The Institute for New Economic Thinking at the Oxford Martin School’s Post

The clock is starting to run down here at COP29 in Baku, and negotiators still seem some way from an agreement on the crucial new global climate finance goal. A key question is how much public finance developed-nation governments feel able to promise without triggering a political backlash at home. Their calculations will look very different depending on whether they view this money as charity, or as an investment driven by cold-blooded economic self-interest. They should see it largely as the latter, argues a new economic paper from Patrick Bolton of Imperial College London and Alissa M. Kleinnijenhuis of Cornell University, which is getting attention among delegates in Baku. If developed nations provide $2.8tn in grant-equivalent finance for emissions mitigation in developing countries over the next decade, they can expect economic benefits of at least $7.9tn: a return of 182 per cent. Crucially, this number represents only the economic benefits to the developed nations themselves (in the form of reduced climate change impacts), not to the world as a whole. More in today's FT Moral Money newsletter: https://lnkd.in/e5ixid9g

Interesting article Simon Mundy. Good job on sharing 👏🏾 This article is needed for those that require win:win proposals to act. However, I must add that there is absolutely nothing new about developed countries only doing things that are in their own interest. Labelling this as “selfish” and “cold-blooded” is misleading. The entire Bretton Woods system was set up to benefit the Western world after World War 2 and since COP processes are part of that world, these underlying beliefs and intentions are in operation. I see the Financial Times as part of the maintenance of this system because you don’t really give much prominence to scholars and thought leaders that question the very pillars on which the system stands. Covering each proposal for technical changes is not nearly enough. The reason there is a risk of political backlash is because there isn’t a wide acceptance of solidarity, interdependence and acknowledgement of the extractive nature of capitalism. Let’s talk if Moral Money wants to be part of change beyond technical papers.

The new finance package adopted also includes a fresh pledge by wealthy nations to provide $300 billion annually to poorer countries to help them address climate change challenges. The new deal may seem impressive as it triples the previous $100 billion goal set in 2009. However, it did not meet the hopes of negotiators and delegates from the Global South, especially those from Africa and similar regions, with the Nigerian delegation describing it as an “insult.” Within the past two weeks of negotiations, many voices echoed their dissatisfaction with the negotiation process, feeling that it was overshadowed by roadblocks and alleged sabotage from wealthier nations and even some developing countries. This year’s COP, dubbed the finance COP, began on 11 November and was expected to end on 22 November. However, the discussions were extended by over 33 hours, leaving some negotiators to stage a walkout. They expressed their dissatisfaction with weak commitments from wealthy nations. The final draft agreed on Sunday followed two dissatisfactory proposal drafts on Thursday and Friday, which prompted negotiators/delegates from the Global South to say, “A no deal is better than a deal that commits African countries to what is undeliverable without serious climate finance.”

We need to see more progress at COP29. It's also even clearer than ever that we need to fight against the fossil fuel lobby. Their "takeover" of COP is shameless, and I'd love to see the UK's new approach to climate leadership tackle this as well. This COP is centred on the debate about what rich countries are willing to pay to emerging markets to help finance the green transition, with negotiations centred around how to finance $1tn a year in climate finance (a significant increase from $100bn today, yet still a small fraction of the financing required to steer our course back to within our planetary boundaries). The truth is, this is not a "cost" to rich countries, but rather a benefit to the world. We know that financing the climate transition (even just out of the G7 or G20) will provide clear benefits in excess of their costs. Research from visiting professor Alissa Kleinnijenhuis at my own Cornell University calls this the "Great Carbon Arbitrage" - it's so painfully obvious that this will have a positive ROI. How can we shift the narrative from costs to benefits? I believe this is the key to unlocking the climate finance required to speed up our transition. We have less than 6 years to go at our current rate of CO2 emissions... More on Cornell's research in this area, presented at a recent conference: https://lnkd.in/eXjg4ySc

At the COP29 summit in Baku, Azerbaijan, countries agreed to a new climate finance target of $300 billion annually to assist developing nations in addressing climate change impacts. This commitment replaces the previous $100 billion per year goal set in 2009, which was met two years late in 2022 and is set to expire in 2025. Despite this increase, many developing countries have criticized the new target as insufficient. They argue that the pledged amount falls short of the estimated trillions needed to effectively combat climate change and adapt to its effects. The negotiations highlighted ongoing debates over the financial responsibilities of industrialized nations, whose historical fossil fuel consumption has significantly contributed to global greenhouse gas emissions. The agreement also includes provisions for the Loss and Damage Fund, established at COP27, which is now ready to receive contributions and is expected to begin financing projects in 2025. While the $300 billion annual commitment marks progress, it underscores the persistent challenges in mobilizing adequate climate finance to meet the needs of vulnerable nations. The outcome of COP29 reflects the complexities of international climate negotiations and the pressing need for more ambitious financial commitments to effectively address the global climate crisis.

