Climate summit host unveils new fund ahead of COP29
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The incoming host country of the next UN climate summit unveiled a new fund meant to direct money from oil and gas producing countries to the developing world.
Why it matters: If it's adequately funded, it could help vulnerable nations withstand the effects of climate change caused mainly by burning fossil fuels, such as oil, gas and coal for energy.
- The Climate Action Fund unveiled by COP29 host Azerbaijan would specifically come from fossil fuel companies as well as major producers of fossil fuels.
Zoom in: Azerbaijan itself would fall into this category, as would the U.S., which is the world's top liquefied natural gas exporter and largest oil producer.
- As with other parts of the Paris Agreement architecture, the fund would be voluntary. It would incorporate public and private sources of money, along with grant support and other types of assistance for addressing the consequences of climate-worsened disasters.
- The action fund would also be designed to provide off-take agreements for renewable energy projects and first loss capital for certain industrial projects in developing countries.
- Such funding types can make it less risky to build new projects, since there's more certainty there will be a buyer for the renewable energy, for example.
The funding would be split between climate mitigation, adaptation and other uses.
- It will provide for rapid response funds that can be used if small island states, least developed nations or other developing countries suffer a major disaster.
Between the lines: The new fund is designed to become operational when the initial fundraising round ends, with a goal of $1 having billion at that point.
- Countries and companies would submit to annual contributions, rather than a one-time cash infusion.
- What is unique about this fund, should it come to fruition, is that it focuses on countries producing the fuels causing global warming.
- It also seeks participation from energy producing companies, which previous UN-linked climate funds have not done.
- This amount of money pales in comparison to the actual climate finance needs of developing countries, however, which are suffering the most harm from climate change yet are responsible for contributing the least to causing the problem.
Yes, but: Liability concerns could prevent companies from contributing money to the fund. This is an issue that has stymied some of the talks on the new "loss and damage" fund.
- The U.S., for example, has made clear that contributions to such a fund be voluntary and have no admission of culpability for causing climate change.
- Industrialized countries, including energy producers such as the U.S., have a history of failing to live up to funding pledges on time that they made at past climate summits.
Zoom out: There are multiple pre-COP29 meetings taking place at which countries may increase the likelihood of a meaningful agreement on climate finance, including via the new fund.
On Monday, climate ministers are meeting for talks in Wuhan, China.
- PetroChina announced at this meeting that it has joined the Oil and Gas Decarbonization Charter, which was launched at COP28 in Dubai.
- The charter, which contains targets for companies to reach net zero emissions, includes 52 other companies, accounting for about 40% of global oil production, according to a statement from the COP28 presidency.
- National oil companies account for the majority of members of this initiative.
