COP29: The Economic Case for a New Common Quantified Goal of Climate Finance (NCQG) at Scale

Abstract:

Global emissions are on the wrong trajectory, continuing to rise when they urgently need to decline to meet the Paris Agreement’s goals. Achieving these targets requires limiting global warming to well below 2 °C above pre-industrial levels, with efforts to cap the increase at 1.5 °C. The best available science makes the imperative of limiting global warming to 1.5 °C clear: every extra 0.1 °C of warming significantly increases severe climate risks. Meanwhile the remaining carbon budget for 1.5 °C (50 percent) is about 200 gigaton. At the current emission rate of 41.6 gigatonnes of CO2 emissions, the carbon budget will be exhausted in about 5 years. Limiting global warming to 1.5 °C requires speed and scale in emission reductions. While carbon taxation could be a potent tool to achieve this, its incomplete adoption implies that other approaches that could deliver speed and scale must fill the gap. Climate finance is the main candidate.

Uniquely, at this year’s COP, COP29, Parties to the Paris Agreement will agree on a New Common Quantified Goal of Climate Finance (NCQG), lifting the annual climate finance provided by developed to developing countries from a floor of $100 billion. The $100 billion was always recognized as a political figure, rather than a true reflection of the financial needs of developing countries for mitigation, adaptation, and addressing loss and damage. Without a high enough NCQG, reflecting developing countries’ needs, it is impossible for them to update their Nationally Determined Contributions (NDCs) in 2025 in line with limiting global warming to 1.5 °C. Current NDCs imply 2.8 °C of warming, and the next update beyond 2025 is only in 2030, when we will have run out of the remaining carbon budget based on the current emission trajectory.