COP29, day 267 (or has it only been 11?) 📄 Finance Text: According to the Presidency a new text will land by midday AZ time. If countries were as aligned on the COP outcome as they were in their statements of disappointment of the last iteration, we’d be out of here much sooner. Hopefully, the next drop will be in better shape. ☑️ What to look for when the new text arrives: (i) Numbers: (ii) Donor base: (iii) Adaptation guarantees: (iv) Review/ratchet mechanism: (v) Small islands/LDCs/Africa specific $$$: (vi) Quality of $$ (grants v loans): 🎤 “We are at a make-or-break-it moment. Historical polluters must be held accountable and pay up, not hide behind uncertainty. Climate finance is not climate investment—vulnerable communities' livelihoods are not a business case for private profit. Public finance must lead. Now is the time to get this done, we need a finance deal in Baku.“ ☝️ How about this? About 80 of the most vulnerable countries negotiating as AILAC, AGN, LDCS and AOSIS brought a proposal of a plan on Thursday evening. According to their ministers, the plan has been put to Global North countries in negotiations. When asked what quantum Panama’s climate envoy Juan Carlos Monterrey could accept, he replied: “That's like asking how many dead people we’re willing to have in our countries.” Their proposed plan includes: - landing a deal on grant-based public money in Baku - agreeing a roadmap to Belém on which sources to tap to bridge the gap to $1.3 trillion. - Considering options like redirecting fossil fuel subsidies, levies on shipping, aviation, and taxes on wealth and major polluters, and other sources of public finance towards climate action. 🎤 Developed countries still lack a credible plan to address the catastrophic impacts of their inaction and lack of financial support. The actual needs of developing countries are already $5-6 trillion by 2030. Taxes on fossil fuels, the super-rich and redirection of subsidies and military spending have to go to climate justice. 👀👀 The Saudis have been making rounds in international talks, blocking fossil fuel language, countering last years agreement on fossil fuel phase out. Heard in yesterday's talks: “The Arab Group will not accept any text that targets specific sectors, including fossil fuels.”.

An Article 6 deal has finally been clinched. See these posts for more details - https://lnkd.in/gq7sAkSH https://lnkd.in/gJZKthai "Countries at the COP29 summit in Baku adopted a US$300 billion (S$404 billion) global finance target to help poorer nations cope with the impacts of climate change, a deal roundly criticised by its intended recipients as woefully insufficient." "The agreement replaces rich countries’ previous commitment to provide US$100 billion per year in climate finance - a goal that was met two years late, in 2022, and which expires in 2025." "The summit cut to the heart of the debate over the financial responsibility of industrialized countries, whose historical use of fossil fuels has caused the bulk of greenhouse gas emissions, to compensate others for the damage wrought by climate change. It also laid bare the divisions between wealthy governments constrained by tight domestic budgets and developing nations reeling from the costs of worsening storms, floods and droughts. Countries also agreed on Nov 23 on rules for a global market to buy and sell carbon credits that proponents say could mobilise billions more dollars into new projects to help fight global warming, from reforestation to deployment of clean energy technologies. Countries are seeking financing to deliver on the Paris Agreement goal of limiting global temperature rise to 1.5 deg C above pre-industrial levels - beyond which catastrophic climate impacts could occur. The world is currently on track for as much as 3.1 deg C of warming by the end of this century, according to the 2024 UN Emissions Gap report, with global greenhouse gas emissions and fossil fuels use continuing to rise."

Last week’s COP29 in Baku disappointed many by managing to get only $300bn of annual climate funding for developing countries – far short of the $1-trillion those countries wanted, writes Stuart Theobald. The pitch was about need and moral obligation, rather than returns. The key development question, and route for developing countries to ensure resilience to climate change, is to ask how some of the global investment pool of about $175-trillion can be attracted on its own terms — as an opportunity to generate returns. If developing countries can offer that, they can regain control of their own policy decisions and seek a development path that deals with the world as it is, in which there is no such thing as a free lunch and development must be driven by domestic objectives. For the full article, visit https://lnkd.in/dFPzAPRi Stuart Theobald, CFA

COP29 Azerbaijan triples finance to developing countries‼️🌍, but puts high expectations on investors and corporates to finance shift to a low-carbon economy 👨💼👩🏽💼🍃🌱🏦📈💹 COP29 closes with a deal on 1,3 trillion USD annually to developing countries to shift to a low-carbon economy. But only $300bn of that will come in the form they are most in need of – grants and low-interest loans from public funds in the developed world. That means that the rest will have to come from other sources like investors and corporates. Feel free to reach out to our director Nick Laidlaw or myself if you would like to invest in our high-quality and high-integrity blue carbon projects. In Worldview International Foundation we finance all our activities with private funds, and we know it is possible. But in order to do that, regulations, especially for the carbon markets, have to come in place. Currently we are in a ‘perfect policy trap’ where e.g. several countries do not give land rights to implementers of carbon projects like us because the “policy is not yet ready”. We cannot wait for the prefect policy now, we need to act now. This is why the agreement on principles for international carbon markets at COP29 and the operationalization of them globally and nationally will be extremely important. Read text on carbon markets (Article 6) from COP29 here: https://lnkd.in/eRMM_u4j As a comparison: - 300 billion USD is around 4-5 months of military spending in the USA - The Norwegian Oil Fund (Norges Bank Investment Management) has a market value of around 1800 billion. https://lnkd.in/e5hYKGji

🌍 **Climate Action Needed Now!** 🌍 Being back from COP29 Azerbaijan it’s clear for me that we can do it! There is so many positiveness on the ground when talking to business and officials. While low-income countries need **at least $1 trillion a year** to combat climate change and while the world may seem fragmented, creative solutions exist! 📝 **What Can We Do?** - **changing incentives** to fund renewable energy initiatives. - **Tackle existing debt** to redirect funds to sustainable projects. - **collaboration in financial sector is needed for example with international development banks** to expedite support. We must showcase the *economic appeal* of sustainable solutions and close the credibility and viability gaps. It’s time for DEDICATION and ACTION! 📖 **Read this eye-opening article from the New York Times:** [https://lnkd.in/ewtcKQx7] Deutsche Bank Deutsche Bank Private Bank #ClimateChange #RenewableEnergy #SustainableDevelopment #GlobalAction #ClimateFinance #Economics #Finance