By: Meera Gopal 

Introduction

As the world navigates a year of significant political transitions, Asia’s urgent need for climate finance—driven by rising climate vulnerability and outsized emissions—should take center stage. While some climate finance can be secured locally, much of it will have to come from international sources, especially for countries with fewer domestic resources.

Notably, the international climate policy framework requires advanced and developed countries to provide climate finance support to developing countries. In reality, this has been a highly contested issue, as some developing countries have expressed concerns about the form and quality of finance provided. This year is particularly critical as parties negotiate the contents of a new climate finance goal under the United Nations Framework Convention on Climate Change (UNFCCC), known as the New Collective Quantified Goal (NCQG). This goal would replace the existing target, under which developed countries were to contribute $100 billion annually to developing countries; the original deadline for this contribution was 2020, but it was extended until 2025 because of repeated failure to meet the target.

This essay explores three crucial aspects of this issue. First, it offers a snapshot of climate finance flowing to developing countries and its particular relevance for Asia. Next, with elections reshaping leadership in the donor bases of the United Kingdom, the European Union (EU), and France, it examines how climate issues have featured in political debates and what the election outcomes might mean for future international climate aid. Finally, the essay considers the potential impact of these transitions on Asian countries and whether they could open new doors for Asia to advance its climate resilience.

Climate Finance Flows and Priorities for Asia

For Asia, climate finance needs far exceed current flows, which are estimated to range from USD 1 trillion to 2 trillion per year from now to 2030, while the Asian Development Bank estimates that actual annual flows for 2018–2019 amounted to only $519.9 billion. Moreover, most existing flows are in the form of loans, an inadequate instrument for many economies. Countries such as Pakistan and Sri Lanka are reeling from severe debt stress, and they are in no position to take on further debt. Thus, it is crucial that donors develop fit-for-purpose channels of climate finance that can meet the region’s needs.

Under the UNFCCC regime, countries categorized as developed are required to produce a biennial report on their climate finance contributions to developing countries. For the purposes of this essay, the submissions of the United Kingdom, the EU, and France all of which held pivotal elections this summer, provide insights into how these donor bases are addressing the global climate finance gap. The United Kingdom reported that it had committed USD 7.43 billion (GBP 5.8 billion) from 2015–2016 to 2020–2021, and it has committed to double this contribution between 2021–2022 and 2025–2026. In 2020, the EU reportedly committed almost USD 27 billion (EUR 23.5 billion), with 27% allocated to climate adaptation and 21% to crosscutting activities. And France reported that in 2020, it provided almost USD 5.54 billion (EUR 5.08 billion) in public climate finance to developing countries, through bilateral and multilateral sources, including USD 1.96 billion (EUR 1.8 billion) for adaptation. While significant, these flows are shaped by the political landscapes in the donor countries, which are now in flux.

These submissions show that the donor bases have significant climate-related investments and projects in Asia through bilateral partnerships, regional programs, and even contributions to regional multilateral banks, including the Asian Development Bank and the Asian Investment Infrastructure Bank. Some of these projects offer capacity and resilience building in climate-vulnerable countries in the region. For instance, through the 2020 European Green Deal, the EU has several initiatives in Central and Western Asia that are driving energy sector reforms and the transition to a low-carbon economy, in addition to forging cooperation on critical raw materials with countries in the region such as Kazakhstan. The EU also has several bilateral initiatives with India and China on clean energy and transport sectors. The EU has prioritized financial support for least developed countries (LDCs) and small island developing states in the Pacific. On a regional level, the EU has outlined its cooperation priorities and strategy, including on climate, for the Indo Pacific in a 2021 policy, Conclusions on an EU Strategy for Cooperation in the Indo Pacific.

The Just Energy Transition Partnership (JET-P) is another platform bringing together donor bases, focused on supporting coal-dependent countries to pursue a complete phaseout and transition to a clean energy economy. Notably, two of the four JET-P agreements have been signed in key Asian economies—Indonesia and Vietnam. However, several challenges have arisen as these agreements have begun implementation. Much of the public finance in the package takes the form of traditional development finance through loans, and only a small portion is planned to be concessional or in the form of grants.

The period beginning in 2024–2025 will be crucial, for both global politics and climate finance, as (1) countries move toward a negotiated outcome for the NCQG, and (2) countries submit their next iterations of their Nationally Determined Contributions (NDCs), which must reflect a progression in climate ambition.

The NCQG negotiations have been highly contentious. Donor countries, including the EU and the United Kingdom, have demanded an expansion of the “contributor base”—that is, the group of countries that are obligated to contribute climate finance—to include advanced developing economies such as China and the United Arab Emirates. This expansion is vehemently opposed by developing countries, including the major Asian emitters, through negotiating blocs such as the Like-Minded Developing Countries, which want to focus on the quantity and form of finance. Political transitions in these donor bases will influence their approach to COP29.

