Which Countries Should Pay for International Climate Finance

The world needs trillions of dollars annually to combat climate change, but questions remain as to where that funding will come from. Most at stake are poorer countries that are the least protected - and hardest hit - from the increasing ravages of heat waves, storm surges and other extreme weather events exacerbated each year by climate change. Many of these countries lack the resources to undertake a rapid and just transition to a low-carbon, climate-resilient economy without external help.

Through the UN Framework Climate Change Convention (UNFCCC) and the Paris Agreement, countries have made several finance-related commitments, including a new fund for responding to loss and damage to help developing countries recover from extreme climate events. This year, countries are scheduled to set a new finance target aimed at bringing much-needed funds to developing countries. Known as the New Collective Quantified Goal (NCQG), it will replace the $100 billion target developed countries pledged to mobilize annually for developing nations until 2025.

These negotiations have led to a variety of questions, including which countries should help pay. Answering this question involves a number of considerations, including legal interpretations of the Paris Agreement and discussions of justice and fairness. To date, a list of the 23 mostly high-income countries, known as Annex II of the Convention, have been jointly responsible for making financial contributions that enable developing countries to achieve low-emission development and greater climate resilience. This list includes countries like the United States, Japan and Germany.

Now, developed countries are pushing for additional nations to also contribute, specifically nations that today have relatively high levels of wealth and emissions. Meanwhile, developing countries generally say that there is no legal mandate to discuss who should contribute to the new goal, arguing that the Paris Agreement states that the responsibility falls solely on developed nations.

Analyzing Countries' Climate Finance Responsibilities

Negotiating responsibility for climate finance is not new in the UN climate talks. Financial responsibility has generally been explained through a combination of historic responsibility - measured by emissions levels - and the capacity to pay - measured by levels of economic development. Developed nations, understood as Annex II countries, have typically been high on both these fronts.

However, in the 30-plus years since the countries were identified in Annex II, the world's per capita income has tripled, reflecting not just nominal, but real gains in living standards. Some non-Annex II countries now have wealth and emissions that are higher than some Annex II nations. Whether this new reality should alter the list of contributing nations will be a hotly contested element of the new climate finance goal negotiations at the upcoming UN climate change summit (COP29) in Azerbaijan this November.

To help contribute to informed discussions on where countries stand in terms of their historic responsibility and capacity to pay, WRI has created a climate finance calculator that generates scenarios based on a country's historical emissions and their income level. Evaluating different scenarios highlights the nuances needed to consider the level of responsibility for different countries.