Focus on Arts and Ecology

Policymakers must discard the “grow now, clean later” model, attract investment in renewables and collaborate, writes a former senior advisor for the Executive Office of the President of the Republic of Indonesia. 

By Sumartono Darmanto, November 15, 2024

As a senior advisor on strategic economic affairs in charge of economic diplomacy, business economics and nation branding for Indonesia’s portfolios in 2016-17, I learned early on about the country’s plans to build numerous coal-fired power plants to meet its growing energy demand. Foreseeing the potential consequences, I remarked to a colleague: “China still struggles with air pollution from coal plants, which contributes to health issues and climate change. Shouldn’t we learn from their experience and aim for cleaner growth?”

Unfortunately, we were told there was nothing that we could do. Over the following years, Jakarta’s air quality began to deteriorate: a World Bank report found that in 2019, PM2.5 air pollution in Indonesia resulted in estimated economic costs of USD 74 billion and caused roughly 183,000 deaths.

Development beyond growth

Like many policymakers, I once believed that to alleviate poverty, we needed to accelerate economic growth and tolerate pollution. I thought that, once my country was richer, we could clean up the pollution. This belief has proven both harmful and costly. In 1996, an OECD study found that early environmental investment didn’t compromise economic growth; in fact, countries that delayed its adoption paid higher cumulative costs later.

Such studies make clear that policymakers must discard the “grow now, clean later” model. Through my research at Tsinghua University’s Institute of Climate Change and Sustainable Development (ICCSD) in Beijing, I’ve learned how integrated governance of climate, air pollution and economic development can help countries achieve domestic policy goals and fulfil international climate commitments.

China’s “war on air pollution” exemplifies this approach. Beijing’s air quality has markedly improved, and the country is now the world’s largest producer of solar panels, wind turbines and electric vehicles. Two factors stand out in China’s success:

i. Leadership commitment. Top leaders must prioritise pollution control, low-emission development and stopping climate change, providing firm strategic direction across government.

ii. Dedicated oversight. A dedicated ministry, such as China’s Ministry of Ecology and Environment, can coordinate policies, technology and financial investments.

Achieving integrated governance means sectors must collaborate. The industrial sector must enforce pollution control; the energy sector must accelerate clean energy transitions, and all sectors should align with net-zero goals.

Governments need to implement measures such as carbon pricing, green subsidies, guaranteed public procurement, and state investments. Cutting-edge technologies, like near real-time carbon monitoring, are crucial to correctly measure emissions and ensure effective policies to prevent pollution.

Air quality and investment

Improving air quality requires sustained investment in pollution monitoring, emission control, and clean energy. In Indonesia, we still lack pollution-prevention solutions, and our heavy reliance on coal power and petrol-burning vehicles must urgently shift.

China, the world leader in solar, battery and electric vehicle production, could be a major investor. Since 2014, Chinese solar companies have made substantial investments in Vietnam, creating jobs and upskilling local workers. In March 2023, China’s leading electric vehicle manufacturer BYD broke ground on its first plant in Thailand, marking the latest move by Chinese automakers to expand their footprint in Southeast Asia.

For Indonesia and other Global South countries to attract Chinese investment and China’s world-class environmental technology companies, we must align our infrastructure projects and policy goals with China’s global green development strategy and mission of ecological civilisation. This means offering investment opportunities that can simultaneously provide mutual economic benefit and improve air quality, such as in renewables, emissions reduction, waste-to-energy facilities with air pollution controls, nature-based solutions and sustainable ecological protection compensation mechanisms that have proven successful in China.

In his first official state visit, Indonesian President Prabowo Subianto met with Chinese President Xi Jinping in early November, where the two sides announced USD 10 billion in new Chinese investments in Indonesia. The official joint statement from the meeting mentioned cooperation areas, including new energy vehicles, batteries, solar PV, and the establishment of a Green Mineral Resources Partnership. This is a promising first step, which must be closely and carefully followed up to ensure alignment to Indonesia’s and China’s long-term social and environmental goals, and the protection of both countries’ reputations.

