Climate finance plays a vital role in upholding the trust of developing nations in future climate change negotiations. The issues regarding climate finance are expected to take centre stage at the Conference of the Parties (COP 28) meeting in Dubai, scheduled for November 30 to December 12, as part of Climate Change 2023: Synthesis Report, which serves as the primary scientific input for the global stocktake at COP.
Climate finance plays a vital role in upholding the trust of developing nations in future climate change negotiations. Comment. (15 marks, 250 words).
Demand of Climate Finance:
- Developed countries and climate-vulnerable nations are likely to call for increased mitigation efforts from developing countries, potentially met with demands from the latter that developed nations have not met the target of mobilizing $100 billion in climate finance.
- This sum falls short of addressing the challenges faced by developing countries as they transition towards low-carbon and climate-resilient development.
- Providing financial support to developing nations aligns with the operationalization of the foundational principle of Common but Differentiated Responsibilities and Respective Capabilities.
- To estimate the adequate climate finance, developed countries are obligated to furnish financial resources to developing country parties, a requirement outlined in Article 9 of the Paris Agreement on Climate Change.
- Additionally, they are mandated to include information about the financial resources they have provided and their projected levels of public financial resources for developing country parties in their Biennial Update Reports (BUR).
Previous Agreements on Climate Finance:
- At the Copenhagen Climate Conference in 2009, developed countries committed to raising $100 billion annually by 2020.
- Furthermore, in accordance with the Paris Agreement’s accompanying decision, these developed nations are obligated to collectively generate $100 billion by 2025, before a new collective quantified goal (NCQG) “starting at a minimum of $100 billion per year” is established by the end of 2024.
- Unfortunately, at the 26th United Nations Climate Change conference in Glasgow in 2021, developed countries expressed deep regret as they were only able to mobilize a total of $79.6 billion.
- The Global Environment Facility, an organization designated by the UNFCCC to provide grants and concessional loans to developing nations, undergoes a replenishment process every four years. A similar approach has been adopted by developed countries in the case of the Green Climate Fund (GCF) to raise financial resources. The GCF was established to manage a portion of the $100 billion designated for developing countries to transition towards low-emission and climate-resilient development. On October 5, 2023, the GCF held its second replenishment conference, attended by 25 out of 37 developed countries, pledging a total of $9.3 billion in new contributions.
Magnitude of Climate Finance Needed:
- The Paris Agreement is based on the self-determined efforts of all parties outlined in their nationally determined contributions (NDCs), which detail a party’s mitigation actions for the next five years.
- When all NDCs are combined, they indicate a trajectory that surpasses the 1.5°C temperature target. Considering the needs of Global South countries as expressed in their NDCs, the total quantified amount for the first time approaches nearly $6 trillion until 2030.
- According to India’s third Biennial Update Report (BUR), the country’s financial requirements derived from its NDCs for adaptation and mitigation purposes for the period 2015-2030 amount to $206 billion and $834 billion, respectively.
- A significant portion of these financial needs is associated with the transition from traditional energy systems to low-carbon, cleaner energy systems, which are not covered by the designated financial mechanisms of the United Nations Framework Convention on Climate Change (UNFCCC).
- Furthermore, India has emphasized its demand for a just transition at COP27, as “3.6 million people in 159 districts in India are dependent on the fossil fuel economy through direct or indirect employment in coal mining and the power sector.” They require support in the form of suitable economic opportunities and livelihoods.
Issues Concerned with Climate Finance:
- The burden-sharing formula among developed countries for providing financial resources to developing country parties remains unclear.
- One analysis suggests that the United States contributed just 5% of its equitable share in 2020.
- The lack of a mandatory formula for fundraising makes it challenging to predict how the required funds, or the NCQG for climate finance, will be mobilized.
- Neither the UNFCCC nor the Paris Agreement specifies the criteria for mobilization; instead, the process relies on a replenishment mechanism.
- Notably, the GCF also accepts voluntary contributions from nine developing countries. These additional contributions facilitate the tracking of international public climate finance, as there has been ongoing debate about what qualifies as such finance.
In the instance of a potential breakdown of a global public benefit, such as global financial stability in 2009-10, there was a conspicuous display of strong political determination, a sense of urgency, and the self-interest of influential nations in the Global North. During that period, G-20 governments promptly reacted to the global financial crisis, swiftly providing $1.1 trillion within a few weeks to support the International Monetary Fund and multilateral development banks in order to rescue the global financial system. Regrettably, these critical elements are absent when it comes to the essential transfer of climate finance from developed to developing countries to protect another global common resource, namely, the environment.