Introduction
Climate change is expensive due to the costs of impacts and responses to climate change. The world is estimated to need about $\mathsf { U S S 1 0 }$ trillion annually in climate finance from 2031 to 2050. Rich developed countries have thus far failed to meet a 2009 promise to deliver a mere $$ 100$ billion per year of climate finance to poorer countries. Mobilising greater quantities of climate finance is the subject of this year’s United Nations climate meeting in Azerbaijan called the 29th Conference of the Parties (COP29).
COP is a yearly meeting held by the United Nations for countries to address climate change. One of the main fault lines at the upcoming COP in November 2024 is negotiations over a new collective quantified goal (NCQG) on climate finance. The NCQG is climate negotiation speak for a new global goal to streamline and fill existing and future climate finance gaps. At its core, it is an agreement to mobilise money from developed countries to developing countries to finance actions to deal with climate change impacts. Climate commitments cannot be turned into action without adequate finance. For this agreement to come into effect, Parties to the United Nations Framework Convention on Climate Change (UNFCCC), the overarching global climate treaty, need to reach a consensus but the negotiations must overcome geopolitical and economic divisions.
Though the NCQG is a global goal, it impacts how Parties to the UNFCCC implement climate commitments within their respective countries. For instance, Malaysia has taken up the task of energy transition through its National Energy Transition Roadmap (NETR) which would cost RM1.2 trillion under the most conservative estimate. This is an amount nearly equal to Malaysia’s total government debt as of April 2024 - RM1.22 trillion, implying that if NETR were to be publicly financed, it would entail doubling our sovereign debt.
The energy transition is only a portion of the climate transition costs Malaysia faces. The country will also need to spend on adaptation measures to tackle increased flood risk, heat stress, and sea-level rise swallowing its coastline. The costs of response measures are yet to be estimated by the government. These may exceed another trillion ringgit leading to the likelihood of Malaysia needing some degree of external financing to meet its climate costs. Additionally, Malaysia is due to submit its updated climate goals in the form of a nationally determined contribution (NDC) to the UN in February 2025 to indicate increased climate ambitions since its last submission in 2021. Malaysia must carefully consider the NCQG negotiation outcomes to ensure the commitments Malaysia pledges to are financially sound.
Making climate commitments that cannot be financed would mean that Malaysia could miss its targets and find itself more vulnerable to or even more culpable for climate change. Malaysia’s existing climate strategy is to make commitments without considering whether they can be adequately domestically financed. This makes its abandonment of international financing conditionality in its 2021 UN climate goal all the more puzzling. The latter implies that Malaysia is capable of self-financing climate transition. However, the reigning fiscal policy is one of consolidation which runs counter to doubling government debt.
The Significance of the UNFCCC’s Paris Agreement to Climate Finance
While countries are individually “equal” in the UN climate negotiations, they are far from equal when considering contributions to greenhouse gas (GHG) emissions, rate of development, and vulnerability to climate change. This does not however deter the UN from attempting to level the playing field through the UNFCCC. The UNFCCC can be regarded as an international parliament that allows each country to present and defend its respective interests individually or as a bloc on limiting climate change impacts through actions and initiatives. However, there is no process for majority voting, so decisions must be reached by consensus. Unfortunately, this also allows for individual countries to withhold consensus.
The UNFCCC’s ultimate objective is to stabilise the global climate system (Article 2). It proposes to do so based on the principles of equity and: Common but differentiated responsibilities and respective capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse effects thereof. (Article 3)
Furthermore, the treaty calls for the “specific needs and special circumstances of developing country Parties, especially those that are particularly vulnerable to the adverse effects of climate change” or “that would have to bear a disproportionate or abnormal burden under the Convention, should be given full consideration” (Article 3).
Thus, at the highest legal level of international climate treaties, there are fundamental considerations for the special economic circumstances of developing countries and their lesser responsibility for contributing to climate change.
Article 9 of the Paris Agreement (PA), the current implementing treaty of the UNFCCC, states that:
- Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention.
