The 29th UN climate summit in Baku, Azerbaijan, concluded in the early morning hours of Sunday by adopting a new collective quantified goal (“NCQG”) on climate finance. This result came at the back of intense negotiations for two weeks where polar opposite expectations on the final outcome hardly converged until the final hours. Developing countries had expected a substantial increase in public, grant-based finance of around $600 billion, which would be hard to mobilise given the current budget constraints and spending priorities in the developed countries. The final outcome includes:

• A core finance goal to mobilise at least $300 billion by 2035 from public finance from a growing set of contributors, especially multilateral development banks, and new sources of finance,
• A total investment goal of at least $1.3 trillion with a roadmap that should set out which financial flows can contribute by 2035,
• Increased adaptation finance and improved access to finance, especially for least developed countries or countries facing high debt stress.

While most developing countries were disappointed about the final outcome, the outcome still shows countries’ willingness to engage constructively in multilateral negotiations on climate ahead of the new US administration taking office in January. The leadership of the EU, Colombia, Kenya, Sierra Leone, least developed countries, the UK and small island states brought a deal together in Baku. The new goal could result in a step change with financial reforms effectively directing more investments towards the transition. 

This step change on finance is key to enable countries to set out steeper emission reductions and fossil fuel phase out trajectories in their national climate plans (“Nationally Determined Contributions”) for 2035 which are due in February 2025. The EU can thus focus its diplomatic efforts next year on working closely with countries on the following three areas:

• Engaging with countries on their national plans for 2035

The more national plans are submitted by February or well before COP30 in Brazil, the clearer the UN can assess at COP30 if countries are collectively on track to limit global warming to well below 2°C. “Team Europe” has the right knowledge and diplomatic ties to work with partners on whole-economy transition planning that enhances competitiveness and prosperity.

• Walking the talk on mobilising private finance for developing countries

A range of initiatives to leverage private investments have been created in recent years, seeking to address developing countries’ concerns that the cost of capital and access to private funding are still major barriers. Two prominent examples are the Global Green Bond Initiative and the German Green Guarantee Group. The EU is thus in a prime position to show progress on tools that can help deliver the $1.3 trillion.

• Starting new forms of energy partnerships in the Global Energy Transition Forum

President von der Leyen has announced a “Global Energy Transition Forum” at the G20 summit. This can build on the EU’s diplomatic success which saw all countries agree to move away from fossil fuels, triple renewable energy and double energy efficiency at COP28 in Dubai. With the new European Commission starting its work on 1 December, there is a significant demand and opportunity to reform the EU’s energy diplomacy and partnerships to accelerate the global energy decarbonisation.