COP29 host Azerbaijan launches climate fund, introduces fossil fuel levy

Azerbaijan, the host of this year’s UN climate talks, has shelved a planned levy on fossil fuel production and instead launched a fund to “invest” in climate action in developing countries.

Reports suggest that Azerbaijan, which relies heavily on oil and gas revenues, faced resistance from some oil- and gas-producing Gulf countries regarding the planned levy announced in May.

The new fund, the “Climate Finance Action Fund” (CFAF), will receive annual contributions from fossil fuel-producing countries and companies. Initial fundraising aims for $1 billion, with members committing to annual contributions as fixed sums or based on production volume, according to a statement.

Based in the capital city of Baku, the fund will target climate projects in developing countries, meeting the next generation of national climate plans to limit global warming to 1.5 degrees Celsius, and addressing the consequences of climate change-fuelled disasters.

Financial support to help middle-income and poor countries fight climate change will be at the centre of the UN climate conference in Baku, where the world will reach the deadline to agree on the New Collective Quantified Goal (NCQG) the new amount developed nations must mobilise every year starting 2025 to support climate action in developing countries.

But achieving consensus will not be easy, given the disappointing progress made on the issue at the mid-year UN Climate talks in Bonn, Germany.

The COP29 presidency said 50 per cent of the capital will go to climate projects in developing countries, focusing on clean energy, energy efficiency, climate resilience, and new technologies.