- Other Parties are encouraged to provide or continue to provide such support voluntarily.
Because reducing greenhouse gas emissions effectively means reducing the usage of fossil fuels, this process threatens to be a constraint on economic development for fossil fuel-dependent countries or those with limited access to alternatives. If not carefully managed, compliance with the UNFCCC and its subsidiary treaties could constrain a state’s economic potential and consequently its geopolitical power. The largest fossil polluter and global hegemon, the United States (US), has pulled out of climate treaties more than once.
Articles 2 and 3 of the UNFCCC lay the basis for competitive claim-making by developed and developing countries. Developed countries such as the European Union (EU) would seek to downplay equity and the differentiated aspects of common responsibilities. They would argue for the NCQG to “expand the contributor base” as per Article 9.2 of the PA (which is voluntary), rather than elaborate on their obligations under Article 9.1 (which is mandatory: “shall”). Calls to expand the contributor base are particularly aimed at rising developing countries such as China which are viewed as serious economic competitors to developed countries.
Background
COP29’s climate finance negotiations are taking place against a history of unmet global climate finance goals and a breakdown of trust among developed and developing countries. Climate finance burdens for developing countries have increased since the 2015 PA replaced the 1997 Kyoto Protocol (KP).
Based on common but differentiated responsibilities (CBDR) and developed countries taking the lead, the KP set binding emission reduction commitments for developed countries which was eventually abandoned by the US, Canada, Japan, New Zealand, and Russia. Drawing them back in, the PA expanded emission reduction commitments to developing countries. This helped assuage developed countries' anxieties over emission reductions compromising their competitiveness against rising developing countries. In contrast, universal commitments under the PA added additional financing pressure to developing countries’ ongoing efforts to pursue sustainable development and poverty eradication. Balancing these commitments were obligations for developed countries to provide financial resources to developing countries (Article 9.1) and to “take the lead” in mobilising climate finance (Article 9.3).
The Unmet $$ 100$ Billion a Year by 2020 Goal
The NCQG supersedes the $$ 100$ billion a year by 2020 goal pledged in 2009 by developed countries. The goal was first conceived in the 2009 Copenhagen Accord when climate negotiations were faltering coupled with the pressure exerted by developing countries on developed countries to compensate for climate problems caused by the latter. The $$ 100$ billion a year fund was meant to help developing countries cope with increasing climate change impacts while transitioning to low-carbon economies. Basically, the proposed goal was meant to appease developing countries. Still, how the goal would be achieved was purposely kept vague towards the end of its negotiation because of careful wording.
[D]eveloped countries commit to a goal of mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of developing countries. This funding will come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance.
By 2020 however, the goal remained unmet despite claims made by developed countries and was subsequently extended to 2025. Hence, the NCQG aims to be more robust, based on the lessons from the unmet $$ 100$ billion a year goal. At the latest meeting in September 2024, issues dividing developed and developing countries remained the same, which means that the unmet $$ 100$ billion goal remains outstanding. These issues will be explored further in a subsequent Views article.
Geopolitical Landscape
The UNFCCC uses two broad categories to differentiate countries: countries listed in Annex I to the Framework Convention on Climate Change correspond to developed countries, while nonAnnex I refers to developing countries. Another category that needs to be mentioned is least developed countries (LDCs) because of their unique position of being highly vulnerable to economic and environmental shocks coupled with low levels of human assets.
Thus, while the UNFCCC and PA are ostensibly “environmental” negotiations, the primary political cleavage is economic status. Other collective identities are based on geographical proximity (regional groupings), geographical features (small island states), and geopolitical affiliation (e.g. Western allies).
The Conversation on the NCQG from Three Perspectives
Developed countries are 36 countries distinguished by their high levels of economic development tied to high levels of fossil fuel use during their industrialisation. For example, the US, the United Kingdom, Japan, and 27 members of the EU have a collective cumulative carbon dioxide emissions share of 50.4% compared to the rest of the world. Based on the principles of equity and CBDR, and the articles of the UNFCCC, they are obliged to provide new and additional financial resources to developing countries to help the latter achieve their climate ambitions which would ultimately benefit all Parties (Article 4.3). However, their actions tend to not be consistent with this.
