Economics Environment & Biodiversity

Climate Financing: A New Collective Quantified Goal (NCQG)

  • At the recently finished Bonn climate summit in Germany, the New Collective Quantified Goal (NCQG) emerged as an important commitment in global climate financing.
  • The conference, which serves as a precursor to the next Conference of Parties-28 (COP28) in Dubai, has shown substantial financial shortfalls for climate action.

What exactly is the New Collective Quantified Goal (NCQG)?

  • At the 2009 COP, wealthier countries pledged $100 billion each year to developing countries until 2020.
  • Climate change mitigation costs are estimated to be in the billions, if not trillions, of dollars.
  • The 2015 Paris Climate Agreement emphasised the importance of establishing an NCQG for climate funding by 2025.
  • The NCGQ, dubbed the “most important climate goal,” seeks to account for the needs and priorities of developing countries.
  • It should take into account scientific data, respond to rising funding for Loss and Damage, and involve developed countries raising their commitments.

NCQG is required

  • Out of the planned $100 billion each year, developed countries contributed $83.3 billion in 2020.
  • According to Oxfam’s study, these estimates may be overstated by up to 225% due to inaccurate and dishonest reporting.
  • The 2009 aim of $100 billion lacked clarity in terms of the concept and source of ‘climate finance.’

Challenges and Concerns

(A) Accessibility and Sustainability of Climate Finance

  • While climate finance monies have expanded, they are still mostly inaccessible to developing countries.
  • The majority of climate money is in the form of loans and equity, putting developing countries in a crippling debt problem.
  • Only about 5% of climate money is provided as grants, significantly limiting the capacity of developing countries.

(B) Developed Countries’ Perspective

  • Developed countries say that the NCQG should be viewed as a global aim shared by all countries.
  • According to this viewpoint, developing countries bear the weight of mitigation, adaptation, and loss and damage.
  • Experts are concerned that poor countries will be unable to pay the costs while simultaneously assuring long-term infrastructure development.
  • As a vital component of climate finance, developed countries urge for the mobilisation of private-sector investments and loans.

Future plans

  • Countries have until 2024 to reach an agreement on the NCQG.
  • While no official figures are available, estimations show that transitioning to a low-carbon economy will necessitate annual investments ranging from $4 trillion to $6 trillion.
  • Instead of a single aggregate figure, some advocate defining various targets or sub-goals for emphasis areas such as mitigation, adaptation, and loss and damage.
  • The emphasis should be on increasing concessional finance, reducing debt, and transforming the NCQG into an equitable, people-led transition process.
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