Azerbaijan, the host of this year's UN climate conference, on Monday called on all countries to urgently resolve outstanding issues to agree on a new climate finance goal which the UN climate chief said is entirely in the self-interest of every nation.

The negotiating priority of COP29 being held in Baku, the capital of Azerbaijan, is the new climate finance package, also called the New Collective Quantified Goal. Historic polluters must deliver a package that is ambitious, predictable, time-bound, reliable and delivered as grants not loans for Global South countries.

"If at least two-thirds of the world's nations cannot afford to cut emissions quickly, then every nation pays a brutal price.  If nations can’t build resilience into supply chains, the entire global economy will be brought to its knees. No country is immune. So, let's dispense with any idea that climate finance is charity. An ambitious new climate finance goal is entirely in the self-interest of every nation," UN climate change Executive Secretary Simon Stiell said during the opening ceremony.

He said just agreeing to a new climate finance goal is not enough and countries must work harder to reform the global financial system.

Developing countries are calling for a reform of the global financial system to make climate funding more accessible, affordable, and fair. The current system often requires them to take on debt or pay high interest rates for climate projects, which strains their economies.    COP29 President Mukhtar Babayev said current policies are leading the world toward 3 degrees Celsius of warming, which would be catastrophic for billions of people.

He said the COP29 Presidency's top priority is to find consensus on a fair and ambitious New Collective Quantified Goal (NCQG), or new climate finance goal, to replace the previous goal of USD 100 billion per year agreed in 2009.

Babayev emphasised that the NCQG must be effective and adequate to address the scale and urgency of the problem.

Negotiations have seen some progress but a lot of work is left, with just 12 days to land the deal. Countries now urgently need to finalize the elements, resolve our differences on contributors and quantum and set the new goal, he said.

Babayev acknowledged that the negotiations are complex and challenging, with both political and financial constraints.

He said while the numbers may sound large, they pale in comparison to the cost of inaction. "Nothing has a greater impact on the security, prosperity, and well-being of all nations than climate change," he said.

Negotiations over the new climate finance goal in recent months have revealed deep divides, with countries disagreeing on almost every element of the NCQG, including the amount of funding needed, who should contribute, the types of projects eligible, and the time period it should cover.

Developing countries argue that unlike the USD 100 billion climate finance goal agreed upon in 2009, the NCQG must address their “needs and priorities".

Estimates indicate that developing and poorer countries will require trillions of dollars in the coming years to adapt to and combat climate change. Among Global South negotiators, the Like-Minded Developing Countries (LMDC) group has suggested that USD 1 trillion per year is needed, the Arab Group has called for USD 1.1 trillion, the African Group USD 1.3 trillion, India USD 1 trillion, and Pakistan USD 2 trillion.

According to the UNFCCC Standing Committee on Finance's Second Needs Determination Report, between USD 5.01 trillion and USD 6.85 trillion will be needed by 2030 to support developing nations in achieving their Nationally Determined Contributions (NDCs) to meet the Paris Agreement goals, including limiting warming to 1.5 degrees Celsius.

However, this is not a full estimate, as only 98 of the 142 countries that submitted their NDCs provided ‘costed’ needs.

According to the United Nations Framework Convention on Climate Change (UNFCCC), adopted in 1992, high-income industrialised nations (referred to as Annex II countries) are responsible for providing finance and technology to help developing countries address and adapt to climate change. These countries include the US, the UK, Canada, Japan, Australia, New Zealand, and EU member states such as Germany and France.

Some developed countries, led by the EU and the US, argue that the global economic landscape has shifted significantly since 1992. They suggest that nations that have become wealthier since then, like China and some Gulf states, should also contribute to the new climate finance goal.

Developing countries view this as an attempt to shift responsibility from those who have historically benefited from industrialisation and contributed the most to greenhouse gas emissions. They argue that expecting them to contribute, especially when many are still grappling with poverty and inadequate infrastructure amid worsening climate impacts, undermines the principle of equity.

Developing countries also insist that the new climate finance goal, or NCQG, should focus on public, grant-based, and concessional finance, as these forms of funding are less burdensome for nations already facing financial challenges.

Public finance ensures a stable source of support, while grants and concessional loans (with very low or zero interest) are easier for developing countries to manage. This approach helps them avoid piling on debt and allows them to focus on urgent climate action, like building infrastructure to adapt to climate impacts, without jeopardising their economic stability.

This year’s annual climate conference is being held in Baku from November 11-22.

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