Editorial 1: All eyes on Baku and the climate finance goal

Context

With developing countries burdened by the climate crisis they did not cause, the critical question is whether negotiations on global climate finance will deliver outcomes or just promises.

Introduction

The New Collective Quantified Goal (NCQG) will be a key determinant of COP29 (also touted as a ‘finance COP’) turning out to be successful. The foundation of climate finance actions is unequivocally centred on addressing the “needs and priorities of developing countries”, as mandated in Article 9 of the Paris Agreement. NCQG, and set to be finalised at COP29, will shape the future of climate finance. COP29 is being held in Baku, Azerbaijan, from November 11 to 22, 2024.

Unresolved battles

• Differing Positions: In the debate over the NCQG, countries with diverse interests are taking sharply differing positions, as highlighted in the recent high-level ministerial dialogue on NCQG ahead of COP29.
• Key unresolved issues include
  •  the structure and the scope of the NCQG,
  • the scale of financial contributions, and
  • time frames, and sources.
• Equity in climate finance: Developing countries insist that the financial burden must not shift unfairly onto them.
  • They emphasise the responsibility of developed countries to provide support,
  • laying stress on the need for equity in climate finance, with a balance between adaptation and mitigation.
• Target preferences: Their position favours clear, quantitative targets, with a focus on public finance, grants, and concessional loans, alongside specific, predictable time frames of either five or 10 years.
• Position of developed countries: In contrast, developed countries push to broaden the contributor base, advocating for a more inclusive approach to climate finance.
  • They prioritise outcome-driven strategies, targeting low emissions and climate resilience, while exploring innovative financing and flexible, multilayered finance structures.

The $100 billion annual climate finance pledge

• Missed deadlines and distrust: made in 2009 and extended to 2025, has been a glaring source of distrust.
  • Developed countries missed the original 2020 deadline, only meeting the target in 2022, undermining faith in their commitments and leaving developing countries struggling with the consequences of delayed action.
  • Moreover, the $100 billion target is woefully insufficient. Trillions are needed. The Standing Committee on Finance estimates that for 48% of costed needs from 98 parties, the amount required for climate action ranges between $5.036 trillion and $6.876 trillion.
• Reality of the $100 billion pledge: Although the OECD reports that the $100 billion goal was met for the first time in 2022, with developed countries mobilising $115.9 billion, the reality exposes serious flaws.
  • There are insufficient resources for adaptation, and the over-reliance on loans, instead of grants, is pushing vulnerable countries further into debt.
• Grants-based public finance must be the core of climate finance, with concessional loans supplementing but not replacing it.
• Private investmentlimitations:  is useful for clean energy but falls short in adaptation projects, where the returns are less clear.
  • This investment bias towards mitigation leaves crucial adaptation efforts such as infrastructure resilience and disaster management severely underfunded.
• Grants-Based Public Finance: Accessing funds from entities such as the Green Climate Fund and Global Environment Facility remains a significant hurdle for developing countries, hindering their ability to adapt.

