Climate finance takes center stage at COP29 in Baku, Azerbaijan. The escalating climate crisis has led the UN to estimate that developing countries need approximately USD 6 trillion by 2030 to enact their climate change action plans. The talks here revolve around the New Collective Quantified Goal on Climate Finance (NCQG), building on a 2009 commitment by developed countries. Key issues under discussion include funding targets, developing countries' priorities, and financing mechanisms.

Unraveling China's Impact on Global Climate Finance

Climate Finance at COP29

Climate finance is high on the agenda at COP29 in Baku. The escalating climate crisis has led to a significant need for funds in developing countries. The NCQG is a critical measure of the conference's success, with developed countries aiming to provide USD 100 billion annually by 2020. Currently, there is a gap between the targeted and actual funds received. China is emerging as an important source of funding, having contributed over USD 30 billion since the Belt and Road Initiative.

Recent studies by thinktanks show that China's contributions put it on par with the United Kingdom in terms of climate finance. The Belt and Road Initiative is a global infrastructure development strategy that includes various projects. China has provided and mobilized over CNY 177 billion in project funding since 2016 to support other developing countries in addressing climate change.

What is Climate Finance?

There is no unified definition of climate finance globally. The Organisation for Economic Co-operation and Development defines it as including bilateral and multilateral public finance, climate-related export credits, and private finance mobilized. China's climate finance mainly goes to developing countries in Asia and Africa, with about half invested in the energy sector.

China channels its climate financing through bilateral, multilateral, and export credit mechanisms. Only 3% of its overseas climate investment is in the form of grants, lower than developed countries. Beata Cichocka emphasizes the importance of grant-equivalent support.

Beyond NCQG: Other Dialogues?

During COP29 negotiations, China, along with the Group of 77, calls for increased financial commitments from developed countries. China has committed to supporting the NCQG but expresses concern over expanding the contributor pool while downplaying their own obligations.

China's position in NCQG negotiations is similar to its stance on the Loss and Damage Fund. It helps other developing countries through South-South Cooperation and has signed many memorandums of understanding. China's existing and voluntary contributions should be acknowledged.

Funding Targets: Inflation Adjustments

NCQG's funding targets are under negotiation. Developing countries advocate for USD 1.3 trillion annually, while developed countries prefer maintaining the "at least USD 100 billion annually" phrase. Teng Fei argues that considering inflation, the target is actually declining.

Based on the US dollar inflation rate, developed countries need to provide more funds. Liu Shuang believes the NCQG framework needs reform and a multilayered funding support mechanism based on developing countries' needs.

The Global Challenge: Reporting and Regulation

The NCQG also includes reporting, implementation, and regulation mechanisms. China lacks a tracking and disclosure system for climate finance. There are challenges in accounting for funds from various channels.

Developed countries are more experienced in reporting. We could learn from the Paris Agreement's transparency reports mechanism. A cross-government and financial-sector reporting mechanism led by the Ministry of Ecology and Environment would be beneficial.

Closing the Domestic Gap

China is facing a huge funding gap to address climate change due to frequent extreme weather events. Research on adaptation funds is limited.

Shao Danqing suggests using blended financing mechanisms to leverage public funds and attract private sector investment. The People's Bank of China is developing a national transition finance standard to support carbon-intensive sectors' decarbonization.