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It may be the most important abbreviation you’ve never heard of. Four letters, NCQG, are set to dominate discussions at the looming UN climate summit – and may determine efforts to stem the global warming emergency.
At COP29, starting on 11 November, governments are set to thrash out a new climate finance target called the New Collective Quantified Goal (NCQG). That’s why in-the-know observers are already referring to the Azerbaijan-hosted summit as “the Finance COP”.
Money is vital for responding to the climate crisis: to pay for preparedness, for emergency relief after disasters, and for recovering from longer-term impacts and rebuilding.
Agreeing to the NCQG is crucial as it forms the financial bedrock on which the world’s plan to manage climate change – and its many harmful effects – will be based. But it won’t be easy: Who pays and receives climate finance – and how much – have long been some of the most contentious aspects of the COP negotiations.
“Finance underpins everything, [so] the NCQG is, unfortunately, the answer to everything,” Debbie Hillier, head representative at Mercy Corps for the Zurich Climate Resilience Alliance, a grouping of NGOs and academics, told The New Humanitarian.
From 2025, the NCQG, if agreed, should supersede the previous finance target, which was to transfer $100 billion per year by 2020 from the Global North countries whose historical emissions largely caused climate change, to those in the Global South. Both targets – the $100 billion and the plan to replace it after 2025 – were written into the 2015 Paris Agreement.
Estimates vary for how much the NCQG should be worth. The value of the goal, known as the “quantum”, tends to have a floor of around a trillion dollars per year, although how much of this should be public finance and grants will be hotly debated.
Low-income countries and climate campaigners have long said the existing $100 billion target is inadequate and are quick to flag how far it is from being met. They worry that a weak NCQG will further entrench climate inequities. An insufficient funding target “would lock in something terrible for 10 to 15 years”, said Hillier. “That is extremely dangerous.”
Officials in high-income countries, however, fret about their ability to pay their existing obligations amid shrinking aid budgets, domestic financial strains, and the threat of green backlashes from voters who may feel there are more pressing priorities.
Whether governments agree to the NCQG, and if it dedicates money to address the humanitarian impacts of climate change, will likely come down to the wire in Baku, finance experts told The New Humanitarian.
With COP29 fast approaching, here's a look at some key sticking points – with a particular eye on those most affecting humanitarian action.
What are the main streams of climate finance?
Climate finance has two key purposes – mitigation and adaptation – but their differences often require different types of money.
Climate mitigation is focused on reducing overall greenhouse gas emissions, such as carbon pollution. Private investment is often used here as many projects in this category – such as renewable energy facilities or electric cars – can provide a return.
On the other hand, climate adaptation is about preparing societies for the effects of global warming. Projects under this category are extremely varied, and in lower-income countries they can look a lot like traditional ‘development’ programmes, and are often funded by multilateral institutions like the Green Climate Fund.
Adaptation finance is also the pot from which humanitarians are eyeing funding for climate-framed programming like resilience-building and anticipatory action.
Because it can be harder to secure returns on investment for adaptation projects like building flood prevention infrastructure or environmental restoration, grant or concessional finance tends to be favoured.
Largely for this reason, adaptation finance massively lags behind mitigation finance despite widespread acceptance – including in the text of COP accords – of its need. Countries agreed in 2021 to double adaptation finance from 2019 levels by 2025, but progress towards this goal has been slow.
While huge amounts have been invested in mitigation, this does little to help those already experiencing the worst impacts of the climate crisis, spurring campaigners to seek dedicated targets – or sub-goals – on adaptation and loss and damage (see below) in the NCQG.
But securing new adaptation finance targets in the NCQG won’t solve all the headaches for humanitarians in what is a fiendishly difficult policy area, in particular when it comes to implementing programmes in the most vulnerable settings.
“It’s harder [compared to mitigation finance] to get large amounts of [adaptation] money to the local level in a way that is transparent, that is accountable. It’s difficult to disburse,” explained Sarah Colenbrander, director of ODI’s Climate and Sustainability Programme.
These problems appear “on steroids in a fragile and conflict-affected country”, Colenbrander said, adding that big international NGOs are likely to be the main conduits for adaptation finance to reach such settings – despite worries about transaction costs and increasing criticism of their models within humanitarian spaces.
But it’s not all bad. More adaptation finance should make more money available for the kinds of anticipatory action programmes – aimed at preventing disasters and preparing for them before they happen – that humanitarians say are sorely needed amid increasing climate risks.
Just 1.1% of crisis funding went to pre-arranged financing in 2022, and mostly to middle-income countries, according to research by the Centre for Disaster Protection. And it’s also worth noting for humanitarians that these types of initiatives tend to happen in more stable environments – not so much in fragile and conflict-affected areas.
How does loss and damage fit in?
Loss and damage, which refers to payments to help countries recover from climate disasters, has been a particularly fraught policy area. Some high-income countries view it “as a proxy for unlimited liability for historical emissions and the demand for compensation or reparations”, explained Alden Meyer, senior associate at the E3G think tank.
After years of tense talks, a Fund for Responding to Loss and Damage (FRLD) was finally agreed at COP28 last year, a decision hailed by campaigners as historic.
For the world’s most climate-vulnerable countries, the NCQG is seen as a key lever to move forward on loss and damaging financing.
