Climate finance has become a focal point in discussions on global climate action, particularly during COP28 in Dubai. The finance day at COP28 marked a significant breakthrough in international financial architecture, with influential countries and financial institutions committing to innovative mechanisms aimed at supporting low-income and vulnerable nations in their efforts against climate change.
GS-3- Environmental Pollution & Degradation
What do you understand by climate finance? Highlighting the important developments in climate financing in COP28, analyse how can it be an effective tool in mitigating climate change. (15 Marks, 250 Words).
About Climate Finance:
- Climate finance entails financing from public, private, and alternative sources, locally, nationally, or transnationally, to support mitigation and adaptation actions addressing climate change. The majority of funds are allocated for disaster adaptation and mitigation.
- It involves financing at the local, national, or transnational levels, sourced from public, private, and alternative funding, with the aim of supporting actions that mitigate and adapt to the challenges of climate change.
- The UNFCCC, Kyoto Protocol, and the Paris Agreement advocate for financial support from parties with greater financial resources (Developed Countries) to those less endowed and more vulnerable (Developing Countries). This aligns with the principle of “Common but Differentiated Responsibility and Respective Capabilities” (CBDR).
- Despite ongoing debates and differing opinions on the definition and elements of climate financing, it is considered a crucial tool to address the climate crisis.
- Developing countries advocate for climate finance to be new and additional, while developed nations debate whether it should consist solely of grants or include loans and other financial forms. This ongoing debate aims to distinguish climate finance from existing financial sources.
Recent Initiatives on Climate Finance:
- Prominent entities, including the UK, France, World Bank, Inter-American Development Bank, European Investment Bank, European Bank for Reconstruction and Development, and the African Development Bank (AFDB), announced the expansion of Climate-Resilient Debt Clauses (CRDCs).
- This initiative, supported by 73 countries, calls for donors to extend the use of CRDCs by 2025 and create fiscal space for climate action.
- Prime Minister Modi, in his address at COP28, emphasized the necessity of providing climate finance and technology to Global South countries to assist them in fulfilling their commitments.
- He called for progress in establishing a new collective quantified goal on climate finance, replenishing the Green Climate Fund and Adaptation Fund, securing affordable finance from Multilateral Development Banks (MDBs) for climate action, and developed countries achieving carbon neutrality before 2050.
Status of Climate Finance:
- With current pledges totaling around $700 million, vulnerable countries affected by costly climate disasters are calling for additional funds through a newly formed disaster fund.
- A report by the Organisation for Economic Cooperation and Development (OECD) revealed that developed countries provided and mobilized $89.6 billion in climate finance for developing countries in 2021.
- However, the estimated amount needed for the energy transition, climate adaptation, and disaster relief is substantial, reaching $2.4 trillion annually for emerging markets and developing countries.
Financing the most Vulnerable Population:
- While stakeholders hold varying opinions, experts stress the importance of directing funds towards the most vulnerable populations.
- Partha Hefaz Shaikh from WaterAid Bangladesh suggests allocating climate finance to water, hygiene, and sanitation, emphasizing the need to support services providing climate-resilient Water, Sanitation, and Hygiene (WASH) services to those most affected by climate change. He emphasizes prioritizing households facing the greatest impact of the climate crisis.
- Notably, Bangladesh, ranked as the 7th most vulnerable to climate change, faces a potential 2-9% GDP loss by 2050, as warned by the Intergovernmental Panel on Climate Change (IPCC).
- Kitty van der Heijden, Deputy Executive Director of partnerships at UNICEF, expresses concern that only 1% of all climate finance goes to education. She insists that this percentage must increase at COP28 to align with rising temperatures and the urgent need for comprehensive climate action.
Developed nations should collaborate with and support developing countries in their shift towards clean energy and in securing funds for climate-resilient infrastructure. Additionally, it is crucial to maintain a political dedication to generating new financial resources and to enhance the effectiveness of finance in mitigating emissions and reducing vulnerability.