Global South solidarity

Global South countries, home to 85% of the world’s population, are among the most affected by air pollution and climate change. Establishing a unified global system where every country contributes to reducing greenhouse gas emissions equitably could be transformative.

Such an endeavour to unite Global South countries has been achieved before. In April 1955, leaders from 29 Asian and African nations, including Indonesian President Soekarno and Chinese Premier Zhou Enlai, gathered in Bandung, Indonesia, and laid the foundation for non-alignment during the Cold War. In facing today’s planetary crisis, I believe the Global South needs to revisit this spirit of solidarity and establish an International Climate Union through which to share best practices in policy, technology and finance. This would be a concrete follow-up to Indonesia and China pledging to take leading roles in advancing South-South cooperation and promoting global governance reform, as prominently mentioned in the joint statement.

During my time in China, I encountered enthusiastic partners – from scientists and NGOs to enterprises and government agencies – who could be instrumental in collaborative efforts. Such partnerships can improve air quality, stimulate economic growth, and enable us to integrate into global green supply chains.

The opportunities to tackle air pollution and climate change abound, but to seize them, our governments must adopt new approaches.

As countries negotiate the terms of the New Collective Quantified Goal at COP29, China’s stance is drawing attention. 

By Lin Zi, November 19, 2024

Climate finance is high on the agenda at COP29, which is currently taking place in Baku, Azerbaijan. The escalating climate crisis has led the UN to estimate that developing countries need approximately USD 6 trillion to enact their climate change action plans by 2030.

The talks in Baku are centred around the New Collective Quantified Goal on Climate Finance (NCQG), which will be a critical measure of the conference’s success. The NCQG builds on a 2009 commitment made by developed countries at COP15, to provide USD 100 billion in climate finance to poorer nations annually by 2020. Key issues under discussion at COP29 include the ultimate funding targets, developing countries’ priorities and needs, and the design of financing mechanisms.

So far, developed countries including Switzerland and Canada have used COP29 to propose expanding the contributor base, mobilising more nations to join. Emerging economies such as China, the United Arab Emirates and South Korea (not included in COP15’s USD 100 billion commitment) are now seen by the international society as capable and responsible for making more significant contributions to climate finance.

China is under the brightest spotlight. Recent studies by several thinktanks indicate that since its Belt and Road Initiative was launched, China has contributed over USD 30 billion to global climate finance. According to the World Resources Institute, this puts China on a par with the United Kingdom, to become the joint fifth-largest provider of climate finance after Japan, Germany, the United States and France.

Speaking in Baku on 12 November, the Chinese Vice Premier Ding Xuexiang highlighted that, since 2016, China has provided and mobilised over CNY 177 billion (approximately USD 24.5 billion) in project funding to support other developing countries in addressing climate change. He also called for developed countries to increase their financial support and technology transfers to developing countries. However, this figure was absent from Chinese official media reports the following day, sparking speculation that China might be wary of its statements being taken out of context, and potentially misrepresenting its stance on NCQG.

What is China’s position on the NCQG negotiations? What role does it play in global climate finance? And, to avoid a zero-sum game underpinned by China-US tensions regarding the scope of contributors, what considerations should guide the NCQG design? This article seeks to clarify these questions.

China’s contributions to global climate finance

According to the Organisation for Economic Co-operation and Development (OECD), for nine years there was a consistent gap between climate financing targets and the actual funds received by developing countries, between 2013 and 2021. It was not until 2022 that developed countries surpassed the USD 100 billion annual target for the first time, providing USD 115.9 billion in climate finance for developing nations. This was two years behind schedule – and even then, the figure was questioned.

China is emerging as an important source of funding for climate finance in developing countries. According to a recent study by the Center for Global Development (CGD), a thinktank based in London and Washington DC, China has contributed about USD 3.8 billion annually in climate finance to developing countries since the implementation of the Belt and Road Initiative in 2013, through bilateral, multilateral and regional financing mechanisms. By 2021, China had contributed a total of USD 34.3 billion in climate finance.

