commitment, the authors suggest that "advanced economies" need to triple their existing $100 billion climate finance commitment to $300 billion. The remaining funds should come primarily from the private sector and multilateral development banks.The report also highlights the potential for enhanced cooperation and financing from leading developing countries, a point that has been a source of contention in the negotiations, as developed nations have attempted to widen the contributor base to include countries like China and the Gulf states.As the COP29 summit continues, the complexities surrounding climate finance remain at the forefront of the discussions. The postponement of Azerbaijan's CFAF and the slow progress on the post-2025 finance goal underscore the challenges in aligning the diverse interests and priorities of the global community in the fight against climate change.