In relation to the $$ 100$ billion a year goal by 2020, the OECD claimed that developed countries reached the goal in 2022, ahead of the extended deadline of 2025. It was however refuted and noted that developed countries contributed under a third, perhaps even less, than what was reported. This was supported by a report by Oxfam in 2024 refuting the numbers reported by the OECD and a statement by the co-chairs of the first Global Stocktake (GST1) in 2023 at COP28 where they expressed regret over the unachieved goal.
Notes with deep regret that the goal of developed country Parties to mobilize jointly USD 100 billion per year by 2020 in the context of meaningful mitigation actions and transparency on implementation was not met in 2021, including owing to challenges in mobilizing finance from private sources, and welcomes the ongoing efforts of developed country Parties towards achieving the goal of mobilizing jointly USD 100 billion per year.
In the NCQG negotiations, developed countries mainly emphasised expanding the contributor base to include richer developing countries and possibly the private sector. The logic behind spreading out their responsibility expands to using other sources of finance beyond public financing, including but not limited to private financing and intermediaries such as multilateral development banks (MDBs). This is troubling as only countries, not firms, are signatories to the PA and are answerable to the UNFCCC. Aside from the US, developed countries did not commit to any quantum in the NCQG nor decide on a timeframe to manage the goal. They also opposed having subgoals such as loss and damage (L&D) within the NCQG, removing critical climate ambition milestones and making them unmeasurable. There is also little clarification on what developed countries consider as improving access to climate finance given their positions on the aforementioned items. All in all, their positions make the new goal less concrete and would make achieving it even more challenging.
Developing countries view the delivery and mobilisation of the NCQG as a legal obligation of developed countries under the PA and that developing countries should be recipients of climate finance, rather than contributors. The UNFCCC’s occasional needs determination report (NDR) estimates that developing countries would need up to $\ U S $ 5.01-6.85$ trillion cumulatively until 2030 to meet their current submitted PA obligations. This estimation is limited due to incomplete information – only 98 Parties identified their costed needs out of the 142 Parties who submitted their NDCs. Therefore, the finance figures suggested are likely to be underestimates.
In the negotiations, developing countries maintained that climate finance must be based on developing countries’ needs, and the alignment of climate finance to NDCs and other national plans. They recognise increasing climate finance needs and taking into consideration the unmet $$ 100$ billion a year goal, some developing countries are compromising by requesting a quantum goal of mobilising at least $$ 1$ trillion a year. They stressed the inclusion of sub-goals in the NCQG for measured response across all three pillars of climate action namely mitigation, adaptation, and L&D. Recognising that developing countries receive the short end in the current climate finance landscape, they want climate finance to be properly defined to encourage its delivery in the form of grants or grant equivalents, as opposed to loans. A common climate finance definition would also prevent ‘double counting’ ensuring that the NCQG’s purpose and function are met.
LDCs have a special status recognised in the PA that Parties are expected to respect. Their low level of economic development pushes their starting point behind most developing countries when it comes to addressing climate change, amplified by their underfunded sustainable development goals in areas such as poverty, education, as well as nutrition and health. LDCs received less than $3 %$ of global climate finance flows in 2021/2022, amounting to around $$ 30$ billion.
In the negotiations, LDCs’ priorities for the NCQG include recognition for their special status enshrined in the PA, the adherence to the principles of equity and CBDR, inclusion of the L&D subgoal, a clear definition of climate finance, and the primary delivery of climate finance in the form of grants. LDCs underscored that climate finance be aligned with NDCs and other national plans because the climate ambitions in their NDCs are contingent largely on technology transfer, and capacity building which are mobilised by external finance.
Taking full account of the specific needs and special situations of the least developed countries with regard to funding and transfer of technology.