China’s climate finance goes mainly to developing countries in Asia and Africa. The CGD’s research shows that about half of it is invested mainly in the energy sector, followed by transport, water supply and sanitation. In the energy sector, photovoltaic (solar power) projects accounted for 39% of the total, followed by hydro and wind projects at 25% and 16% respectively. Transport investments are dominated by urban light rail and metro. Investments in mining accounted for only 4%. Agriculture, forestry and fisheries accounted for only 1%.

According to the World Resources Institute’s report, China channels its climate financing through four main avenues: bilateral public funds, multilateral public funds, export credits and mobilised private financing.

It is worth mentioning that China’s overseas climate investment is mainly in the form of loans. Only 3% of the money was given as grants, far lower than the 39% level of developed countries.

Beata Cichocka, research associate of the CGD’s European Development Policy and Leadership Programme, tells Dialogue Earth this is crucial:

“Although China has provided some USD 27 billion in bilateral and regional climate-related finance since 2013, only the equivalent of USD 6 billion of this can be considered ‘grant-equivalent’ support [ie funding that is either not repayable, or comes with significant concessionality compared with market rates].”

Beyond NCQG: Other dialogues?

During COP29 negotiations, China, alongside the Group of 77 (G77), has called for developed countries to increase their financial commitments for the NCQG. Previously, China committed to supporting the NCQG through the BASIC Ministers Joint Statement on Climate Change. But the country also expressed “serious concern” over proposals from developed countries to expand the contributor pool alongside downplaying their own obligations.

An anonymous Chinese expert tells Dialogue Earth that while China will adhere to NCQG principles, alternative platforms for dialogue could help push progress via other consensus-based declarations.

China’s position in the NCQG negotiations appears similar to its stance on the Loss and Damage Fund at COP27: it does not have an obligation to contribute financially to the NCQG targets because it remains a developing country.

China has also consistently helped other developing countries mitigate and adapt to climate change through the “South-South Cooperation” mechanism, sharing resources, technology and knowledge.

Speaking inside COP29’s China Pavilion, the country’s vice ecology and environment minister, Zhao Yingmin, said: “China has signed 53 South-South Cooperation Memorandums of Understanding on climate change with 42 developing countries, and has provided training for more than 10,000 individuals from over 120 countries.”

According to Cichocka, China’s existing and voluntary contributions (including non-financial projects) through its South-South Cooperation mechanisms should be acknowledged. To avoid the discussion on the contributor base from becoming a zero-sum game in the context of bilateral China-US tensions, she suggests framing this more broadly, to acknowledge the growing role and responsibility regarding climate change of many other emerging economies beyond China.

“China has the dual experience of being both a recipient and provider of international climate finance – and in this way it can contribute to the discussions from a unique perspective,” Cichocka says.

Funding targets: Inflation adjustments

At the time of writing, NCQG’s funding targets remain under negotiation. Developing countries are advocating for developed nations to provide USD 1.3 trillion annually, while developed countries favour maintaining the “at least USD 100 billion annually” phrasing.

Teng Fei, deputy director of Tsinghua University’s Institute of Energy, Environment and Economy, says if USD 100 billion continues to be the starting line, the targets are in fact not growing but declining: this target originated 15 years ago, which means USD 100 billion in 2024 is equivalent to USD 70 billion in 2009 considering inflation.

Teng says: “Based on the inflation rate of the US dollar over the past 15 years, developed countries would need to provide USD 170 billion in climate finance to developing countries by 2030, and USD 200 billion by 2035.”

In addition, the design of the NCQG framework also requires reform. That is according to Liu Shuang, director of the World Resources Institute’s China Finance Program. She believes a good framework should be multilayered, tailored to the diverse national circumstances of developing countries, and should not consist solely of concessional or commercial loans.

