While adaptation finance and Article 9.1 of the Paris Agreement received the most political attention among finance issues at COP30, deliberations on the alignment of global financial flows with climate action also reached and important outcome. Building on technical negotiations in the first week of COP30, the Presidency produced a decision establishing the Veredas Dialogue on the implementation of Article 2.1c and its complementarity with Article 9 of the Paris Agreement. This article unpacks this decision and opportunities for this new dialogue.
Background: Article 2.1c and the Sharm el-Sheikh Dialogue
Article 2.1c is one of the long-term goals of the Paris Agreement. It is “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. In short, it is the goal of aligning all finance flows with climate action. This means ensuring all investments, public and private, domestic and international, support, or are at least not inconsistent, with limiting global warming to 1.5 degrees and supporting climate resilience.
Work in earnest under the UN climate process on Article 2.1c only began after COP27. There, Parties established the Sharm el-Sheikh Dialogue (SeSD) on the scope of Article 2.1c and its complementarity with Article 9. The SeSD lasted three years until COP30, largely comprising workshops to discuss issues related to scaling up finance into climate action and scaling down finance that runs counter to climate objectives. A wide range of approaches were canvassed, including subsidy reform, green finance taxonomies, climate-related financial disclosures, green bonds, emissions pricing, climate budgeting, climate scenario planning, and more. Key cross-cutting issues have included the need to tailor approaches for different contexts, capacity building and finance to support implementation, and how to minimise potential unintended cross-border consequences of action taken at the national level.
The SeSD did not, however, lead to substantive outcomes to guide or accelerate implementation of Article 2.1c. While the co-Chairs of the process produced annual reports for consideration at COP28 and COP29, the accompanying decisions were only procedural in nature to support the continued dialogue. At COP30, however, the SeSD was concluded and Parties were mandated to decide on a way forward.
Lines of argument during the negotiations at COP30
Negotiations in Belém on Article 2.1 were dominated by two competing narratives. The first was that the urgency of realigning finance flows to respond to the climate crisis requires the UNFCCC to deliver more than just workshops to support achieving Article 2.1c. Specific suggestions built off the recommendations from the final report of the co-Chairs of the SeSD. This was largely advanced by developed countries and some high ambition developing country groups such as the Least Developed Countries (LDCs) Group.
The second narrative was based on two premises: 1) that a common understanding of the full scope and implementation of Article 2.1c remains elusive and 2) that safeguards are required to address the risk of approaches to realign finance flows driven by developed countries negatively impacting developing countries. These premises combined to support an argument that future work on Article 2.1c was either not worthwhile or should not go beyond a continued dialogue and workshops. This narrative was advanced most strongly by the African Group of Negotiators (AGN), the Arab Group, and the Like Minded Developing Countries (LMDCs).
The COP30 decision on Article 2.1c of the Paris Agreement
The decision on Article 2.1c at COP30 was a compromise drawn up by Brazil during the second week of negotiations in Belém as part of their final political package.
The primary component of the decision is to begin deliberations under the Veredas Dialogue. This will build off and have similar modalities to the SeSD. COP Presidencies will appoint developed and developing country Party co-Chairs each year, and at least one meeting will be held alongside the Subsidiary Body meetings in June. The decision also established an ongoing agenda item for future COPs.
There are also, however, several developments from the decision that will make future work on global finance flows different from what we saw during the SeSD.
Firstly, the COP30 decision took a substantive step forward through acknowledging the need for safeguards as raised by many Parties during negotiations. These included a) recognising the need to pursue all three long-term goals of the Paris Agreement in tandem, b) that Article 2.1c is complementary to and not a substitute for the provision and mobilisation of finance under Article 9, c) that efforts to align finance flows with climate action are nationally determined, d) that deliberations on Article 2.1c are facilitative and non-prescriptive and non-punitive, and e) the need for transparency while avoiding creating additional burden on Parties. These safeguards respond to the priorities of many developing countries and should provide guardrails to support Parties to move towards deeper deliberations on Article 2.1c in the coming years.
