- The world faces a mounting climate emergency and a global debt crisis.
- Global climate negotiators have reached a framework for a fund to aid vulnerable countries in dealing with loss and damage from the mounting climate crisis.
- The climate financing framework is one of the most politically contentious issues in the run-up to the COP28 summit.
The urgent need for climate financing in developing nations
The world faces a mounting climate emergency and a global debt crisis. Consequently, calls for a new “fit for climate” global financial structure have grown louder throughout the developing world. Different stakeholders have underscored the urgent need for decisive action on climate financing. Voices from the V20 group of climate-vulnerable countries, the recent Paris Summit for a New Global Financing Pact, and Africa’s Climate Summit in Nairobi have emphasized the need to implement measures to support low-income and climate-vulnerable countries in pursuing sustainable growth.
Africa has a particularly urgent need. Recent estimates indicate that the continent needs $2.8 trillion in climate financing between 2020 and 2030. However, Africa receives only 3 per cent of global climate financing. Of this, only 14 per cent comes from the private sector. Notably, Africa accounts for only 3.8 per cent of global greenhouse gas (GHG) emissions. The developed world contributes 90 per cent.
The world’s most climate-vulnerable countries continue bearing the brunt of a crisis they have created. However, development-related climate financing has decreased. Bilateral official development assistance (ODA) from OECD Development Assistance Committee members to Africa amounted to $34 billion in 2022. This was a 7.4 per cent decline from 2021. In the meantime, total private market assets under management rose to $11.7 trillion in 2022. The assets have increased at an annual rate of nearly 20 per cent since 2017.
Agreement on framework to aid climate-vulnerable countries
Global climate negotiators have reached a framework for a fund to aid vulnerable countries in dealing with loss and damage from the mounting climate crisis. However, the eventual breakthrough climate financing proposals over the funding structure of the program.
Delegates in a meeting in Abu Dhabi resolved on November 4 that the World Bank will host a new Loss and Damage Fund on a provisional basis for four years – breaking a standoff following months of negotiations. The negotiators also set basic guiding principles for climate financing, with the Global North urged to offer support. The deliberations next head to the COP28 in Dubai taking place later this month.
Developed nations consider the World Bank as the best-placed institution to host the Loss and Damage Fund, owing to its global reach and experience with similar financial outfits. The World Bank had augmented its resolve to finance climate goals this year amid calls for multilateral financial institutions to do more.
Sultan Al Jaber, the president-designate of COP28 said “Billions of people, lives, and livelihoods who are vulnerable to the effects of climate change depend upon the adoption of this recommended approach.” The document is “clear and strong” and “paves the way for agreement,” he added.
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Divisions on the climate financing pact operation
Rich countries want heavy emitters including China and Saudi Arabia to invest in the fund. They argue that the world has significantly transformed in the last 30 years, with China and Saudi Arabia having amassed enough wealth to offer such aid.
Consequently, representatives from climate-vulnerable nations and human rights activists expressed their disappointment in leaving the negotiations in Abu Dhabi without a clear commitment to an instant and significant infusion of climate financing. Consequently, tensions threaten to spill over into the broader climate negotiation at COP28.
Even as the climate negotiators reached the pact, the lead US representative protested that the framework did not reflect consensus. Moreover, human rights activists faulted the US and other developed nations for blocking the language that would specify rich, historic polluters have a mandate to pay into the Loss and Damage Fund.
The divisions have raised concerns that developed and developing countries have become increasingly entrenched ahead of COP28. The summit is supposed to measure the global climate progress since the landmark Paris Agreement in 2015. It is also an opportunity to lay out what countries across the globe can do to close the climate financing gap and keep global warming to 1.5C.
However, the COP28 in Dubai faces an uphill challenge amid heightened geopolitical tensions and high inflation. The climate financing framework is one of the most politically contentious issues in the run-up to the COP28 summit. Countries may adopt the framework or push to reopen the text for further changes.
Developing nations’ demands for “loss and damage” burden
Developing nations had sought clear language to specify that the wealthy nations should climate financing burden. These wealthy nations have developed their economies by burning fossil fuels. Consequently, they have released a considerable portion of greenhouse gases into the atmosphere to date.
Climate-vulnerable nations had remained reluctant to have the World Bank host the fund amid concerns about its commitment to prioritise climate action.
Moreover, countries in the Global South have expressed concerns that the World Bank’s climate shift is only cosmetic. The institution’s ex-chief David Malpass was caught up in a controversy after fumbling a question on the causes of climate change at a conference in 2022. This fueled criticism that he did not acknowledge the scientific accord on the impact of man-made emissions.
Nevertheless, the negotiations committee “delivered on its mandate, but it was the furthest thing imaginable from a success,” said Brandon Wu, director of policy and campaigns at ActionAid USA. “Developing countries showed massive flexibility, giving concessions from the very beginning,” but developed nations “simply dug in their heels.”
The eventual language does not demand immediate financing of the Loss and Damage Fund. It also does not indicate the intended scale of the proposed contributions, according to Harjeet Singh, head of global political strategy at Climate Action Network-International.
Singh said in an interview, “We are only looking at an empty bank account. It does not go far enough to support communities who are facing climate emergencies now and address needs that are already running into hundreds of billions of dollars.”
Read also: UNGA 2023: IFAD calls for swift climate action
Still on the cards
Divisions over where location of the fund ” distracted from the actual task at hand” and guaranteeing a fund ” that would provide effective remedy for communities suffering harms from the climate crisis,” said Lien Vandamme, a senior advocate for the Centre for Environmental Law.
China and Saudi Arabia have also been adamant about paying into the Loss and Damage Fund. They have contended that they were still developing and that nations carrying the bulk of historical emissions should capitalise on the climate financing initiative.
Avinash, Persaud, the climate envoy to Barbados Prime Minister Mia Mottley, said that the island nation has qualms on the climate financing framework he said posed “mutual discomfort” and was a “challenging and difficult outcome.”
However, he stressed that the agreement represents “a positive step forward.” “Failure would have cast a long shadow over COP, ” Persaud added.
Keeping the climate financing “door open”
The US successfully for language that makes it clear the Loss and Damage Fund can receive money from a wide range of sources. This keeps the door open to revenue from carbon pricing mechanisms and benevolent donations.
The US argued that no single economy has enough resources to deliver what the fund needs. However, the US failed in its bid for a language for purely voluntary contributions.
According to a US State Department official, the text of the agreement does not reflect unanimity on the need for clarity on the voluntary contributions.
