How discussions at COP29 could shape India's renewable energy future

Dubbed the ‘Finance COP’, the UNFCCC COP29, held in Baku, concluded with an important decision to deliver $300 billion per year under the New Collective Quantified Goal (NCQG) towards climate change initiatives in developing countries.

 

This decision will come into force from 2025, and developed countries must achieve this target by 2035. This is a below-par compromise, given that almost all developing countries have expressed significant dissatisfaction with the lower-than-expected sum of money committed. The final text also includes the last-minute addition of the ‘Baku to Belém roadmap to $1.3 trillion’, which calls on all actors, public and private, to scale up climate action.

 

COP29 also included other important decisions on carbon markets and a commitment to fully operationalise the Loss and Damage fund. The UNFCCC renewed its call to ramp up climate mitigation targets, which are currently not aligned with scientific targets.

 

The goal of tripling renewable energy by 2030, set at COP28, depends on urgently mobilising international finances for the developing world. Without this support, emission reductions and resilient energy infrastructure will not be possible. Despite the urgency, the pace and scale of financing for these initiatives lag significantly.

 

For many developing nations, the delay and gap in achieving even the modest $100 billion annual climate finance target — now pushed to 2025 — has been a bone of contention. This becomes crucial at a time when only $220 billion out of the total $2 trillion (11 per cent of the total) global renewable energy investments are targeted towards developing economies. Moreover, the shortfall undermines trust in global commitments, raising questions about the feasibility of achieving larger goals like the NCQG.

 

The N.K. Singh-Larry Summers report highlights that an additional $3 trillion annually is required by 2030 to achieve global climate and sustainable development goals. Of this, $1.8 trillion, primarily focusing on infrastructure investments, would support the deployment of renewable infrastructure, while $1.2 trillion is allocated for achieving other sustainable development goals (SDGs), wherein energy's role as a key enabler of development is becoming increasingly evident. Additionally, concessional and official development assistance (ODA) will be vital in supporting these efforts.

 

According to WRI, the NCQG should build on existing finance commitments, given the complexity of the discussions around scope, scale, and transparency. Political will and coordinated action across forums like the G20 will be important to drive the process. The leaders’ agreement at the Rio G20 Summit to scale up climate and energy transition actions is a testament to that. The declaration also highlighted the need to mobilise enhanced low-cost financing for developing economies as essential to meet global climate goals.

 

Renewable energy (RE) is the lynchpin in the global decarbonisation strategy if we are to remain below the 1.5°C threshold. Yet, the barriers to accessing finance remain daunting. A recent report by the International Energy Agency (IEA), for instance, highlights the fact that the debt for large RE projects in developing countries is twice the cost in developed countries. Distributed renewable energy (DRE) systems face even steeper costs, exacerbated by the perception of higher risks.

 

The financial disparity stems from two main factors: a perceived lack of “bankable projects” and investor concerns around regulatory and policy uncertainties in developing markets. For example, Africa, which needs to expand its RE capacity by 4.5 times by 2030 to meet global targets, struggles to attract capital at affordable rates. Similarly, India and other emerging economies such as Brazil, the Philippines, Indonesia, Saudi Arabia, Nigeria, and Algeria face challenges in achieving their respective 2.6x and 3.4x growth targets.

 

If the global goal of tripling RE is to be met, finance must flow more freely to developing countries. Addressing systemic challenges like risk perception, barriers to tech access, designing projects of international standards, and information asymmetry is crucial. The 11 NCQG meetings have already emphasised these points, underscoring the urgent need for robust fiscal and monetary mechanisms to mobilise the trillions required for the RE sector in the coming years.

 

The IEA report highlights the failure of mechanisms and institutions such as development finance institutions (DFIs) and international financial institutions (IFIs) to mobilise large-scale finance effectively. This created an opportunity for the COP29 Presidency to set the ground for meaningful change. As a start, there were discussions on measures to mitigate investment risks, align energy transition policies, and enhance project bankability. Negotiators could have used these to unlock significant public and private funding, but $300 billion is the maximum that could be attained.

 

Private sector finance is critical for achieving RE targets. For this, the private sector needs clear signals in the form of fiscal measures like tax breaks, guarantees, and non-fiscal measures, such as clearly defined regulatory processes, to confidently invest in RE projects and further reduce the risk premium in developing markets.

 

Finance discussions are part of a complex, multi-year process. There is a big gap between the financial needs and what was committed at Baku for the developing world, but the window for ratcheting up the commitment to $1.3 trillion has also been left open. The current tsunami of disenchantment around the lack of ambition in finance should pave the way for action to ensure that COP30 at Belém leads to an outcome in line with the trillion-dollar target championed in most global studies.

 

Tirthankar Mandal is Associate Director of Energy Policy, and Deepak Krishnan is Deputy Director with the Energy Program at WRI India. Views expressed by the authors are personal.

 

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