“It is essential to design a multilayered funding support mechanism based on the needs of developing countries and the characteristics of different sectors,” Liu explains. “This could be part of the NCQG discussions or go beyond the scope of NCQG.”

The global challenge: Reporting and regulation

The NCQG encompasses not only financial targets but also mechanisms for reporting, implementation and regulation. At present, China lacks a tracking and disclosure system for climate finance.

“There are many practical obstacles; it’s not that China is unwilling to report,” says Liu. “The challenge lies in accounting for funds from various channels. China currently lacks an established coordination and reporting mechanism, and no government department has been authorised to take on this responsibility.”

In fact, the reporting, implementation and regulation of the NCQG are significant challenges globally. Even within the UN, there are numerous types of climate and environmental funds. Among the most well-known are the Global Environment Facility, the Climate Investment Funds and the Green Climate Fund. These funds have overlapping areas of focus but differ in their financing priorities and mechanisms.

“In recent years, one of the major controversies has been that within the UN system, there are various types of climate funds and contributing institutions, but no coordination mechanism among them. Each operates independently, which has resulted in resources not being utilised in the most effective way,” says Liu.

Developed countries, having been involved in climate finance collection and reporting for longer, are relatively more experienced. For example, in the US, climate finance reporting is coordinated by the team of the Special Presidential Envoy for Climate Change, working with all funding-related departments. The main funding entities include the United States Agency for International Development and the Export-Import Bank of the United States. In addition to coordination mechanisms, the human resources required for data collection, organisation and reporting are substantial.

“We could learn from the biennial transparency reports mechanism under the Paris Agreement and establish a cross-government and financial-sector reporting mechanism led by the Ministry of Ecology and Environment. This would benefit us not only in terms of foreign aid but also in climate finance management,” Liu says.

Closing the domestic gap

With the frequent occurrence of extreme weather events in recent years, China itself is facing a huge funding gap to address climate change. China’s fourth national communication on climate change shows that according to its Nationally Determined Contribution target (updated in 2021), the total funding requirements for its climate change mitigation requirements between 2021 and 2030 will reach about CNY 19.8 trillion (USD 2.7 trillion). The equivalent 2021-2060 figure will reach about CNY 260 trillion (USD 36 trillion). The largest funding areas have been identified as power, transportation and construction.

Research on China’s funding needs for adapting to climate change is relatively limited. There is no data on the adaptation funds required to meet its updated NDC targets.

Dialogue Earth consulted Shao Danqing, a research associate at Peking University’s Macro and Green Finance Lab: “A trend is that financial aid to China from developed countries is gradually decreasing. For example, Japan and Germany, which have provided grants or concessional loans to China over the past decades, have gradually stopped or reduced their financial aid. Financial support from multilateral development banks to China is also expected to decline.”

Shao says China’s public funds are far from sufficient to meet the funding needs for addressing climate change. Therefore, blended financing mechanisms must be utilised, leveraging public funds to attract more private sector investment to bridge the gap and support a just transition.

“We call it concessional or catalytic funding, meaning we hope these funds can take on more risks or accept lower returns to attract private sector investment. This would help ensure that the risk-adjusted returns of climate projects – whether for mitigation or adaptation – can meet the needs of commercial capital,” she says.

Teng notes that, if the returns on climate projects could reach 8%, private sector capital would be highly motivated to invest.

Shao says China’s existing green finance standards and green industry guidance does not cover “transformation” activities that help carbon-intensive sectors decarbonise or enhance climate resilience – this needs to be developed.

Currently, the People’s Bank of China is leading the development of a national transition finance standard. This will help financial institutions better identify projects or enterprises eligible for transition financing support. It also covers low-carbon transition activities in the coal power sector.

Shao suggests China could, on the one hand, support other developing countries in addressing climate change through multilateral initiatives such as the Green Belt and Road Initiative and South-South Cooperation. On the other hand, China should explore mechanisms like blended financing to leverage more domestic private sector funds to support its own climate goals.

