Opinion At CoP29, Global South and North should shed adversarial position on climate finance
It is one of the sharpest platforms for negotiating. By definition, that requires concessions on all sides. A little more generosity from the Global South may, ironically, transform the Baku meet into a resounding success.
The Global South’s finance needs have shot up to over $1 trillion a year today, compared to the $100 billion a year offered back in 2009. 
Securing better climate finances for the Global South has emerged as the pre-eminent goal for CoP29. It’s a necessary pursuit as the developing world houses the majority of the worst-affected regions. However, the Global South and the Global North should not come to the table as adversaries.
The Global South’s finance needs have shot up to over $1 trillion a year today, compared to the $100 billion a year offered back in 2009. Yet, the numbers suggest that it was only in 2022 that the financing went past $100 billion for the first time. Even so, more than half of it is reported to be in the form of loans to already struggling nations. So neither the quantum of the funds nor their manner of disbursement instils confidence. It has been reported that some of the poorest Global South countries were spending around 40 per cent of their budgets on debt servicing alone — at a time when they desperately need to channel every dollar into more clean-energy capacities and climate-resilient towns and cities.
This is exacerbated by the lack of access to concessional finance since the cost of capital for investing in essential infrastructure (like utility-scale solar) in, say, Germany, would be three-four times lower than India. It gets worse in the traditionally riskier markets, like sub-Saharan Africa. But the trouble is that climate impacts are not just threatening to upend critical sectors like agriculture and insurance in the Global South. The richer nations are also witnessing unexpected wildfires, torrential rains and heatwaves. So it’s not difficult to see why their investors would be reluctant to take on more risk by lending to the developing world.
This has understandably led to dissatisfaction since climate justice necessitates that the ones responsible for the crisis loosen their purse strings. However, the revised draft of the UN’s New Collective Quantified Goal attempts to say that the “parties with high GHG emissions and economic capabilities” would be expected to contribute to the global climate funds corpus. The opposition has been immediate from China and India as both are major economies that cannot be expected to throttle their growth to undo the wrongs of the past. The rest of the BRICS bloc is likely to voice similar reservations. At the same time, the pathways that these economies choose could be pivotal to the world’s carbon budget.
The monetary system encourages profitability, so the first way forward could be for the Global South countries to facilitate higher returns. For instance, if a private investor were to expect a 12-13 per cent annual return on a major infrastructure project in India and 8-10 years to break even, perhaps the need of the hour is to boost it to 17-18 per cent (or even higher) over the same period. This would enable the investor to recoup the funds quicker, net a higher profit and make the same money available for reinvestment much sooner. This can be explored through aggressive tax breaks, innovative revenue-sharing mechanisms or aggregating demand for capital-intensive sectors that could be lucrative — like green hydrogen for the hard-to-abate sectors or higher subsidies for electrified public transit. The idea is to elevate India’s attractiveness to foreign investors with the underlying principle of reciprocity. For those who doubt how this would impact India’s earnings, a greater volume of investments would more than compensate for the lower revenues from each project.
Second, using climate finance not as loans or grants but as a backstop for the public and large private lenders may be explored. Solar, wind, wind-solar hybrid and hydropower projects (amongst others) enjoy a must-run status in India, but at times their output has been curtailed and some lenders may view them as risky Having the backstop of international climate funds to underwrite such projects may ease their apprehensions and unlock more (concessional) financing. Of course, this presupposes that the country offers a policy environment that promotes renewable capacity addition. India is one of the most progressive in this regard, so successfully implementing the measure here would make for a good case study for the rest of the Global South.
The CoP is one of the sharpest platforms for negotiating. By definition, that requires concessions on all sides. A little more generosity from the Global South may, ironically, transform COP29 into a resounding success.
The writer is director, Climate Trends
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