Fastexy Exchange|Money will likely be the central tension in the U.N.'s COP27 climate negotiations

As the United Nations climate conference opens in Egypt,Fastexy Exchange the most critical talks will likely focus on the soaring costs of limiting — and adapting to — global warming, especially in the world's most vulnerable countries. It's a contentious conversation more than a decade in the making.

In 2009, industrialized countries pledged to provide developing nations with $100 billion a year in climate financing by 2020. The agreement is rooted in the fact that developed countries generated most of the heat-trapping pollution now in the atmosphere, while developing nations have already begun to bear a disproportionate share of the harm from extreme weather.

That 2020 deadline came and went without rich countries delivering on their promises.

Global efforts to limit climate change are in jeopardy without more aid, experts say. Developing countries need money to move to renewable energy so that their economies can grow without driving up greenhouse gas emissions. They also need funding to deal with the impacts they're already facing from rising temperatures. Scientists say it's likely climate change helped fuel floods in Pakistan that killed at least 1500 people this summer, and that it contributed to torrential rain that triggered floods and landslides in South Africa.

Now, rampant inflation and an energy crisis caused by Russia's war in Ukraine could complicate efforts to convince developed nations to make good on their financial commitments. That's to say nothing of the need to boost future obligations in line with the trillions of dollars that developing countries will actually need to prepare for a hotter Earth.

"The challenge is going to be, how do we maintain momentum when there are so many short-term crises and pressures, and yet the climate crisis is intensifying?" says Amar Bhattacharya, who is part of an independent group of experts that was convened ahead of COP27 to advise conference leaders on how to increase climate financing.

Despite the turmoil, rich countries face pressure to come up with the money they promised in order to keep developing nations on board with efforts to cut global emissions, says Bella Tonkonogy, a director at the Climate Policy Initiative, a nonprofit that works with governments and businesses to promote economic growth while addressing climate change.

"Developed countries know that if we are to reach our global emissions reduction targets that everybody has signed up to, that developed countries need to have credibility and need to have trust established with developing countries," says Tonkonogy. "And this question of finance is one of, if not the most critical components of establishing that trust."

Observers call for rethinking climate finance

The latest tally by the Organization for Economic Co-operation and Development (OECD) shows developing countries received $83.3 billion from public and private sources in 2020.

But even with the financing provided so far, there have been problems and stumbling blocks.

The bulk of the money is being delivered through loans, which critics say add to the debt burden of governments that are already on shaky financial footing.

Mia Amor Mottley, prime minister of Barbados, has said developing nations should at least have access to loans on the same favorable terms that were offered to their counterparts in the developed world.

"We have incurred debts for COVID, we have incurred debts for climate, and we have incurred debts now in order to fight this difficult moment with the inflationary crisis and with the absence of certainty of supply of goods," Mottley said at the United Nations in September. "Why, therefore, must the developing world now seek to find money within seven to 10 years when others had the benefit of longer tenors to repay their money?"

As an alternative, there are calls to provide more climate financing in the form of grants, which don't have to be repaid, says Gaia Larsen, director of climate finance access and deployment at the World Resources Institute's Sustainable Finance Center.

"[Hopefully], going forward, there will be means of making sure that countries are able to act on climate and that they're able to do so without further getting themselves into trouble in terms of their debt levels and their ability to pay for all the things they need to pay for," Larsen says.

There's little funding to help poorer nations cope with warming that's already happening

There are also problems with how money is being allocated, according to climate finance experts.

Some impacts from climate change are irreversible, according to the UN, and even if countries could immediately stop emitting greenhouse gasses, the effects of global warming would still be felt for decades.

Yet most of the financing that's being doled out is going to projects like wind and solar farms that are aimed at limiting further increases in global temperatures. That's left a huge shortfall for projects like building flood defenses, or introducing drought-resistant crops that can help poorer nations cope with warming that's already happened.

Meanwhile, it can be "tricky" for the most vulnerable countries to access funding, Larsen says. The process can require data and technical expertise to show how climate funding would be used, and how it would benefit the climate, and some developing countries lack the resources for these analyses

"We cannot stop putting emphasis on mitigation, because otherwise, the adaptation costs will just skyrocket," says Mafalda Duarte, CEO of Climate Investment Funds, which works with multilateral development banks. But "we have already locked in further impacts down the road," she says. "And who is bearing the cost, disproportionately? It comes down to the poorest and developing countries."

Kerry says developed countries will deliver on funding commitment next year

For the past year, United States President Joe Biden has been pushing to quadruple U.S. climate funding for developing countries to more than $11 billion annually starting in 2024. About half of that money needs to be appropriated by Congress.

John Kerry, the United States' special presidential envoy for climate change, has suggested that the president's goal could be at risk depending on the outcome of midterm elections in the U.S.

Still, Kerry says developed nations will hit their $100 billion funding target next year.

"Simply put, we developed countries need to make good on the finance goals that we have set," Kerry said in October at the Council on Foreign Relations in Washington, D.C.

But observers say those goals are just a drop in the bucket. BlackRock, the world's largest asset manager, has said emerging economies will need at least $1 trillion a year to eliminate or offset their carbon emissions.

"[Raising] ambition in a way that is centered around real results is what I hope will come from COP," says Bhattacharya, "rather than the rhetoric of the $100 billion."