“As the largest developing country, China’s achievement of carbon neutrality will be a significant contribution to the global climate process,” she says.

First week of Baku talks marked by low turnout of leaders, Argentina’s withdrawal, and a gulf between blocs’ demands on a new finance goal. 

By Fermín Koop, November 15, 2024

COP29, the United Nations climate change summit, opened this week in Baku, Azerbaijan. With the smell of oil wafting from the city’s nearby refineries, representatives from nearly 200 countries will try to agree on a new goal for financing emissions reductions and climate change adaptation around the world.

In 2009, developed countries pledged that by 2020, they would collectively mobilise USD 100 billion per year to support climate action in developing countries. This target was only met for the first time in 2022, according to the Organization for Economic Cooperation and Development (OECD).

The new target that countries are aiming to adopt at COP29 will replace this USD 100 billion figure. But after the summit’s first week of talks, there is still a gulf between the positions of developed and developing countries on where the so-called New Collective Quantified Goal (NCQG) should be set, with first drafts of the summit’s finance text leaving multiple options open.

The G77 plus China, a negotiating group of developing countries that includes most Latin American nations, called for USD 1.3 trillion to be the new annual commitment from developed countries, and for this to feature specific funds for emissions reductions, adaptation, and loss and damage. In addition, the group is demanding that such financing should increasingly arrive in the form of grants rather than loans, so as not to generate further debt for already strained economies.

Similarly, the Independent Association of Latin America and the Caribbean (AILAC), a negotiating group of eight Latin American countries, called for a dedicated percentage of the agreed financing goal to be allocated towards the region. Other blocs outside of Latin America have made the same request, with some even putting numbers on their suggested shares: the 39-strong Alliance of Small Island States (AOSIS) is asking for at least USD 39 billion a year.

“Latin American countries are looking out for the interests of the region, calling for funds to be public, predictable and transparent, and to cover all sectors,” said Sandra Guzmán, founder of the Climate Finance Group for Latin America and the Caribbean (GFLAC).

The new target will support financing for emissions reductions in sectors such as energy and agriculture, as well as adaptation to the effects of climate change, from droughts to floods. In addition, by increasing funding, it would allow developing countries to pursue more ambitious actions in their updated nationally determined contributions (NDCs), their climate plans as part of the Paris Agreement, which are due for submission in 2025.

Studies have shown that developing countries need trillions of dollars annually to support climate action. According to one report, implementing their national climate plans will cost between USD 5 trillion and USD 6.8 trillion cumulatively by 2030. Other sources estimate this cost at USD 7.8 trillion for the same period.

“The goal must be set within the framework of climate justice, to ensure that the major climate debtors of the Global North channel fair, accessible and debt-free finance to the countries of the south,” said Carola Mejía, coordinator of the Climate Justice, Transitions and the Amazon at the Latin American Network for Economic and Social Justice (Latindadd), an NGO.

Little Latin American presence

Long flight times to Azerbaijan and domestic priorities have meant that few Latin American and Caribbean presidents have made the trip to COP29. Despite emerging as a prominent champion of the phase-out of fossil fuels at recent COPs, Colombian president Gustavo Petro cancelled his trip due to disastrous floods that have struck the country, while his Brazilian counterpart Lula da Silva has chosen to remain at home to attend the G20 summit in Rio de Janeiro.

Brazil’s vice-president Geraldo Alckmin and Minister of the Environment and Climate Change, Marina Silva, travelled to Baku to present the country’s new NDC. The Brazilian government pledged to reduce emissions by between 59% and 67% by 2035, a target they claim is in line with the Paris Agreement, but one that has been called into question by NGOs.

“It is much more than a simple emissions-reduction target; it reflects the vision of a country determined to be a protagonist in the new global economy,” said Alckmin. For Silva, the plan is part of a “new development paradigm for Brazil”, with a boost to the country’s bioeconomy and energy transition.

