Climate Finance
Introduction:
- The needs and priorities of developing countries will continue to be met by grant-based and reasonably priced international public climate finance.
About:
- Climate change adaptation and mitigation efforts receive funding on a local, national, or international level from public, private, and alternative sources.
Funding programmes for the environment worldwide:
- Developed nations committed to raising $100 billion in climate funds in 2009 to aid developing nations in addressing climate change. This objective wasn’t achieved.
- The UNFCCC, Kyoto Protocol, and Paris Agreement all demand that parties with greater financial resources (Developed Countries) support nations with less developed and vulnerable economies financially (Developing Countries).
- The idea of “Common but Differentiated Responsibility and Respective Capabilities” is supported by this (CBDR).
- At COP26, new financial commitments were made to support developing countries in achieving the global goal of combating the effects of climate change. Funding for adaptation will be aided by new regulations for global carbon trading schemes that were approved at COP26.
- The wealthy nation parties to the UNFCCC unanimously set a target of USD 100 billion annually by 2020 to meet the needs of developing countries in order to carry out significant mitigation efforts and transparency in implementation at the UNFCCC COP15 in 2009. (Copenhagen).
- At COP21 in Paris, the parties decided to extend the $100 billion goals until 2025. To achieve this balance between adaptation and mitigation, developed countries decided to increase their collective allocation of adaptation funding from 2019 levels by 2025 at COP26 in Glasgow (2021).
- As the costs of battling and adjusting to climate change have increased, developing countries, especially India, are pleading with wealthy countries to accept a new global climate finance aim, also known as the new collective quantified goal on climate financing (NCQG).
Evaluation:
- Rich nations haven’t actually kept their word on this. Developed nations have pushed for two issues related to climate finance over the past few years:
- They claim that they are on track to fulfil their 2009 commitment to give developing countries $100 billion annually in climate money.
- They think that in the future, the mobilisation of private resources will be the most crucial component of climate finance. They claim that by contributing the trillions of money needed for a global switch to renewable energy, the private sector can stop climate change. They have advocated converting billions of public funding into trillions of private capital through the expansion of blended finance, boosting stand-alone private capital flows, and developing new markets.
- It is obviously challenging for developing countries to develop their policies based on these optimistic stances. What action should poor countries take in response to this?
- At the yearly UN Conference of Parties (COP), government delegations and environmental activists predominate; however, observers and frequent visitors at these conferences indicate a substantial rise in Indian business delegation participation in recent years.
Why/How Goals are not achieved:
- Just before the ongoing 27th Conference of the Parties (COP) of the UN Framework Convention on Climate Change (UNFCCC) began in Egypt in 2022, the UNFCCC Standing Committee on Finance (SCF) published a report on the progress made by developed countries toward achieving the goal of mobilising $100 billion annually. The paper claims that this goal was not achieved in 2020 and that the developed countries’ earlier attempt to mobilise private finance was a total failure.
- Based on OECD study, the developed countries published a “Roadmap to USD100 billion” in 2016 that included projections for climate money in 2020. According to the road map, assuming increased mobilisation rates, state finance would amount to $67 billion and private financing would cover the remaining $33 billion, putting developed countries on track to meet their goal by 2020.
- With $13.1 billion in 2020 as opposed to $33 billion in the road map, private climate finance mobilisation has, however, fallen 60 percentage points short of estimates for industrialised countries, according to OECD 2020 data.
A challenge for developing countries:
- Developing countries have long emphasised that a large share of climate funding should come from public sources because private financing will not meet their requirements and goals, particularly those related to adaptation.
- The funding for climate change is still heavily skewed toward mitigation and goes to projects that can be financed and have clear revenue streams. Private investors are unlikely to identify financially advantageous adaption opportunities. Even when they most urgently want private money for adaptation, weak, indebted, and low-income states with poor credit ratings find it challenging to obtain it.
Climate Finance Delivery Plan (CFDP):
- Due to the terrible failure to fulfil the goal, developed nations extended the timeframe for achieving the $100 billion target from 2020 to 2025. At COP26 (Glasgow) last year, developed countries developed a Climate Finance Delivery Plan (CFDP) to accomplish the goal, stating this time that the goal will be accomplished in 2023 and once again using the OECD report accounting methodology and the 2016 road map.
- While the $83.3 billion total matches the low-end scenario for 2021, according to the SCF report, the mobilised private finance fell short by 6% compared to the scenario estimate for 2020 based on OECD-reported data.
Moving ahead:
- Because of this, it is impossible to rely on phoney pledges of trillions of dollars in private climate finance to meet the urgent needs for climate finance of developing countries.
- Many operations that are financially necessary may have little or no direct mobilisation potential. Meeting the needs of developing countries shouldn’t be sacrificed in order to mobilise private finance in order to hit the $100 billion target, as the SCF research correctly concluded.
Conclusion:
- Given the growing issues brought on by the food, energy, and extreme weather crises, grant-based and low-interest international public climate finance will continue to be essential in addressing the needs and objectives of developing countries.