Perspectives on the NCQG by Sub-blocs
Underneath the broad economic categories of nations, sub-blocs can better reflect regional perspectives and narratives to understand the complexity of the negotiations.
Malaysia in the Geopolitical Landscape
Though Malaysia is one of 136 countries within the Group of 77/China (G77/China) bloc, the majority position in the largest of developing country groupings may not always necessarily reflect Malaysia’s interests. Malaysia used to be in the Like-Minded Developing Countries (LMDC) group but left sometime after 2020, remaining only in G77/China. As G77/China is the largest bloc in the UNFCCC, Malaysia needs to actively participate more within the bloc to be heard.
As a developing country in Southeast Asia, Malaysia expressed interest in forming an Association of Southeast Asian Nations (ASEAN) bloc during SB60. This announcement is partly driven by Malaysia chairing ASEAN in 2025. Though leveraging on regional commonality makes sense, there is no established working identity in the climate negotiations given the ASEAN Way which emphasises closed-door diplomacy, non-interference, and non-confrontationality. If the ASEAN Way applies to the UN negotiation process, reaching a consensus within the bloc on its positions would be its own challenge.
Outside of the UNFCCC, Malaysia has applied to join the global south grouping BRICS. However, some within Malaysia have also expressed interest in being part of the rich country club, the OECD. Choosing both potentially leads to a conflicting stance on the climate finance issue. This is a dichotomy that Malaysia has to grapple with as it is a matter of which characteristics Malaysia identifies with: is it a developing country that requires climate finance assistance to achieve its climate ambitions or a developed country ready to contribute climate finance to the rest of the world?
Malaysia’s Negotiating Position
Malaysia’s proposed negotiation position on the NCQG is accentuated by the fact that developing countries should receive assistance according to the principle of CBDR while emphasising that developing countries’ increased climate ambitions hinge on forthcoming funding which is new and additional. The two areas that Malaysia has its eye on are the climate finance quantum and contributor base. With the quantum, Malaysia favours grants amounting to either $$ 5$ trillion a year or $$ 1.2$ trillion reviewed every 5 years, opting for a shorter review cycle that would encourage proper monitoring of the goal. With the contributor base, Malaysia opposes its expansion citing the stated obligations of developed countries (PA Article 9.1) and that those obligations are voluntary for developing countries (PA Article 9.2). Hence, Malaysia’s proposed positions on the NCQG reflect the wider sentiment of developing countries that are further explored in the following sub-blocs.
Conclusion – The NCQG is a War of Narratives
Fossil fuel-producing developing countries are under scrutiny by developed countries over their current emissions. This is a distraction from historical emissions which drive current and ongoing climate change. Malaysia is never singled out as it is overshadowed by larger oil and gas producers, nor does it stand out in the negotiations by being part of the G77/China bloc. The biggest critics of Malaysia’s emissions are domestic. However, the PA obliges Parties to reduce their emissions based on their capabilities. Malaysia may refer to the UNFCCC Article 4.8(h) which provides consideration to developing countries that are fossil-fuel producers. Developing countries ought not to have to choose between economic development and climate survival because both ensure the well-being of the people, consistent with UNFCCC Article 3.4 and PA Article 2.1. Coupled with the fast-approaching NDC submission deadline in February 2025, Malaysia can start its strategy by reintroducing financial conditionalities within its upgraded NDC. Malaysia’s NDCs ambitions should carefully reconcile climate responsibilities with developmental responsibilities.
Consensus-based decisions in the UNFCCC are tedious but the process serves a necessary function for all Parties to be part of the decision-making process because the negotiation outcomes are legally binding. Reflecting on the varying perspectives and positions above, prior to COP29 Malaysia should ideally have conducted an assessment of its climate finance needs combined with a long-term strategic plan. This would offer a robust basis to evaluate the NCQG negotiations.
Likewise, Malaysia cannot be expected to project a high level of ambition in its revised NDC come February 2025 if the NCQG outcome from COP29 is inadequate.