Issue with expanding the contributor base

• Proposals for expanding contributor base: Discussions on expanding the contributor base for the NCQG raise significant concerns regarding equity and the effectiveness of climate finance negotiations.
  •  According to submissions on the new collective quantified goal on climate finance, Switzerland and Canada have proposed expanding the contributor base to include additional countries based on criteria such as emissions and GNI per capita (PPP).
  • The Canadian and Swiss proposals largely seek to target China along with oil-producing countries such as Bahrain, Brunei, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates.
  • Considering climate change impacts, aspects such as vulnerability, energy poverty and human development are extremely important.
• Risk of delays and stalled progress: The discussions on expanding the contributor base are not new and were pushed during the Paris Agreement talks.
  • Developed countries argued that wealthier nations should step up, citing shifting global economies.
  • The developing countries pushed back, seeing it as an attempt to sidestep the core principles of equity and common but differentiated responsibilities that underpin climate negotiations.
  • This move was seen as a threat to dilute accountability, shifting the burden away from those historically responsible for the climate crisis.
  • The discussion on the contributor base exceeds the intended mandate, risking delays in crucial negotiations.
  • Given the pressing need for climate action, this debate risks stalling progress at COP29.
• NCQG and climate finance commitments: The foundation of the NCQG and climate finance commitments should be firmly anchored in Article 9 of the Paris Agreement, which mandates a balance between adaptation and mitigation finance, emphasising public and grant-based finance for adaptation to avoid increasing the debt burden on developing countries.
• Shifting narrative by developed countries: Yet, developed countries are advancing a narrative focused on “low greenhouse gas emissionsand climate-resilientdevelopment”, which carries significant political implications for their legal obligations under the Paris Agreement and the United Nations Framework Convention on Climate Change.
  • This narrative shift appears to be an attempt to dilute explicit responsibilities by broadening the scope of interpretation.
  • Such a shift undermines both the spirit and the letter of Article 9 of the Paris Agreement, violating the principle of pacta sunt servanda, which demands that treaties and agreements be upheld in good faith.
• Updated definition of climate finance: The Standing Committee on Finance (SCF) has updated the operational definition of climate finance.
  • The current definition of climate finance is “Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases,
  • aims at reducing vulnerability, increasing adaptive capacity, and
  • mainstreaming and increasing resilience of human and ecological systems to negative climate impacts, and
  • includes financing for actions identified in a country’s nationally determined contribution, adaptation communication, national adaptation plan, long-term low-emission development strategy, or
  • other national plan for implementing and achieving the goals of the Paris Agreement and the objective of the Convention”.
• Issue of Additionality: The absence of an explicit reference to additionality in the adopted definition is a critical oversight, as it leaves room for ambiguity on whether climate finance constitutes new and incremental support.
  • Finance refers to the targeted allocation of public funds from developed to developing countries to support climate mitigation and adaptation, while investment involves the allocation of capital with the expectation of profit, which may not align with climate priorities.
  • Counting private investments as part of the NCQG risks diluting the accountability and the responsibility of developed countries to provide clear, targeted, and equitable climate finance, as private capital often lacks the public purpose and oversight essential to meeting international climate objectives, especially adaptation.
  • Having common accounting frameworks continues to be critical.

Way Forward: On the NCQG

• Developing countries need not only finance but also technology transfer and capacity building as a means of implementation to support both mitigation and adaptation.
•  However, procedural barriers within multilateral mechanisms, which often prioritise ‘value-for-money’ over ‘need-for-money’, can hinder their access to funds.
• As COP29 approaches and the NCQG is set to be finalised, the negotiations will decide if climate finance truly addresses the urgent needs of developing countries burdened by the climate crisis they did not cause.

Conclusion

The NCQG’s success hinges on whether it restores faith in multilateralism and rebuilds the fractured trust between developed and developing countries. If the process fails to account for historical responsibility, the unique challenges of developing countries, and the need for capacity building, it risks widening the divide. As the world heads towards Baku, the critical question remains: will the negotiations on global climate finance deliver just outcomes or just promises? It is a global responsibility to cater to climate goals as it will cater the entire humanity.

Editorial 2: India, Pakistan and modifying the Indus Waters Treaty

Context

Given the lack of trust between the two countries, renegotiating the IWT to review and make changes might prove difficult.

Introduction

India’s move to serve formal notice on August 30, 2024, in line with Article XII (3) of the Indus Waters Treaty (IWT), underlines its concerns about meeting ever-increasing domestic water needs in a sustainable manner. The notice is to review and modify the treaty to address India’s specific concerns relating to altered population demographics, along with agricultural and other uses apart from the need to accelerate the development of clean energy to meet India’s emission rights.

• India has also mentioned in the notice that the impact of persistent cross-border terrorism in Jammu and Kashmir is impeding smooth operations of the Treaty, undermining the full utilisation of its rights in the Indus.
• Article XII, which allows modification in the treaty from time to time, lays down a very high threshold:
  • ‘a duly ratified treaty concluded for that purpose between the two Governments’.
• If one goes by the plea made by India and Pakistan during the Kishenganga arbitral award 2013,
  • it appears unlikely that Pakistan and India will reach a modification formula that is to their satisfaction.