With respect to the NDCs, there are calls for more ambitious targets from developing countries, especially high emitters in Asia like China, Indonesia, and India. These targets should be in line with the agreed-upon decisions at COP28 to include economy-wide targets and all greenhouse gases in emissions accounting. Countries have also been encouraged to conceptualize their NDCs as investment plans by identifying priority sectors for each country and estimating climate finance needs for each of those sectors. For developing countries in Asia, this is a key concern—both for setting such lofty targets and for achieving them realistically. Platforms such as the NDC Partnership, which includes these donor bases as members, have specific programs in developing Asian countries that cater to NDC investment planning and catalyzing climate finance for NDC implementation. 

Will Political Transitions Influence Climate Cooperation Approaches?

Recent election outcomes in these donor bases could have a decisive impact on the way these countries approach their climate finance commitments and international cooperation on climate. Existing policies, partnerships, alliances, and commitments could be impacted by these transitions. While the EU and French elections saw the rise of right-leaning parties, implying a more conservative outlook on both issues, the British elections saw a landslide win for the Labour Party, implying more investment in climate policy and international cooperation. The EU and France are ironing out several domestic issues, including a new EU Commission and a National Assembly and cabinet for France, which could take several months. Thus, it remains unclear how the new governments will prioritize efforts on climate and international cooperation.

On the other hand, several Asian countries are undergoing their own political transitions, including India, Indonesia, Pakistan, South Korea, and Bangladesh. For instance, Bangladesh is already facing a political crisis with a new interim government in place following the ouster of Prime Minister Sheikh Hasina. Donor countries must take an ever-greater interest in understanding their development partners’ political transitions to better align and leverage opportunities. For example, India is a critical partner for all three donor bases, and it is particularly affected by these political transitions, with several ongoing projects and partnerships. India is also poised to be a bridging partner to the larger developing Asia bloc for these three donor bases through platforms like the recently concluded third iteration of the virtual Voice of Global South Summit, with its heavy focus on building climate resilience.

The United Kingdom

Under the leadership of Keir Starmer, the Labour Party has made a number of commitments on climate, development, and nature, in terms of both domestic policy and the United Kingdom’s role on the international stage. On international cooperation, it has promised to “rebuild Britain’s reputation on international development with a new approach” and to create a “Clean Power Alliance,” bringing together a coalition of countries to focus on energy security and clean supply chains.

One of the top priorities for the new government is to regain a leadership role in international climate diplomacy. However, experts believe that sudden changes to current policies on foreign aid are unlikely. In fact, the new government quickly slashed its aid allocation within the Foreign, Commonwealth and Development Office budget to meet the rising costs of addressing refugee and asylum seekers’ needs.  The new minister for development, Anneliese Dodds, has stated that the United Kingdom aims to restore overseas development spending to 0.7% of economic output—albeit with the caveat that this can only be achieved when “fiscal circumstances allow.”

Despite such budget cuts, David Lammy, the United Kingdom’s new foreign secretary, took an early trip to the ASEAN Summit and India. Climate and economic cooperation were top-priority issues discussed during these visits, indicating the United Kingdom’s intention to restore its role as a climate leader on the global stage and its keen interest in maintaining strategic partnerships. The United Kingdom could provide affordable finance for heavy emitters in the region to support their clean energy transitions. It could also support these countries in developing cleaner supply chains in light of trade measures, for example, by redistributing revenues from the United Kingdom’s Carbon Monitoring Adjustment Mechanism (CBAM).

The European Union

The EU elections saw the center-right European People’s Party secure a comfortable majority. The “Greens”—that is, political parties supporting a climate agenda—suffered substantial setbacks, especially in larger constituencies such as France and Germany. Amid this new political alliance, Ursula von der Leyen was reelected as president of the European Commission. Thus, recipient development partners can expect some continuity in the EU’s approach to climate finance. The EU’s contributions come from individual member states’ budgets and development financial institutions, as well as from its own budget and the European Development Fund and European Investment Bank.

Experts believe that climate ambition will continue to be a priority for the EU bloc under von der Leyen’s continued leadership. Her Political Guidelines for 2024–2029, presented to the EU Parliament in July, support this view by highlighting the need to step up green diplomacy and engage more with non-EU countries. The Conservatives, who were among the biggest winners in the election, support the EU Green Deal. President von der Leyen announced that she would put forward a Clean Industrial Deal in her first 100 days in office, with the aim of addressing investments to energy intensive sectors.

