National Council of Applied Economic Research
Opinion: Amit Mitra and Souryabrata Mohapatra.
As COP29 concludes in Baku, the world stands at a critical juncture in addressing the escalating climate crisis. Activist Greta Thunberg’s sharp critique-branding the summit’s draft text as “a complete disaster”-highlights the frustration over unmet promises and insufficient ambition. The Global South’s urgent demand for $1.3 trillion annually by 2035 has been countered by a mere $250 billion proposal, exposing a glaring gap between rhetoric and action. With climate-related disasters in 2024 alone causing over $520 billion in damages and displacing 40 million people, the stakes are higher than ever. The question remains: can global leadership rise to meet this challenge?
The recently concluded G20 Summit in Rio de Janeiro was expected to galvanize global leaders into action on climate finance. Instead, it delivered vague commitments and a rehashed promise to finalize the New Collective Quantified Goal (NCQG) by 2025. The NCQG, meant to replace the outdated $100 billion annual target, has yet to bridge the growing gap between rhetoric and reality. For instance, while developed nations agreed to provide $250 billion by 2035, this figure barely scratches the surface of the $6.8 trillion required annually to meet global climate goals.
India, a key player in the G20, requires $250 billion annually until 2047 to achieve its net-zero targets. However, mechanisms for mobilizing such funding remain conspicuously absent. The G20’s failure to provide actionable solutions leaves countries like India vulnerable to the compounding effects of climate disasters, which caused economic losses exceeding ?1.5 lakh crore in 2024.
Developing countries have long argued for equitable climate finance to combat the disproportionate impacts they face. Bangladesh, for instance, loses nearly 1% of its GDP annually to climate-induced disasters. Despite these vulnerabilities, the OECD reported that only $150 billion in climate finance was mobilized in 2022-less than 2.5% of what is required annually by 2030. The $250 billion annual commitment proposed at COP29 is a far cry from addressing the systemic inequalities embedded in climate finance negotiations.
The draft text’s suggestion that countries like China and Saudi Arabia contribute additional funds adds another layer of complexity. As “developing nations” under UN climate conventions, they have resisted obligations to finance adaptation efforts in other countries. This contentious issue, coupled with the ambiguous definitions of what constitutes “climate finance” (grants, loans, or private investments), risks undermining the very solidarity required to combat climate change effectively.
Compounding the uncertainties of COP29 is the spectre of Donald Trump’s re-election as U.S. President. His previous administration’s withdrawal from the Paris Agreement and prioritization of fossil fuel extraction set a dangerous precedent. Should Trump resume office, global climate diplomacy could suffer irreparable setbacks, jeopardizing years of progress. As the U.S. accounts for over 20% of historical emissions, its leadership-or lack thereof-will significantly influence climate finance negotiations.
The potential rollback of U.S. commitments threatens to derail the fragile consensus reached at COP29. Already, the U.S.’s current contributions to climate finance are insufficient to meet global demands, and Trump’s policies could further erode trust among nations. In this context, mobilizing the $1.3 trillion annual target advocated by the Global South appears increasingly unlikely.
The stakes could not be higher. A recent study projects that unchecked climate change could slash global GDP by up to 10% by 2050, equating to $178 trillion in damages. For the Asia-Pacific region, economic losses could reach $3.2 trillion annually by mid-century without robust mitigation efforts. Even developed nations are not immune: the U.S. faces $20 billion in annual wildfire damages, while Europe’s escalating heatwaves could cost €200 billion annually by 2050.
For India, the risks are even more immediate. With extreme weather events occurring on 342 days in 2024 alone, the country faces an annual GDP loss of 2-2.5% by 2050 if global temperatures exceed 1.5°C. These numbers underscore the urgent need for binding commitments and effective mechanisms to mobilize climate finance at scale.
COP29’s inability to address the core issues of climate finance represents a critical failure of global leadership. The Warsaw International Mechanism on Loss and Damage, intended to support nations facing irreversible impacts, remains underfunded and inadequately operationalized. Similarly, progress on Article 6 of the Paris Agreement, which could enable global carbon markets, has stalled. Experts estimate that a robust Article 6 framework could reduce global emissions by 5 gigatons annually by 2030, yet this potential remains unrealized.
The summit’s proposed $250 billion annual target, while a step forward, lacks the scale and urgency needed to meet the climate challenge. Moreover, the absence of clear accountability mechanisms or enforceable timelines risks perpetuating the cycle of broken promises that has plagued previous negotiations.
As COP29 wraps up, it leaves behind a troubling legacy of unresolved ambitions. The promised $1.3 trillion in climate finance remains elusive, with a fragmented consensus revealing more divides than unity. While G20 nations control 85% of global GDP and three-quarters of emissions, their failure to deliver actionable solutions underscores a troubling inertia. This summit could have marked a turning point; instead, it serves as a cautionary tale of political gridlock in the face of an escalating crisis. The cost of inaction grows steeper each day, and the question remains: how much longer can the world afford to wait?
The writers are associated with National Council for Applied Economic Research, New Delhi. Views are personal.