Brazil’s new climate plan had been much anticipated in the run-up to the summit, with attention turning to the country as it prepares to host COP30 in the northern city of Belém in 2025. But its NDC has met with a mixed response, with many criticising the apparent contradiction of the country seeking emissions cuts while planning to boost its oil production and exports.

Romain Ioualalen, campaigns coordinator at Oil Change International, argued that Brazil missed an opportunity to demonstrate climate leadership. “Brazil cannot say its plan is aligned with the Paris Agreement while it plans to increase oil and gas production by 36% by 2035,” he added.

In an analysis of Brazil’s plan, the NGO Observatório do Clima questioned the decision to present its target as a range, as it does not commit to or guarantee the level of emissions reductions. The government must explain how it will realise its commitment to achieve zero deforestation, and how it will address energy emissions, it added.

As part of the BASIC negotiating group with South Africa, India and China, Brazil also asked at the beginning of the COP to include an agenda item on “unilateral trade restrictive measures”, in relation to carbon taxes instituted by the European Union. The item was ultimately not included in the agenda, which was adopted late on the first day after hours of delays and disagreement among nations.

Colombia’s environment minister Susana Muhamad arrived in Baku at the end of the week, as did her Chilean counterpart Maisa Rojas. At a press conference, Rojas called for reforms to the global financial system, and for increased funding to support more ambitious climate action in developing countries.

Muhamad told Dialogue Earth that while new funding sources, such as the private sector, could be considered to meet the new target, developed countries must “substantially” increase their public funding. She also asked that the “debt crisis” of the developing world be considered, and echoed calls for a specific percentage of the new financing target to be allocated to Latin America.

In a move that made headlines, but may not arrive as a shock given its president Javier Milei’s open and repeated denial of climate change, Argentina withdrew its delegation from COP29 on Wednesday, without elaborating on its reasons. Argentina was the chair of the G77 plus China group in the finance negotiations before the COP, but stepped away from the role as the summit began.

Anabella Rosemberg, a senior advisor at Climate Action Network International, highlighted that Argentina was withdrawing only from COP29 itself, rather than the broader UN climate convention or Paris treaty. “So it is largely symbolic, and all it does is remove the country from critical conversations going on in climate finance,” she said. “It’s difficult to understand how a climate-vulnerable country like Argentina would cut itself off from critical support being negotiated here at COP29.”

Just transition and minerals in focus at COP29

At last year’s COP28 summit in the United Arab Emirates, countries agreed to make a “just and orderly” transition away from fossil fuels well before or around 2050. This year, discussions on the global energy transition are continuing in Azerbaijan, with an additional focus on critical minerals central to the transition, such as lithium.

Azerbaijan president Ilham Aliyev said at the opening of COP29 that oil and gas are “a gift from God” and questioned criticism of his country’s dependence on fossil fuel production and exports. Brazil’s Marina Silva responded by saying that “sugar is also a gift from God, but if we eat too much of it we will be diabetic”.

Gaston Browne, prime minister of Antigua and Barbuda, said countries must reduce both dependence on fossil fuels and the subsidies that support them. “Those who depend on fossil fuels do not want an accelerated transition and are putting the planet at risk. The only way to avoid crossing the 1.5C limit [of global warming] is an energy transition,” he added.

UN Secretary-General Antonio Guterres argued that while critical minerals are “a great opportunity to bring prosperity and eliminate poverty” in developing countries, they can also lead to “human and environmental rights violations without generating value-added chains” in these nations.

At COP29, Guterres presented a report on critical minerals produced for the UN by a panel of experts in September. The report contains a set of seven principles to underpin responsible, fair and sustainable extraction of critical minerals for clean energy supply chains.

“The COP29 financing goal must include concessional finance for the transition-mineral-producing countries of the Global South to achieve significant added value and address energy, infrastructure and skilled labour bottlenecks,” said Suneeta Kaimal, an author of the UN report and president of the Natural Resource Governance Institute.

COP29 is set to conclude next Friday, 22 November, with the second week dedicated to negotiations over the summit’s final agreements and texts.