Climate Change Understanding Climate Finance and COP29 Outcomes

As global temperatures continue to rise, so does the urgency for substantial and sustained finance to mitigate greenhouse gas emissions and adapt to climate impacts worldwide. Despite outstanding needs—estimated in the trillions per year just for developing countries—the landscape for meeting climate finance goals remains critically fraught. Recent outcomes of the Climate Conference in Baku evidenced just how difficult it will be for developing countries to get what they need to tackle the climate crisis.  

While COP29 negotiators tripled financial support from $100 billion to $300 billion per year from the developed countries by 2035, the outcome still fell far short of needs and asks. While these figures are significant, they are only part of the story and arguably not the most important part.

This outcome is not a surprise. Knowing this gap would not be closed, Perry World House’s (PWH) Michael Weisberg has been leading a research agenda at Penn to help country parties, as well as the private sector, think through how to bridge the financial chasm and shake loose the real money needed to finance climate action globally, and to meet the full ambitions of the Paris Agreement.

Weisberg began setting a course to help address this discord in the fall of 2023, when he partnered with colleagues at the Wharton School to host a convening that dissected the challenges at hand. Among them were the fact that developed countries had not yet met their commitment to jointly mobilize $100 billion annually by 2020 for climate action in developing countries; that climate finance skewed some 80 percent toward mitigation activities; and that the resources that were available, besides being inadequate, were hard to access and often came in the form of loans that squeezed developing countries fiscal space to meet their development goals and respond to climate driven emergencies. That year at COP27, Weisberg worked closely with Maldivian ministers and negotiators to help secure a decision to launch a loss and damage fund for countries hardest hit by climate impacts.  

A year later, at COP28 in Dubai, the fund was operationalized, the World Bank agreed to host it, and it was capitalized, in part by the UAE. This opened the possibility of more non-Annex II (developing) countries financing climate action. This was an important signal, because at COP29 in Baku, parties would negotiate a new collective quantified goal (NCQG)—well beyond the initial $100 billion that was to flow from developed to developing countries to finance climate action.

Ahead of COP29, where developed countries were very unlikely to meet demands or needs tabled by developing countries, Weisberg put together a work program. He hosted high-level convenings to develop and socialize ideas at the margins of the UN General Assembly meeting and the Annual Meeting of the World Bank Group. Just before Baku, he convened a high-level group of academics, practitioners and policymakers from some 16 countries—Maldives, Egypt, Fiji, Jordan, Barbados, Peru, Ecuador, Nepal, Guatemala, and India among them—to develop a white paper, titled Innovative Finance to Ensure Stability in the Face of Adverse Climate Change Impacts.  Written by former PWH Postdoc Michael Franczak and PWH Non-Resident Senior Advisor Koko Warner, and published just as climate negotiators were arriving at COP29, the paper gave stakeholders an understanding of the financial tools available to them.

On the ground at COP29, as a delegate from Fiji, Weisberg used the outcomes from work done at PWH to help country delegations understand both trade-offs and the architecture necessary to resource climate action. With the private sector expected to be relied on to generate a large portion of revenues needed, and with public budgets for many countries strapped, the whitepaper informs ways to close the ‘trillion dollar’ shortfall so countries can withstand and eventually overcome the climate crisis. 

One of the most significant aspects of the COP29 agreement is the increased attention to how climate finance will be delivered. This includes, first, reforming global financial institutions. Key paragraphs in the decision call for changes to multilateral development banks like the World Bank, aiming to unlock and direct resources more efficiently. It also calls for removing disenablers and providing easier access to funds. While not headline-grabbing, commitments to streamline finance access address a long-standing grievance of developing countries. Bureaucratic hurdles and reporting requirements have often delayed or diluted the impact of funds, making this development potentially one of the most important outcomes of COP29.

Weisberg, for his part, remains optimistic about the impact of PWH’s thought leadership in the climate space. “A bright spot at COP29 has been to see some of the themes that Perry World House and our partners at the International Peace Institute have spent the semester developing appear in the draft finance text,” he said from Baku. It wasn’t the outcome everyone wanted, but it does show that finance will be flowing to climate action in the coming decade. We have to keep working.