Internationally, drastic changes to EU’s approach to climate cooperation seem unlikely, given von der Leyen’s continued leadership. In fact, new Commissioner designates were unveiled last week and the team on climate and international cooperation makes clear that continuity is a high priority. The EU climate commissioner, Wopke Hoekstra, is being re-designated to the portfolio with a mandate to strengthen EU’s climate diplomacy and its leading role in international negotiations. Spain’s Teresa Ribera Rodriguez has been designated as the Executive Vice President for a clean, just and competitive energy transition. These appointments are subject to parliamentary approval, expected to take place in November.

The European CBAM has raised serious concerns in many developing countries, including those in Asia, that are dependent on income from exports. Support for these countries, both financially and technologically, as they work on greening their manufacturing and industrial sectors should be a priority for the EU, to ensure they are ready to meet the stringent requirements under the CBAM. Thus, it is not surprising that within the first month of the elections, the director-general of the EU Commission, Gerassimos Thomas, visited India to discuss EU-India cooperation on the EU CBAM and to discuss the challenges that Indian entities might face as the policy is implemented.

France

France saw a “snap election” that took place in two phases on June 30 and July 7, 2024. Contrary to predictions, the election produced a legislature split into three major blocs: the left-wing New Popular Front (Le Nouveau Front Populaire) alliance landed first place; President Emmanuel Macron’s centrist alliance, Ensemble, secured second place; and the far-right National Rally (Rassemblement National) and its allies came in third, with none of the partners gaining a clear majority. Michel Barnier from the right-wing bloc has been named the new French prime minister. It remains to be seen how this marriage of Macron’s centrist and Barnier’s right-wing ideologies will pan out for the French Assembly—starting with the tabling of the 2025 budget next month.

However, climate ambition was not one of the key focus areas of any of the parties during this election, because of perceived opposition to green polices across Europe. While commentators expect turbulence in France’s domestic politics, little has been said about its approach to international climate cooperation, except that budgetary allocations will now be governed by the Parliament, which could impact how international aid is approached in the near future.

Under President Macron, France led the reform agenda for the global financial architecture through the Summit for a New Global Financing Pact in 2023. France was one of the first countries to reallocate its share of International Monetary Fund (IMF) special drawing rights (SDRs) to the Resilience and Sustainability Trust, which is the IMF’s new platform supporting low-cost, climate-resilient development in low-income countries. However, domestic politics has impacted this momentum—in April 2024, President Macron made budget cuts to foreign aid to comply with EU fiscal rules on debt and deficit. The extent to which the new French Parliament will support Macron’s global climate leadership ambitions remains uncertain. Furthermore, the upcoming 2027 presidential elections starkly highlight Macron’s challenge to retain his position of power.

Takeaways for Developing Asia

Understanding current partnerships and alliances is key to grasping the implications of these elections for developing Asia. The submissions to the UNFCCC, including NDCs and those discussed earlier, shed much-needed light on these ties—all three donor countries have ongoing projects in the region, from South Asia to LDCs such as Cambodia, Timor-Leste, and Bangladesh, to the small island states of the Pacific.

The election outcomes demonstrate that, at present, only the United Kingdom is in a position to provide some measure of certainty and continuity to these existing partnerships. Through new platforms like the Clean Power Alliance, it should focus on bringing together all UK-led energy transition alliances under a single umbrella and engaging with developing countries that are high emitters, such as India, Indonesia, and the Philippines.

Political instability and uncertainty in France are casting a shadow over the country’s approach to climate finance and international aid, especially reform of the global financial architecture agenda. Similarly, in the case of the EU, the European Commission’s finalization of members will not be completed until the end of 2024, and it is too early to predict how the EU will approach issues relating to climate finance and international cooperation on climate. It will be interesting to see how Presidents Macron and von der Leyen pursue their ambitious global climate plans amid the new political realities of France and the EU, respectively.

As these donor bases look to firm up their approaches to international aid and climate finance, they could benefit from the following considerations with regard to their approach to developing countries in Asia.

First, the United Kingdom, the EU, and France should take appropriate steps to prioritize their relations with the Global South, and especially with developing Asia. Crucially, they will need to rely on and leverage existing partnerships to support and raise much-needed climate ambition and resilience in the region. This can be achieved through a multitude of channels, including rechanneling SDRs, offering more low-cost climate finance, and supporting reform of the international financial architecture.

Second, these countries could invigorate the multilateral financial system, including by committing or rechanneling more SDRs into the IMF’s Resilience and Sustainability Trust and contributing to the current replenishment of the World Bank Group’s International Development Association, which caters to the world’s poorest nations.

Finally, and most importantly, these donors should ensure that the outcome of the NCQG negotiations is implemented in a way that does not further alienate the interests of the developing country bloc. This can be achieved by working with partners in the region to identify the priorities and needs of these countries. These efforts would go a long way toward building trust within the region. On their end, developing Asian countries should prioritize the development of institutional capacity to be able to absorb climate finance in all forms by leveraging global platforms and bilateral engagements with these donor bases.