Azerbaijan to start climate fund with $500mn of oil money

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Petrostate Azerbaijan has made its first token step to marshal climate finance ahead of the UN COP29 summit it will host in November, with plans to raise “at least” $500mn for green projects.

Under the working title of “climate investment fund for future”, Baku intends to launch the venture with a contribution from Azerbaijan’s state oil company Socar, a senior COP29 official said. It would seek to raise further capital from other fossil fuel producers.

The amount pales in comparison to the $30bn fund announced by the United Arab Emirates at the last COP28 in Dubai, with aims to mobilise $250bn of private sector investment for climate action by 2030.

But COP29 officials said the Azeri fund would form a starting point for fossil fuel companies to contribute, by setting up a mechanism through which they could either donate lump sums or portions of revenue.

The move comes after the Azeri President Ilham Aliyev earlier this year defended the country’s “god-given” oil and gas reserves, arguing its fossil fuels would be needed for years to come because of European energy demand.

Several diplomats and negotiators have privately expressed concerns that Azerbaijan, which relies heavily on oil and gas revenues, is fundamentally reluctant to address the question of how to shift away from fossil fuels.

At COP28 in Dubai almost 200 countries agreed to transition away from fossil fuels “in a just, orderly and equitable manner” to reach net zero emissions by 2050, but little further progress has been made under the UN climate process towards this goal.

The senior COP29 official said any returns on investments from its climate-oriented fund would be cycled back into it, and Azeri officials were presently discussing whether 50 per cent of the capital should be ringfenced for developing countries worst hit by extreme weather events.

“We will, once the concept is ready, reach out to the parties we think could be potential contributors . . . We will be enquiring of all countries that produce and use fossil fuels to be part of the initiative,” the official said. He added that the fund would not constitute a levy on fossil fuel companies.

UN climate talks in Bonn in June, at the midway point before the COP29 summit, ended with recriminations between developing and developed nations about a new goal for climate finance.

The previous $100bn-a-year target set in 2009 was finally reached last year, two years behind schedule and after a reclassification of existing aid.

Big donors such as the EU and US have called on countries such as China and Saudi Arabia, which have made strides in economic growth, to contribute more funds in future. But this push has been met with fierce resistance on the grounds that the historical emissions behind climate change had been for the benefit of the wealthier economies.

The stalemate has left UN climate negotiators frustrated about the prospects for climate targets at COP29 to be upgraded to tackle the consequences of global warming.