Rwanda, aligning with the needs of developing countries, is advocating for a new global climate finance target of at least $1.3 trillion annually.

The goal dubbed a "new collective quantified goal on climate finance" (NCQG) is expected to be a major focus at the 29th Conference of Parties (COP29), underway in Baku, Azerbaijan.

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According to Mukhtar Babayev, the COP29 president, countries will have to resolve differences on contributors to, and quantum of, the fund and set the new goal.

He also referred to a "realistic goal” of mobilising hundreds of billions from the public sector as against trillions that developing countries need.

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"We now want to be crystal clear about our expectations. Our plan is based on two pillars: to enhance ambition and enable action. This means setting out clear climate plans and delivering the finance we need,” Babayev said.

But what is the new goal, and what is the impact?

In 2009, developed countries agreed that by 2020, they would collectively mobilise $100 billion per year to support developing countries' climate action.

However, according to the Organisation for Economic Cooperation and Development (OECD), this goal was met for the first time in 2022 — two years after the initial deadline.

But negotiators are already working on developing a new goal. And this time, they are unveiling an ambitious plan.

When countries signed the Paris Agreement in 2015, they decided to set a "new collective quantified goal on climate finance" (NCQG) to replace the existing goal of $100 billion per year.

It is expected that the NCQG is meant to be adopted this year at COP29 in Azerbaijan.

The new finance goal is expected to channel greater funds toward urgently needed climate action in developing countries.

It will support the implementation of low-carbon, climate-resilient solutions in energy, transport, agriculture, and other vital systems.

By increasing financial support, it should enable developing countries to step up their climate ambitions in the next round of national climate plans (NDCs), which are due in 2025.

However, deliberations on the new goal have been slow to date.

Negotiators have yet to reach consensus on foundational questions, from the dollar amount of the goal to which countries should contribute.

The majority of developing countries are facing financing shortages, particularly for their NDC implementation.

For instance, the overall financing gap for Rwanda’s NDC implementation is estimated at $6.5 billion until the 2030 period.

Here are the five major elements of the NCQG that negotiators will likely deliberate on;

Determining which countries will contribute to the financial goal

Responsibility for meeting the $100 billion goal rests with developed countries, defined in this case as the 24 countries that were OECD members in 1992 when the United Nations Framework Convention on Climate Change (UNFCCC) was signed.

However, some developed countries point out that the world has changed a lot over the past three decades.

In part, they argue that additional nations are now capable of contributing to a global goal, and bear a responsibility to do so based on their contributions to greenhouse gas emissions.

Many developing countries, meanwhile, argue there is no legal mandate to discuss contributors to the goal.

They maintain that contributors are already agreed upon in Article 9 of the Paris Agreement and under the UNFCCC. Both documents state that developed nations have a responsibility to provide climate finance to developing nations.

Several developed countries have suggested various indicators to assess who can and should pay into the NCQG.

For example, countries' potential to contribute could be analysed based on their ability to pay (income) and historical responsibility for climate change (emissions).

Developed countries are also questioning who should receive the funds.

They want to tailor support to countries that are most vulnerable to climate impacts or that have the most ambitious climate action commitments.

Choosing an appropriate time frame

Equally debatable, according to organisers, is what time period the new climate finance goal will cover — that is, how much time developed countries will have to meet the target.

The time frame negotiators select will influence the size of the goal and how to monitor progress.

Most countries have expressed the need to have clear start and end dates, with proposed time frames varying from five years to 10 or 20 years.

According to analysts, a five-year time frame could more closely link the NCQG to the Paris Agreement's NDC and Global Stocktake (GST) processes, both of which run on five-year cycles.

For example, the next round of the NCQG could be informed by the latest round of NDCs updates in 2025 and the second GST in 2028.

It is also true that a longer time frame, in the 10-20-year range, could provide countries with a more stable and predictable indication of the targets they need to aim for.

But the further-off horizon makes it more difficult to project how much finance will be needed, factoring in inflation, shifting costs of technology, and future climate impacts.

Addressing the three pillars of climate action

The $100 billion goal covers climate-related activities under two categories: mitigation (efforts to reduce greenhouse emissions) and adaptation (efforts to build resilience to climate impacts).

But even with increased action to curb climate change and build resilience, countries will continue to face losses and damages from climate impacts that are already here.

"Loss and damage" refers to the impacts that go beyond what communities can adapt to, such as the loss of homes and lives during severe storms.

Whether or not the NCQG will cover loss and damage is still under debate.

Developing country negotiators, in particular, suggest that the NCGQ should cover loss and damage in addition to mitigation and adaptation. They recommend creating subgoals for both adaptation and loss and damage to ensure that these areas receive adequate finance.

Developed nations, however, argue that loss and damage funding is voluntary and covered under a different part of the negotiation process.

Implementing transparent processes to track progress

When the $100 billion goal was agreed in 2009, there was no institutionalised mechanism to hold developed countries accountable for fulfilling it.

This led to significant frustration amongst developing countries when the goal was not met on time.

At COP26 in 2021, the UNFCCC's Standing Committee on Finance (SCF) was tasked with assessing progress towards the $100 billion goal.

The new climate finance goal is likely to incorporate such tracking mechanisms from the outset.

Countries generally agree that NCQG reporting could leverage existing instruments within the Paris Agreement, specifically the Enhanced Transparency Framework (ETF).

Setting an ambitious target

The $100 billion climate finance target was not needs-based. Rather, it was a political commitment that recognized developed countries' responsibility to provide financial support to developing countries.

But the NCQG will be different: Parties have already agreed that it should take into account the needs and priorities of developing countries to tackle the climate crisis. But negotiators have not yet decided what this will look like.

Research indicates that developing countries need trillions of dollars annually to combat climate change and address its impacts.

A few countries have proposed specific amounts for the NCQG.

For example, India and the Arab Group have called for developed countries to provide around $1 trillion per year to developing nations.

Decisions on other key elements of the goal, such as its time frame, contributors, and what climate-related activities are covered, will ultimately help inform its size.