The 29th Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC), held in Baku in November 2024 and dubbed the “Finance COP,” established a new Collective Quantified Goal on Climate Finance (NCQG). The agreement replaces the outdated 2009 pledge under which developed countries committed to providing $100 billion annually by 2020 to support developing nations in reducing emissions and adapting to climate change.

That target was never met, and the global climate finance gap has since widened. Current estimates suggest that between $500 billion and $1 trillion is required annually for climate mitigation and adaptation. After negotiations that extended 33 hours beyond the deadline, parties agreed to mobilize at least $300 billion per year for developing countries by 2035, with developed nations expected to take the lead.

While the agreement marks progress after years of stalled discussions under the Paris Agreement, it fell short of expectations for many developing countries. The shortfall may widen further following the anticipated withdrawal of the United States from the Paris Agreement in January 2025.

One of the most contentious issues at COP29 was whether developing countries should contribute to the Green Climate Fund. The final declaration encourages voluntary contributions, while criteria for mandatory participation will be discussed at COP30 in Brazil in 2025. Potential contributors include emerging economies classified by income levels and per capita emissions, a group that includes Gulf countries such as Qatar, Saudi Arabia, and the United Arab Emirates.

Although Gulf states are classified as developing, or non-Annex I, countries under the UNFCCC and are therefore not obligated to contribute, their wealth has made this status controversial. While voluntary contributions remain possible, mandatory obligations are unlikely to gain acceptance. Gulf countries face competing domestic priorities, including economic diversification, decarbonization, and addressing severe climate vulnerabilities.

Across the region, governments are pursuing ambitious diversification strategies to reduce dependence on oil and gas revenues. These plans span tourism, infrastructure, logistics, entertainment, and digital sectors and require investments worth hundreds of billions of dollars. Much of this transformation is state-led and financed through hydrocarbon revenues, at a time when oil price volatility is placing growing pressure on public finances.

The Gulf also faces a climate paradox. It is among the world’s most climate-vulnerable regions, grappling with extreme heat, water scarcity, and food insecurity, while remaining economically dependent on fossil fuels. Oil wealth has enabled adaptation through technological solutions such as desalination and food imports, but the global push to transition away from fossil fuels threatens the region’s long-term fiscal stability.

Despite resisting mandatory climate finance obligations, Gulf countries are significant investors in renewable energy and clean-energy projects globally. This reflects a preference for climate action that aligns with national interests rather than multilateral financial commitments.

Ultimately, Gulf countries are likely to pursue climate finance strategies that support economic diversification and domestic resilience. By investing in renewable industries and global clean-energy partnerships, they can contribute to climate action while safeguarding long-term socioeconomic stability.