In a pre-COP meeting, ministers from the V20 – a grouping of influential, climate-vulnerable countries from Barbados to Vanuatu – said the NCQG must address “loss and damage comprehensively”. These countries are among those that, according to a recent analysis by the International Institute for Environment and Development, pay twice as much to service their debt than they currently receive in climate finance – despite having to borrow to repair from climate disasters.
Including money for loss and damage in the NCQG would make it easier to secure the large and likely growing sums experts say will be needed to respond to billions of dollars worth of climate damages each coming year.
But this would mean effectively recognising it as a third climate finance stream, alongside mitigation and adaptation. That’s far from guaranteed to happen at COP29 in Baku, amid questions over the pecking order, particularly when more adaptation finance is needed to prevent more loss and damage in the first place.
So while including loss and damage in the NCQG would clearly make a big difference to the health of the FRLD – and therefore to the budgets of humanitarians who would like access to this money for their related climate programmes – experts aren’t sure it’s going to happen.
“Loss and damage is likely to be one of the things that is traded in or traded out” of the NCQG negotiations, Colenbrander said. “I’m not saying it will be out, but the fact there’s not a clear consensus at this point, it’s clearly something that is on the table.”
Meyer was also sceptical, citing “strong resistance” from richer countries – “the US in particular” – to having an explicit loss and damage sub-goal in the NCQG.
For Hillier, and other humanitarians, the fact that paying for climate impacts wasn’t agreed under the Paris Agreement that set the NCQG timeline shouldn’t preclude loss and damage from becoming a “third pillar” of the climate finance negotiations. “Without it [in the NCQG], there will be no money in the loss and damage fund,” she said.
Colenbrander cautioned that if negotiators fail to include a dedicated loss and damage sub-goal in the NCQG in Baku, this will continue a “recurring theme” of disappointment for climate-vulnerable countries.
The Least Developed Countries fund and the Adaptation Fund – two long-established bodies tasked with improving the climate resilience of lower-income countries – “are really important parts of the climate finance architecture and they are very under-resourced,” she said.
Even without a place in the NCQG, loss and damage has achieved its own political momentum, which could lead to it securing more financing outside the FRLD fund, through schemes like the Global Shield, a pre-arranged finance programme.
What do humanitarians want?
The lack of climate finance funding going to fragile and conflict-affected contexts is another key problem, but it’s not a distinct part of the official negotiations, even if many humanitarians might want it to be.
Only 0.83% of climate adaptation finance in 2022 went to the 10 most fragile and conflict-affected places, according to a Mercy Corps’ analysis of OECD figures. Analyses by other NGOs and multilateral organisations point to a similar chasm.
The issue of conflict and fragility has gained increasing prominence in climate negotiations in recent years, with COP28 seeing a widely endorsed political declaration recognising it, and COP29 hosts Azerbaijan have made the topic a diplomatic priority.
Campaigners would like to go further: They want the problem recognised in the NCQG, with the agreement dedicating a specific portion of climate finance to help narrow the gap. The International Rescue Committee has called for 18% of all adaptation funding to go to the countries affected most by climate vulnerability and conflict – mostly in Africa and the Middle East – and for this percentage to be updated as needs assessments change.
Others have called for that amount to be far higher: Ritu Bharadwaj, principal researcher on climate change at the International Institute for Environment and Development, suggested that 40% of climate finance should be prioritised for fragile and conflict-affected countries due to the increased and myriad risks they face.
Getting such a target into the NCQG is likely to prove challenging, in part because fragile and conflict-affected states are not a unified bloc within the climate negotiations, said Colenbrander.
Laetitia Pettinotti, a climate economist with ODI, noted that, while the Paris Agreement recognises the special needs of "particularly vulnerable" developing countries, it only specifically identifies Small Island Developing States (SIDS) and least developed countries – not those affected by conflict.
What do humanitarians have to offer?
Humanitarians are widely seen as having been a little late to the party when it comes to climate discussions, but many experts think their experiences in dealing with crises – including so-called natural disasters – gives them important perspectives on climate finance.
Their expertise in financial management will be particularly helpful for climate campaigners as they advocate for their vision of the NCQG, according to Jacobo Ocharan, head of political strategies at the Climate Action Network (CAN).
Speaking on a panel earlier this month, Ocharan referenced the 24 Principles and Good Practice of Humanitarian Donorship, a set of donor government guidelines on aid spending. He said they contained “plenty of elements… needed for discussions on climate finance”, such as predictability and flexibility. “This is important: the know-how, the experience, the things that have worked and have not worked in the past,” he added.
And while humanitarians are often criticised for falling short on the agenda to make aid locally led, Ocharan suggested the expertise they have built up in this area could be used to help get more money more quickly to smaller, grassroots organisations. Embittered by years of disappointing performances from multilateral funds, climate campaigners want the NCQG to include mechanisms to help disburse more money this way.
While negotiators prepare for a final showdown in Baku, humanitarians and climate campaigners are urging them to not lose sight of the big picture.
Failing to agree on robust NCQG targets – or worse, failing to agree on any at all – would cause a “lot of bad faith” because countries in the Global South “have been so clear on what they need”, said Hillier. “Climate finance is not about charity or generosity, or the goodwill of the richer countries,” she added. “It’s about responsibility, legal obligations, and justice.”
Edited by Irwin Loy and Andrew Gully.
