Azerbaijan Launches $1 Billion Climate Fund Ahead of COP29

Azerbaijan announced the launch of a $1 billion climate fund aimed at supporting developing countries' new climate targets. The fund will be housed in Baku and managed by a multi-national board. Contributions are expected from 10 fossil-fuel producing countries and oil and gas companies. The fund seeks to enhance climate finance delivery.

Azerbaijan, the host of the upcoming U.N. COP29 climate summit, has unveiled a new climate fund targeting $1 billion to assist developing nations in meeting their new climate goals. The fund, based in Baku, will be overseen by a multi-national board of shareholders and aims to attract contributions from 10 fossil-fuel producing countries and major oil and gas companies.

Originally, Azerbaijan planned a levy on fossil-fuel production to generate funds but adjusted its strategy due to resistance from other countries. COP29 President-Designate Mukhtar Babayev emphasized the need for resource-rich nations to lead climate change efforts and called on donors to support the initiative to elevate climate ambition and action.

Finance will be a critical focus at the COP29 talks in Baku this November, with discussions centered on setting a new global climate finance target for transfers from wealthy to poorer countries by 2025. While Babayev did not disclose specific donor countries or companies, he confirmed Azerbaijan will contribute a founding amount.

The fund will allocate 20% of its investment-generated revenues to a Rapid Response Funding Facility designed to aid the most vulnerable nations during climate emergencies. Azeri officials pointed out that the fund would offer more direct and agile investment decisions compared to traditional multilateral development banks.

In the upcoming weeks, Azerbaijan plans to form a working group comprising economists and experts to devise a contribution formula and access process for potential donors and developing countries, respectively. Exceptions might be made for certain fossil fuel projects, aligning the NDCs with the Paris Agreement's target to cap global temperature rise at 1.5C.

The preceding U.N. climate summit concluded with a consensus on transitioning away from fossil fuels to achieve net-zero emissions by 2050. U.N. climate chief Simon Stiell stated that the success of COP29 depends significantly on advancing climate finance.

"Progress in Baku isn't just about green new numbers. It's about improving climate finance delivery to meet the needs of developing countries both now and in the future," he asserted.

(With inputs from agencies.)