Divergent approaches

• India’s Perspective (Upper Riparian): India, as the upper riparian, treats optimal utilisation as the object and the purpose of the IWT.
• Pakistan’s Viewpoint: This is opposed to Pakistan’s (the lower riparian) understanding of uninterrupted flow to its side.
• Resulting claims and counterclaims: This divergent approach relating to the interpretation of the IWT’s purpose is one of the factors responsible for the claims and counterclaims by India and Pakistan over water use.
• The Hague based Permanent Court of Arbitration (PCA) did not side with the plea of ecological harm raised by Pakistan under Article IV (6) of the IWT.
  • It allowed India to build hydropower projects on the Kishanganga. But the Tribunal has added a caveat:
    • that India has to maintain a minimum nine cubic metre a second flow.
  • India has 33 hydro-power projects, in either construction or planning phase, along the western tributaries.
  • The use of western rivers for hydro-power generation is permitted under the IWT but the crucial point is about India maintaining minimum flow.

Challenges in managing resources

• Objective: Ensuring optimum utilisation and maintaining minimum flow would require better management of the entire Indus Water Basin, resulting in enhanced water resource.
• Challenges in the IWT Structure: Meeting these goals is remote in the given structure of the IWT, which divides the separation of the Indus Basin into eastern and western waters.
  • India has proprietary rights in the eastern rivers (Article II, Ravi, Sutlej and Beas) while
  • Pakistan has proprietary rights in the western rivers (Article III, Indus, Jhelum and Chenab).
• Historical background: The idea of partitioning the rivers was driven by historical contingency relating to Partition and the appeal to the Indian and Pakistani leadership as the only rational strategy.
  • The partitioning of the river basin essentially severed hydrological relationships between the rivers and their tributaries,
  • which not only made integrated water resources management elusive but also led to either minimal or no cooperation.

No Harm Rule and Customary International Law

• IWT and No harm rule: Although the IWT does not have a provision relating to no harm rule, it still binds both the riparians as the rule is a customary international law.
• Obligation not to cause harm: The obligation not to cause significant harm is a due diligence obligation — it amounts to saying that both riparians have to take every appropriate measure to prevent harm while undertaking a hydropower project or projects on the shared water course having a potential transboundary impact.
• ICJ Judgment in the Pulp Mills Case (2010): The International Court of Justice (ICJ), in the Pulp Mills on the Uruguay river case (2010) has identified conducting a transboundary environmental impact assessment (EIA) as an essential requirement of customary international law for projects or activities with a potential for transboundary effects.
  • This judgment amounts to saying India and Pakistan will have to undertake EIA if a project has potential transboundary effects.
  • The ICJ did not identify the core components of an adequate EIA.

Equitable and reasonable utilisation (ERU) of international watercourses

• UN watercourses convention: The Rule relating to equitable and reasonable utilisation (ERU) of international watercourse, which is enshrined in Article 5, and the factors and circumstances for consideration to arrive at an ERU in Article 6 of the 1997 UN Watercourses Convention can guide both the riparians to meet unforeseen circumstances.
• Impact of climate change: The ERU may be leaned on to deal with unforeseen effects of climate change such as depletion of glacial reserves which cause a 30%-40% decrease in the Indus’s water flow.
• Proposal for review: The proposal to review should consider the provision in Article VII.1c which explicitly provides that if both the parties are in agreement, they can cooperate in joint engineering projects along the river.
• Benefits of joint projects: Joint projects that are appropriately designed and operated could offer a chance to mitigate water variability that arises from climate change.

Conclusion: Some suggestions

Given the lack of trust between the two parties, renegotiating the treaty to review and make modifications might prove difficult. A suggestion could be using the IWT’s formal negotiation procedures to arrive at a memorandum of understanding and other cooperative avenues that address issues as they arise, while using the treaty as a structure to organise their development of the basin (N. Zawahiri and D. Michel, 2018). Effective management and cooperation are crucial for resolving water disputes.