COP29 host Azerbaijan establishes climate protection fund and plans levy on fossil fuels

Azerbaijan, the host of this year’s UN climate talks, has put a planned levy on fossil fuel production on hold and instead set up a fund to “invest” in climate protection measures in developing countries.

Azerbaijan, which is heavily dependent on revenues from the oil and gas sector, reportedly faced resistance from some oil and gas producing Gulf states to the planned levy announced in May.

The new fund, called the Climate Finance Action Fund, will receive annual contributions from fossil fuel producing countries and companies. The initial capital will be $1 billion, with members committing to make annual contributions in the form of fixed amounts or based on production volume, a statement said.

Based in the capital Baku, the fund will focus on climate projects in developing countries, supporting the next generation of national climate plans to limit global warming to 1.5 degrees Celsius and address the consequences of disasters caused by climate change.

Financial support for middle-income and poor countries to combat climate change will be at the heart of the UN climate conference in Baku, where the world must meet a deadline to agree on the new collective quantified target (NCQG) – the new amount that developed nations must raise each year from 2025 to support climate action in developing countries.

However, given the disappointing progress at the UN climate talks in Bonn mid-year, reaching a consensus will not be easy.

The COP29 presidency said 50 percent of the capital would go to climate projects in developing countries, with a focus on clean energy, energy efficiency, climate resilience and new technologies.

The other half will help meet members’ national climate targets to keep the 1.5 degree target within reach. Twenty percent of the proceeds will go to a Rapid Response Funding Facility, which will provide immediate, very low-cost, grant-based disaster relief.

“This facility will provide immediately available financial resources to address the consequences of natural disasters in small island developing States, least developed countries and other vulnerable developing communities,” the statement said.

Harjeet Singh, Global Engagement Director of the Fossil Fuel Non-Proliferation Treaty Initiative, said the announcement of a new fund clearly highlights the role of the fossil fuel industry in the climate crisis.

“However, the proposed bill dangerously provides a social license to continue extracting gas, oil and coal. This is a far cry from the robust accountability we have long called for to hold the fossil fuel industry to account for refusing and delaying climate action.”

“The COP29 Presidency’s plan for November’s climate summit lacks ambition to phase out fossil fuels and falls massively short of supporting a just transition for developing countries. True climate justice means holding the fossil fuel industry financially responsible for the destruction it has caused, not enabling its continued operation under the guise of tiny contributions to climate solutions,” he said.

The UN climate conference in Dubai last year ended with a global agreement calling for a move away from fossil fuels to achieve net-zero emissions by 2050.

In a letter sent to all signatories to the UN Climate Change Agreement earlier this week, Azerbaijan called for urgent political efforts to break the impasse in achieving the new climate finance target.

At the UN climate conference in Copenhagen in 2009, rich countries pledged to provide developing countries with $100 billion a year from 2020 to help them mitigate and adapt to climate change. But delays in meeting this target have eroded trust between developed and developing countries and are a constant point of contention at annual climate talks.

In May, the Organisation for Economic Co-operation and Development (OECD) claimed that developed countries had fulfilled their long-standing promise of $100 billion a year by providing nearly $116 billion in climate finance to developing countries in 2022, with nearly 70 percent of the money in the form of loans.

However, the international non-profit organization Oxfam said last week that total climate finance provided by rich countries in 2022 will not exceed $35 billion.

Developing countries argue they cannot be expected to cut their carbon emissions faster unless developed countries – historically responsible for climate change – provide more financial support. Rich countries are now expected to raise more than $100 billion, while developing countries, including India, are demanding trillions of dollars to combat climate change.