NCQG – The Quest for Quantum and Quality.

As the “Finance COP” kicks off, the centerpiece of discussion – NCQG is capturing global attention. For the first time since Copenhagen Accord, climate finance is under revaluation, with high hopes attached for advancing the critical support developing nations need to combat climate challenges. The key point of deliberation will be the scale or the quantum of the NCQG—a figure that, under the Paris Agreement, must start from a minimum of $100 billion per year. To establish an ambitious but achievable target for the NCQG, various government submissions and expert analyses have proposed figures that reflect the priorities and needs of recipient nations. Even the most conservative estimates suggest annual mobilization of no less than a trillion dollars. This vast financial requirement, paired with the urgency of climate action, has placed the establishment of a responsive, realistic quantum squarely at the center of COP29’s focus. Yet just as critical, if not more so, are the mechanisms that will guide the finance delivery in a way that truly aligns with the needs and priorities of the receiving countries.

Lessons from the previous attempt to mobilize $100 billion per year shows that it took over a decade to reach the target, and even then the delivery mechanisms drew widespread criticism for inefficiencies. Thus, a quantum with a demanded increase 10 times the size of prior efforts will need an ambitious target as well as far stricter mechanisms and clearly defined methodologies to ensure transparent, supportive, needs-based, and accountable delivery. The struggle for the negotiating parties is therefore not just limited to ensuring sufficient quantity of the finance, but also adequate quality specifically in terms of limiting debt financing and enhancing accountability of reported finance.

For many developing nations already facing macroeconomic challenges, debt-based financing often exacerbates fiscal strains and limits the capacity to respond effectively to climate impacts. Thus, country coalitions like the Least Developed Countries (LDCs), Small Island Developing States (SIDS), the African Group of Negotiators, and G77 + China are in concert pushing for grant-based or highly concessional financing under the NCQG framework. Their common call reflects an urgent need for climate finance mechanisms that support climate vulnerable countries without deepening economic disparities or piling onto existing financial burdens.

The strong and unyielding stance for grant-based financing is driven by the troubling trend: major climate finance donors continue to prioritize loans over grants. Between 2015 and 2020 alone, billions of dollars were issued as market-rate loans to vulnerable economies, resulting in $11.5 billion in debt added to already-stressed nations like Pakistan, Egypt, Sri Lanka, Nigeria, and Kenya. In 2022—the year the $100 billion climate finance target was declared met—the majority of the public climate finance (69% or $63.6 billion) were again delivered as loans. This approach, framed as assistance, has been widely criticized as exploitative and counterproductive to the true purpose of climate finance i.e. to compensate for developed nations’ historical emissions that caused climate change. In retrospect it is meant to enable adaptation measures to fortify communities against climate impacts in vulnerable countries, as well as support low-emission development pathways to ensure that their development mitigates and not contribute climate crises thus aligning with the 1.5 °C target. However, with loans adding repayments to the equation, critical resources are spent in debt servicing rather advancing climate action.

In cases where the alternative to loan financing is indefinite delays or the cancellation of critical projects, loans may be essential. However, these should be extended with responsible lending practices, highly concessional terms and manageable repayment timelines. But under current practices, the repayment of climate-related debt incurred to developing nations is not sustainable—particularly for adaptation projects that do not generate significant revenue. Moreover, the issue of “tied aid” adds further complexity. Under such arrangements, recipient countries are often required to procure goods or services for financed projects directly from the donor nation, funneling money back to wealthier countries and directing crucial resources away from local needs. This approach is widely seen as a contradiction of the principles of climate finance, locking developing countries into cycles of dependency rather than empowerment.

Real climate finance must prioritize grant-based support and facilitate concessionality to help developing countries tackle adverse impacts effectively, without deepening their financial burdens. This shift is essential if the NCQG is to truly serve the needs of vulnerable nations and support effective adaptation and mitigation efforts on their terms. The Paris Agreement called for the use of “a variety of sources, instruments, and channels” to drive climate finance, yet the specifics remained undefined. Whether the NCQG will address these details is still in question, especially after the growing recognition that loans can weigh heavily on already debt-stressed economies.

Another key area needing ‘sharper specifics’ under the NCQG is accountability and transparency around what truly qualifies as climate finance. In the past, financial flows labeled “climate-relevant” have often been criticized for lacking clear connections to specific climate adaptation or mitigation objectives. Analysis of OECD data, a frequently referenced data source for climate finance that racks progress on request of donors, reveals a notable lack in project-level details as justifications for climate relevance, making it challenging to verify if mobilized funds genuinely serve climate goals.

Additionally, although the Common Tabular Format (CTF) within UNFCCC’s reporting structure requires donors to specify how funds address climate needs, the lack of an agreed-upon definition of climate finance limits this assessment, leaving key element of specificity insufficiently detailed. This issue highlights the broader problem: without a standardized accounting methodology, climate finance data aggregation remains inconsistent. The UNFCCC’s Standing Committee on Finance, in its latest Biennial Assessment, underscores that diverse methodologies across parties and aggregator organizations create obstacles in evaluating overall progress toward climate finance goals.

A striking example of how accounting discrepancies skew reported figures is visible in the contrasting estimates from OECD and Oxfam. While OECD reported that developed nations met the $100 billion annual target with $115.9 billion jointly mobilized in 2022, Oxfam recalibrated this figure using a stricter approach, factoring in grant equivalence and discounting for climate relevance, and estimated the real value closer to $43.5 billion. Even among donors, the undefined methodologies are providing grounds for inconsistent reporting and hindering definite indication of the actual assistance provided. The situation underscores the need for refined, accountable metrics that accurately reflect donor contributions to climate finance and provide clearer insight into funds’ actual impact on climate objectives.

Further compounding the issue, are the mounting concerns about the “rebranding” of development aid as climate finance. In fact, detailed assessments reveal that only 7% of reported climate finance is genuinely additional; the remaining 93% may represent funds redirected from existing development commitments, such as healthcare, infrastructure, and poverty alleviation. This shift has raised red flags, as the promise of climate finance was to provide new and additional funding—not to siphon resources from existing development assistance. Boosting climate finance should never come at the expense of development goals.

The uncertainty around accounting practices has left the $100 billion climate finance target mired in skepticism, often deepening the mistrust between donors and recipients. If NCQG is to stand a chance at mobilizing the immense sums needed, the rules around accounting must be firmly established—no more guesswork, no more ambiguity. As the climate finance landscape evolves, many are watching closely to see if the NCQG will set a new precedent by prioritizing finance instruments that empower rather than encumber developing nations.