BAKU – Just as a simple lever can move heavy objects, rich nations are hoping another kind of leverage — the financial sort — can help them come up with the money that poorer nations need to cope with climate change.
It involves a complex package of grants, loans and private investment, and it's becoming the major currency at annual United Nations climate talks known as COP29.
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But poorer nations worry they’ll get the short end of the lever: not much money and plenty of debt.
Meanwhile, half a world away in Brazil, leaders of the 20 most powerful economies issued a statement that among other things gave support to strong financial aid for climate for poor nations and the use of leverage financial mechanisms. That was cheered by climate analysts and advocates.
Money is the key issue in Baku, where negotiators are working on a new amount of cash for developing nations to transition to clean energy, adapt to climate change and deal with weather disasters. It’ll replace the current goal of $100 billion annually — a goal set in 2009.
Looking for the first domino to fall
Negotiators are fighting over three big parts of the issue: How big the numbers are, how much is grants or loans, and who pays. The how big question is the toughest to negotiate and will likely be resolved only after the first two are solved, COP29 lead negotiator Yalchin Rafiyev told The Associated Press in an interview Tuesday.
“There are interlinkages of the elements. That’s why having one of them agreed could unlock the other one,” Rafiyev said.
It's like the first domino falling leading to another, he said.
In these negotiations, rich potential donor nations have been reluctant to offer a starting figure to negotiate from. So Rafiyev said the conference presidency is putting the pressure on them, telling “the developed countries that the figure should be fair and ambitious, corresponding to the needs and priorities of the world.”
India’s junior environment minister Kirti Vardhan Singh, who is at the Baku talks, said that “the global south are bearing a huge financial burden.”
“This is severely limiting our capacity to meet our developmental needs,” he said.
Money could be in the form of loans, grants or private investment
Experts put the number needed for climate finance at $1 trillion, while developing nations have said they'll need $1.3 trillion. But negotiators are talking about different types of money as well as amounts.
So far rich nations have not quite offered a number for the core of money they could provide. But the European Union is expected to finally do that and it will likely be in the $200 to $300 billion a year range, Linda Kalcher, executive director of the think tank Strategic Perspectives, said Tuesday. It might be even as much as four times the original $100 billion, said Luca Bergamaschi, co-founding director of the Italian ECCO think tank.
But there's a big difference between $200 billion and $1.3 trillion. That can be bridged with “the power of leverage," said Avinash Persaud, climate adviser for the Inter-American Development Bank.
When a country gives a multilateral development bank like his $1, it could be used with loans and private investment to get as much as $16 in spending for transitioning away from dirty energy, Persaud said. When it comes to spending to adapt to climate change, the bang for the buck, is a bit less, about $6 for every dollar, he said.
But when it comes to compensating poor nations already damaged by climate change — such as Caribbean nations devastated by repeated hurricanes — leverage doesn't work because there's no investment and loans. That's where straight-out grants could help, Persaud said.
Whatever the form of the finance, Ireland’s environment minister Eamon Ryan said it would be “unforgivable” for developed countries to walk away from negotiations in without making a firm commitment toward developing ones.
“We have to make an agreement here,” he said. "We do have to provide the finance, particularly for the developing countries, and to give confidence that they will not be excluded, that they will be center stage.”
For developing nations, the talk of loans brings fear of debt
If climate finance comes mostly in the form of loans, it means more debt for nations that are already drowning in it, said Michai Robertson, climate finance negotiator for the Alliance of Small Island States.
“All of these things are just nice ways of saying more debt,” Robertson said.
His organization argues that most of the $1.3 trillion it seeks should be in grants and very low-interest and long-term loans that are easier to pay back. Only about $400 billion should be in leveraged loans, Robertson said.
Leverage from loans “will be a critical part of the solution,” said United Nations Environment Programme Director Inger Andersen. But so must grants and so must debt relief, she added.
Rohey John, Gambia's environment minister, said the absence of a financial commitment from rich nations suggests “they are not interested in the development of the rest of the mankind.”
“Each and every day we wake up to a crisis that will wipe out a whole community or even a whole country, to a crime that we never committed," she said.
Ministers giving their national statements also came out with fighting words.
“Our children, our elderly, our women, our girls, our Indigenous people, our youth deserve better,” said St. Kitts and Nevis Climate Minister Joyelle Clarke. “Let us be seized by a desire for better."
Cuban environment minister Armando Rodriguez Batista urged countries not to “favor death over life.”
Praise and worry about G20 statement
The G20's mention of the need for strong climate finance and especially the replenishment of the International Development Association gives a boost to negotiators in Baku, ECCO's Bergamaschi said.
“G20 Leaders have sent a clear message to their negotiators at COP29: do not leave Baku without a successful new finance goal,” United Nations climate secretary Simon Stiell said. “This is an essential signal, in a world plagued by debt crises and spiraling climate impacts, wrecking lives, slamming supply chains and fanning inflation in every economy.”
Analysts and activists said they were also worried because the G20 statement did not repeat the call for a transition away from fossil fuels, a hard-fought concession at last year's climate talks.
Veteran climate talks analyst Alden Meyer of the European think tank E3G said the watering down of the G20 statement on fossil fuel transition is because of pressure by Russia and Saudi Arabia. He said it is "just the latest reflection of the Saudi wrecking ball strategy" at climate meetings.
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