Finance, trade key agenda items, climate meet likely to be stormy

The developing countries, including India, have been arguing that this particular provision had not been addressed in the agreement on finance that was finalised at last year’s climate meeting, COP29, in Baku, Azerbaijan. That agreement only dealt with the obligation of developed countries to “mobilise” financial resources for developing countries. The agreement finalised in Baku asked the developed countries to mobilise at least US$ 300 billion every year from 2035, tripling their current obligation.

The Paris Agreement obligates the developed nations to both “provide” finance (Article 9.1) as well as “take the lead in mobilising climate finance” (Article 9.3) for developing countries. These two are related but independent obligations. One does not negate or take precedence over the other.

Article 9.1 can imply the provision of public or government funds by the developed countries, while Article 9.3 allows them to mobilise financial resources from private or any other source. The developing countries have been demanding that international climate finance should have a greater component of public funds, should be new, additional and predictable, and should mostly be in the form of grants or soft loans. They have maintained that last year’s finance agreement only addressed the mandate in Article 9.3. The obligation under Article 9.1 still remains outstanding.

They have been using this argument to push back, after their demand for raising the amount of climate finance from the current US$ 100 billion a year to US$ 1.3 trillion a year had been ignored in last year’s agreement. The US $300 billion a year amount had come as a big disappointment for the developing countries, with India making an uncharacteristically angry statement in reaction.

At the annual mid-year conference in Bonn in June this year, the developing countries had disrupted the talks for almost two days on this issue of Article 9.1 obligation. It was then decided that this issue be proposed to be included as a formal agenda item in COP30.

Accordingly, the provisional agenda has listed this issue at the request of Bolivia, which moved the proposal on behalf of the Like-Minded Developing Countries (LMDC) group, which includes India.

Carbon tax

The agenda also has an item on “trade-restrictive unilateral measures”, a reference to Carbon Border Adjustment Mechanism (CBAM), a form of carbon tax imposed by the European Union on the import of certain goods. CBAM seeks to impose a tariff on imported goods like steel or aluminum if their production had a greater carbon footprint than the standards prescribed for EU manufacturers. The developing countries have objected to CBAM, saying this was a restrictive trade practice in the garb of climate regulation, and violative of international trade rules. This issue had come up at last year’s meeting in Baku as well, and held up negotiations for two days. The matter has remained unsettled.

The provisional agenda has to be approved by consensus at the COP meetings. At some of these recent meetings, agenda items themselves have resulted in major stand-offs. On a few occasions, the agenda could be approved only in the second week. The inclusion of discussion on Article 9.1 in the provisional agenda is also likely to be hotly contested by the developed countries at the beginning of COP30.

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