International climate talks this year are expected to be headlined by fraught negotiations over how Canada and other rich countries, which have contributed a disproportionate share of global-warming emissions, can financially compensate other countries in their fight to address climate change.
There are several pressing questions for negotiators: How much should these rich countries pay? Which countries will have to contribute? How should you save money?
The answers may determine how much money developing countries can get for everything from renewable energy projects to wetland conservation.
Failure to achieve a new target at annual UN climate talks could undermine confidence in major international agreements and deal a blow to efforts to limit global warming, observers say.
“It’s too risky,” said Bill Hare, CEO of Climate Analytics, a Berlin-based climate think tank.
Here’s what you need to know about climate finance negotiations — and Canada’s role in them — as the 29th annual United Nations Climate Change Conference, or COP29, gets underway in Baku, Azerbaijan’s capital.
The UN climate talks have recognized that rich and historically high-emitting countries bear greater responsibility for solving climate change.
To put it in perspective, Canada and 22 other high-income countries — including the United States, Japan, Australia and Western European countries — are responsible for about half of estimated global emissions since the mid-19th century, despite offsetting about 12 per cent of the population. On a per capita basis, Canada is among the most polluting countries.
Canada and those 22 other rich countries agreed in 2009 to mobilize $100 billion annually by 2020 to support other countries in mitigating their emissions and protecting their citizens from the worst impacts of climate change. This funding comes from public and private financing, such as government loans and grants or private sector investments in emerging green technology sectors.
For Canada, this has led to contributions ranging from $225,000 to solar power plants in Samoa to $240 million in grants to the world’s largest international climate fund. The Green Climate Fund has supported projects to expand Jamaica’s electric bus fleet and build one of the world’s largest solar projects in Egypt.
However, the international goal of raising $100 billion was only achieved for the first time in 2022, two years later. In some cases, developing countries often struggle to access these funds, said Sumin Han, a climate finance policy analyst at the Canadian Climate Action Network.
“This has really…broken trust between the global North and South,” Han said.
Against this background, negotiating an ambitious and fair new international agreement on climate finance is a “moral imperative,” she said.
Why is climate finance expected to dominate these conversations?
The countries agreed to reach a new collective target by 2025 to replace the $100 billion mark. As the deadline approaches, negotiators are expected to hammer out the details of the new pledge at COP29.
Get daily national news
Get the day’s top political, economic and current affairs news and headlines, delivered to your inbox once a day.
It coincides with another deadline next year for countries to release their updated climate plans – setting out how they plan to cut emissions by 2035 in a bid to limit global warming to 1.5 degrees, as set out in the agreement reached in Paris at COP21.
Setting a realistic climate financing target will be key to making these plans a reality, said Catherine McKenna, a former Canadian environment minister.
“Emissions have to go down on a large scale, money has to shift from fossil fuels to clean (energy) on a large scale, and then you have to think about the people,” McKenna said.
“And you can’t do any of those three things without funding.”
How much does Canada owe?
Under the current target, in 2021 Canada doubled its international climate finance pledge to $5.3 billion over five years. A coalition of Canadian aid organizations has pushed for the government to increase that number at least three times, to $15.9 billion, for the next five-year period ending in 2031.
Naomi Johnson, co-chair of the Canadian Alliance on Climate Change and Development, or C4D, called it a “down payment.”
“There has to be much more going forward to meet climate targets and meet our commitments globally,” Johnson said.
It will represent only a small part of the larger goal that will be negotiated in the talks. Several independent assessments indicate that developing countries may need more than $1 trillion to achieve their climate goals.
The United Nations Trade and Development Organization, a United Nations institution that has proposed an annual target of $1.46 trillion by 2030, noted that this amount would be roughly equal to what rich countries spend on their military budgets and less than fossil fuel subsidies combined.
Canada, along with other rich countries, has not come forward with a dollar value proposal.
Environment and Climate Change Minister Stephen Guilbeault noted that it may not be a single amount, reflecting layers of public and private sector financing, along with multilateral commitments from institutions such as the World Bank.
However, some observers say a potential barrier to knowing how much debt rich countries owe may be who should pay.
“A new climate finance pledge will be a very messy negotiation,” said Catherine Abreu, director of the International Climate Policy Center and a leading Canadian climate policy adviser.
The current list of 23 contributing countries is more than 30 years old. Richer countries, including Canada, are now suggesting that China and some Gulf states, for example, should be required to contribute to the new climate finance target because their emissions have increased dramatically as their economies have grown.
However, there is concern that some rich countries may use these arguments in a bad faith attempt to evade their responsibilities after years of falling short of their climate finance targets, Abreu said.
“Canada will also have to be able to play a constructive role in bridging these divisions,” she added.
What is Canada’s role in climate finance talks?
Canada has played a central role for years in international climate finance talks, Guilbault says.
“I think people see Canada as a reliable partner and bridge builder in these negotiations to help countries find solutions to these difficult discussions, and I would certainly be happy to try to play that role again in Baku this year,” he said recently. interview.
Along with Germany, Canada has been asked to lead efforts to persuade rich countries to meet the previous target of $100 billion.
More recently, Canada and Switzerland were the first countries to establish specific eligibility criteria to expand the contributor base to include new countries. Canada’s proposal would add Russia, Saudi Arabia and China to the list.
Hahn, a climate finance policy analyst at the Canadian Climate Action Network, said Canada has already shown leadership in dealing with this “complex issue.” Now, Canada must ensure that negotiations over who pays do not impede the adoption of a new target.
“It needs to intensify consensus-building efforts among developed countries,” Han said.
Where should the money go and how should it be delivered?
Johnson, co-chair of C4D, suggested that how countries achieve the new climate finance target may be more important than the dollar figure. The coalition, along with developing countries, is pushing for a greater share of climate financing in the form of government grants, rather than loans that could push developing countries further into debt.
An analysis by the International Institute for Environment and Development found that small island developing states and the group of least developed countries spent about $59 billion to repay their debt in 2022, compared to the $28 billion they received in climate finance. The analysis indicated that half of this amount, amounting to $28 billion, was provided in the form of loans.
Johnson said it’s “appalling” that Canada is one of the largest loan providers in its climate finance commitments.
Guilbault said Canada is making progress and aims for an equal split between loans and grants in climate finance commitments, which is still short of the 60-40 split of preferred loans called for by the coalition.
“I hope we can reach 50-50 in the near future,” he added.
Observers have also pushed countries to better divide funds for projects that help countries reduce emissions and those that help them adapt to the impacts of climate change.
Further complicating these discussions is the question of whether the target should also include funds to help pay for the losses and damage developing countries are already facing due to climate change.
While last year’s talks launched the Loss and Damage Fund, developing countries expressed concerns that if it was not included in the new target, it might suffer from underfunding.
Canada, an early supporter of the fund with a $16 million pledge, wants to keep it separate because of concerns it could hinder negotiations.
The negotiations are set to address several other major issues, including how to transparently track funds and how to divide contributions between the public and private sectors.
