Private sector enterprises must raise money for the developing world to invest in a low-carbon economy or face the consequences of climate collapse. This was stated by the president of the COP29 UN climate summit, Mukhtar Babaev, reports Guardian.
"The burden cannot fall entirely on government budgets. Unlocking private financing for the transition of developing countries has long been an ambition of the climate talks. There is no climate solution without the private sector. The world needs more funds, and it needs them faster. History shows that we can mobilize the necessary resources. Now everything is a matter of political will," said Babayev, who is also Azerbaijan's Minister of Environment.
His words came as dozens of heads of state and senior officials from nearly 200 countries gathered in Baku, the capital of Azerbaijan, for the COP29 UN climate summit, which opened today.
The meeting was overshadowed by the re-election of Donald Trump, who has vowed to pull the US out of the Paris climate accord and roll back commitments to cut carbon emissions. Scientists say the world is likely to exceed key temperature limits as a result.
A new global framework
At COP29, countries will seek to build a new global framework to provide the means developing nations need to reduce their greenhouse gas emissions and adapt to the impacts of worsening extreme weather. Poor countries want climate finance to increase from about $100 billion a year today to at least $1 trillion each year by 2035.
Without the US, developed countries are likely to find climate finance targets more difficult to achieve. They can seek to reduce the public money component – from foreign aid budgets and through institutions such as the World Bank – making up the climate finance target.
This could mean an increased role for the private sector in achieving the $1 trillion goal. However, the issue is quite controversial. Private sector money comes with strings attached and can push countries into even greater debt. In addition, the private resource is more difficult to access for the poorest countries that need it most, especially to help them cope with the impacts of extreme weather, an activity that few private sector companies have been prepared to undertake to fund to date.
"With competing priorities, there simply isn't enough money in the world to finance the transition of developing countries to clean energy through grants or concessional financing alone - let alone covering adaptation and losses and damages," Babayev added.
Harassment
Many civil society groups are concerned about the expanded role of the private sector. Mariana Paoli, Head of Global Advocacy at Christian Aid, says:
“Government funding is much better than private funding when it comes to tackling climate change. Governments are the only ones that can provide funding in the form of grants. It is this capital that is the only way to meet the growing needs of developing countries to address the climate crisis. Private finance is driven by profits and is almost always debt, exacerbating the debt crisis facing many developing countries.”
She also argued that this should not count towards the amounts that developing countries require, known as the "new collective quantitative goal" (NCQG).
"Private companies are not responsible for the Paris Agreement. "Any investment related to climate change that they make is welcome, but it is separate from what should be discussed at the Baku talks," Paoli said.
However, many developing countries recognize that private finance must play a role. A spokesperson for the Alliance of Small Island States said: “At the heart of the NCQG are developed countries fulfilling their commitments under the Paris Agreement. A major focus is the provision of public finance from developed to developing countries. An additional pillar is the mobilization of significant private financing through specific public interventions of developed countries. The onus should be on public efforts to promote improved funding.
Simon Steele, the UN's climate chief, told the opening session of COP29 that inflation will result from continued dependence on fossil fuels and that tackling the climate crisis will also help tackle economic problems.
“If at least two-thirds of the world's nations cannot afford to rapidly reduce emissions, then every nation pays a cruel price. If nations cannot build resilience into supply chains, the entire global economy will be brought to its knees. No country is immune. Let's abandon any idea that climate finance is charity. An ambitious new climate finance target is entirely in the self-interest of every nation, including the biggest and richest," he said, referring to the new US administration.
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