COP 29 at Baku showed how climate change and climate action are shaping the geoeconomics and geopolitical agenda. The tensions between the developed and developing countries are increasing as the world grapples with task of mitigation and adaptation even ten years after the Paris Climate Agreement. Meanwhile the target of keeping the global warming below the 1.5°C threshold seems unachievable.

The developed countries refuse to accept responsibility for cumulative emissions and instead are pressurising the developing countries to curb their emissions and undertake risky energy transitions. Climate finance is the heart of the ongoing tussle between the developed and the developing countries. They are extremely reluctant to part with finance or technology to help the developing countries in climate action.

Energy transition to net zero is the new game in town. Energy transition involves the de-carbonisation of the economy at a time when the majority of developing countries are experiencing great economic differences. Clean energy is being projected as the panacea for climate action disregarding the fact that clean energy technologies are still immature, expensive and monopolised by a few countries and a few companies. The developing countries simply cannot afford these technologies unless they are given help in terms of grants, soft loans and transfer of technologies. Taking loans for uncertain energy projects would only push them into greater indebtedness.

COP 29 has reinforced the long-held suspicion that developed countries are shying away from their responsibilities. At the COP 29, the developing countries were bitterly disappointed. What was agreed upon was:-

• Triple the finance to developing countries, from the previous goal of USD 100 billion annually to USD 300 billion annually by 2035.
• Secure efforts of all actors to work together to scale up finance to developing countries, from public and private sources to the amount of USD 1.3 trillion per year by 2035. These are known formally as the New Collective Quantified Goal on Climate Finance (NCQG),
• The language itself leaves room for considerable uncertainty. No one can guarantee that these goals, insufficient as they are, can be met.

While the US commitment to climate change is doubtful, Europe has been at the forefront of climate action. Trump, ever a climate skeptic, may take the US out of the Paris Climate Agreement once again. That will deliver a blow to climate change cause.

In 2008, the EU had agreed to bring down emissions by 20 percent from 1990 level. They claim that this goal was achieved three years ahead of time. In 2014, they announced a target of 40 percent reduction by 2030. In 2020, they scaled up their ambition by 55 percent by 2030. On paper, this seems impressive. But what is the reality? After the Russia-Ukraine war, some of them have restarted the thermal power plants.

The EU claims that their total contribution to climate finance amounted to Euro 23 billion in 2021 and 28 billion in 2023. This amount was given to developing countries. Grant Based Finance is about 50 percent. Can this claim be verified?

However, European policies with respect to developing countries are not necessarily helpful. The Carbon Border Adjustment Mechanism (CBAM), for instance, will have an adverse impact on the Indian economy.

It also appears that Europe is losing out to China in terms of clean energy investments.

According to the Global Landscape of Climate Finance report, the average annual climate finance reached USD 1.3 trillion in 2021-22, double of 2019-20 level. These represent only about 1 percent of the global GDP.

Investments in Clean Energy

The International Energy Agency (IEA) reported that global energy investment is set to exceed $3 trillion for the first time in 2024, with $2 trillion going to clean energy technologies and infrastructure. There are major imbalances in investment, for instance, and Emerging Market and Developing Economies (EMDE) outside China account for only around 15% of global clean energy spending.

Solar PV Supply Chain

China’s share in all the manufacturing stages of solar panels (such as polysilicon, ingots, wafers, cells and modules) exceeds 80%. This is more than double China’s share of global PV demand.

Global solar PV manufacturing capacity has increasingly moved from Europe, Japan and the United States to China over the last decade. China has invested over USD 50 billion in new PV supply capacity – ten times more than Europe.

Europe is responsible for over one-quarter of global EV assembly, but it is home to very little of the supply chain apart from cobalt processing at 20%.

China leads in terms of committed hydrogen projects and could account for almost 70% of 2024 capacity.