Countries and companies involved in oil and gas extraction to be asked to join scheme aimed at tackling global heating.
Oil drilling equipment in the Caspian Sea near Baku, Azerbaijan, in 2017. The country is hosting the Cop29 UN summit this November. Photograph: Grigory Dukor/Reuters
Fossil-fuel producing countries and companies are being asked to pay into a new international fund to help poor countries cope with the effects of the climate crisis.
The climate investment fund is being set up by the Azerbaijan government, host country of the Cop29 UN climate summit in November.
The Climate Finance Action Fund will take financial contributions from fossil-fuel-producing countries and companies and use the money to invest in projects in the developing world that reduce greenhouse gas emissions and help build resilience to the impacts of extreme weather.
Yalchin Rafiyev, the chief negotiator for the Cop29 presidency, said: “Traditional funding methods have proven to be inadequate to the challenges of the climate crisis, so we have decided on a different approach. The fund will be capitalised with contributions from fossil-fuel countries and companies and will catalyse the private sector. Any developing country will be eligible [to receive money from] the fund.”
But contributions to the fund will be voluntary and no mechanism is proposed to force the countries and companies most responsible for greenhouse gas emissions to pay into it.
This falls well short of the levy on fossil fuels that some campaigners have been calling for. Bronwen Tucker, the public finance lead at the campaign group Oil Change International, said: “This is a dangerous distraction from the strong new climate finance goal and national plans that Cop29 must ensure for a fair, full and fast fossil fuel phase-out.”
However, setting up the fund at Cop29 does represent a first attempt within the UN climate negotiations to link fossil fuel-producing countries and industries, which produce the bulk of the world’s greenhouse gas emissions, with a responsibility to help poor countries pay for the consequences they face from the climate crisis.
Harjeet Singh, the global engagement director at the Fossil Fuel Non-Proliferation Treaty Initiative, said: “While the announcement of a new fund for developing countries echoes the longstanding demands for holding the fossil fuel industry accountable, it must not serve as a free pass for continued extraction of gas, oil and coal.
“The fossil fuel industry has caused the climate crisis and must be adequately penalised to pay for the transition and climate damages.”
Azerbaijan is seeking at least $1bn from at least 10 countries and big companies to capitalise the fund. The fund will be headquartered in Baku, the Azerbaijan capital, and its overseeing board will be made up of representatives from the contributors, and will be independent of existing multilateral development banks, including the World Bank.
Tucker said: “Polluters must pay for their climate crimes on the scale of trillions, not with a $1bn voluntary fund that gives Big Oil decision-making powers. Fossil fuel interests have knowingly and systematically blocked, delayed and undermined necessary climate solutions and shouldn’t have a seat at the table.”
Azerbaijan has not yet been specific about its own contribution to the fund, though it has pledged to make one. No other countries have yet signed up.
The fund will not invest in any fossil fuels, including gas. Any profits generated by the fund, for instance by investing in renewable energy, will be ploughed back into the fund, so there will be no opportunity for profit-taking by private sector investors and governments.
Bob Ward, a policy director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, warned: “The Climate Finance Action Fund could be regarded as climate-washing if it is intended to alleviate the pressure to phase out oil, coal and gas.”
Azerbaijan also made a series of other announcements on its presidency, including reiterating its wish for Cop29 to be a “peace Cop”, with the potential for requesting warring in November.
Simon Stiell, the UN climate chief, who has been visiting his home in Grenada where the houses of relatives were severely damaged by Hurricane Beryl, called on all countries to produce stronger plans to cut emissions, and to assist the poor countries worst hit by the climate crisis.
“The significance of this process [the Cop, or conference of the parties under the UN Framework Convention on Climate Change] is that it is humanity’s best hope of solving the climate crisis, achieving decarbonisation and building climate resilience,” he said. “This process does deliver results, as we have seen.”