Secondly, the focus has changed in a subtle but important way. Whereas the SeSD was on the *scope* of Article 2.1c and its complementarity with Article 9, the Veredas Dialogue and future agenda item will be on the *implementation* of Article 2.1c and its complementarity with Article 9. This should help discussions to move forward and be more action oriented. It will also help Parties overcome those who have tried to weaponise the lack of agreement on the full scope of Article 2.1c as a means to block progress. While areas of divergence regarding scope should still be discussed further, Parties can use this implementation framing to advance discussions on the many aspects of Article 2.1c implementation where there is significant convergence.
Thirdly, both the Veredas Dialogue and the new agenda item on matters relating to the implementation of Article 2.1c are not time limited – they are open ended. This contrasts to the SeSD, which was initially only created for one year, and then extended for two years. This lack of future agenda certainty caused problems in negotiations by adding extra fuel to already heated agenda fights and making it difficult to advance towards more substantive outcomes. The new, open-ended horizon for this work should reduce some of the short-term heat from negotiations while unlocking more substantive long-term work.
Fourthly, the COP30 decision also establishes the Xingu Finance Talks. To be convened by the COP Presidency under the Veredas Dialogue, these will be an annual high-level round table between all interested Parties and non-Party stakeholders focused on the implementation of Article 2.1c and its complementarity with Article 9. It calls for the particular participation of the private sector, academia, and financial institutions. Creating a high-level engagement with external actors is an important step forward as many of the actions to implement Article 2.1c require changes in international financial policies that are governed by actors outside the UNFCCC. Higher level engagement is required to effectively influence these actors. Until now, deliberations on Article 2.1c have only been at a technical negotiator level.
Opportunities and priorities for Article 2.1c beyond COP30
The COP30 decision on Article 2.1c creates a stable platform for further work to help align finance flows with climate action in the years to come. Parties must seize the opportunities presented by this. In order to course correct and close the emissions and adaptation gaps it is critical to immediately begin realigning global finance flows with climate ambition.
One opportunity on the horizon is the second Global Stocktake (GST2). As the key driver of the Paris Agreement’s ‘ratchet mechanism’, it is critical to fully leverage the GST to accelerate implementation of Article 2.1c. GST1 was weak on both its backward looking assessment of progress towards Article 2.1c and its forward looking recommendations. The Veredas Dialogue and annual co-Chair reports provide an important platform to generate more insights on both of these fronts to feed into GST2.
Ongoing work through the Veredas Dialogue and future CMA agenda items also provide the opportunity to move towards agreeing some more tangible outputs that support alignment of global finance flows. A number of ideas were put on the table during COP30 and in the co-Chairs’ report, including a platform to help coordinate and enable Parties to share information on their implementation actions, and a framework (potentially inspired by the UAE Framework for Global Climate Resilience) to help assessing progress towards Article 2.1c. There was insufficient time to explore these in detail in Belém, but with safeguards now agreed and a more stable negotiation horizon, Parties can return to these ideas in a more considered fashion.
An additional focus for 2026 related to Article 2.1 should be alignment between the Veredas Dialogue and the various COP 30 ‘roadmaps’. These include the Baku to Belem Roadmap to 1.3T (B2BR) produced before COP30, and the roadmaps on deforestation and transitioning away from fossil fuels announced by Brazil during the closing plenary. These roadmaps need to be aligned to be effective, and the connection with the alignment of financial flows is fundamental to each. Brazil, in conjunction with the first co-Chairs of the Veredas Dialogue and incoming COP31 Presidency should coordinate closely to leverage the upcoming work on Article 2.1c to support this alignment.
A final element that should be prioritised within future work on Article 2.1c is inclusion. This is the case both for participation in the meetings and the content of them. The SeSD workshops, particularly in the final year, benefitted from the participation of a diverse range of Parties and non-Party stakeholders. This requires attention to maintain, as the COP30 decision only specifically refers to academia, the private sector, and financial institutions, and does not specify other key actors such as Indigenous Peoples, youth, and workers. Inclusivity is also key for the content of the meetings in order to maintain broad buy-in from Parties. Small Island Developing States (SIDS) and LDCs frequently commented during the SeSD that the content presented did not resonate with their special circumstances. The Veredas Dialogue will benefit from having presentations, topics, guiding questions specific to SIDS and LDCs. This will help secure stronger engagement from these groups in developing tangible outputs in future.
