Azerbaijan Launches Climate Fund Amidst Controversy

Azerbaijan, hosting the UN climate talks, has replaced a planned levy on fossil fuel production with the Climate Finance Action Fund (CFAF). Aimed at raising $1 billion, CFAF will support climate action in developing countries. Despite criticisms, the fund highlights the fossil fuel industry's ongoing role in the climate crisis.

Azerbaijan, the host of this year's UN climate talks, has abandoned its planned levy on fossil fuel production and instead initiated a new fund to invest in climate action in developing countries.

Reports indicate that Azerbaijan, heavily reliant on oil and gas revenues, encountered opposition from several Gulf countries over the proposed levy announced in May. Consequently, the new Climate Finance Action Fund (CFAF) has been created with annual contributions from fossil fuel-producing nations and companies, initially aiming to raise USD 1 billion. Set in Baku, the fund targets projects in developing nations to limit global warming to 1.5 degrees Celsius and address climate change-induced disasters.

At the upcoming UN climate conference in Baku, the CFAF will be central to discussions, focusing on financial support for middle-income and poor countries. Despite hurdles faced at previous climate talks, the commitment to distribute the capital equally between climate projects and members' NDCs remains strong. Harjeet Singh, from the Fossil Fuel Non-Proliferation Treaty Initiative, criticized the fund's design for potentially facilitating ongoing fossil fuel extraction. Last year's climate talks ended with a goal to transition away from fossil fuels, which Azerbaijan urged countries to push politically. Yet, achieving consensus on new climate finance goals remains challenging.

(With inputs from agencies.)