Climate Financing Key To Move Towards More Resilient, Sustainable Future: CAG

Climate financing is key to collective efforts to move towards a more resilient and sustainable future. It is a catalyst for change, empowering nations, communities and businesses to adopt green technologies, invest in renewable energy and foster sustainable practices. This was stated by the Comptroller and Auditor General of India,  Girish Chandra Murmu while addressing a seminar on Climate Financing.

The CAG said that climate change is no longer a problem we are leaving for our future generations; but a phenomenon we are increasingly experiencing and have to contend with. As climate change intensifies, so does the urgency for robust climate finance mechanisms to fund adaptation, mitigation and resilience-building efforts worldwide.

 Murmu stressed that the need for immediate action was emphasised by the stark difference between the costs associated with inaction and the potential advantages of making timely investments in low-carbon, climate-resilient pathways.

The CAG further stated that ‘Annual climate finance needs are estimated to increase substantially, reaching well beyond USD 10 trillion annually by 2050. Failing to meet these financial demands will exacerbate the rise in global temperatures, simultaneously intensifying the socio-economic consequences of climate-related disasters. Unfortunately, despite the stark cost–benefit analysis, climate finance remains significantly inadequate.’

Murmu emphasised that this seminar was a combined effort to unravel the complexities of climate finance and assess its current state through an audit perspective.

This conference served as a platform for a dialogue on climate financing with the sharing of knowledge and experience on various aspects of the theme by experts and enriching discussions contributing to the success of the conference.

“World Health Organisation (WHO) predicts that climate change is expected to cause approximately 250000 additional human deaths per year, between 2030 and 2050. This grim forecast warrants a comprehensive solution encompassing both climate mitigation and climate adaptation measures. Climate mitigation involves reducing or preventing greenhouse gas emissions, while adaptation entails strategies to adjust to the impacts of climate change. Both require targeted climate finance, ensuring a balanced and holistic approach to combatting climate challenges,” said Murmu at the seminar on Climate Financing. 

“Annual climate finance needs are estimated to increase substantially, reaching well beyond USD 10 trillion annually by 2050. Failing to meet these financial demands will exacerbate the rise in global temperatures, simultaneously intensifying the socio-economic consequences of climate-related disasters. Unfortunately, despite the stark cost–benefit analysis, climate finance remains significantly inadequate,” he added.

Acknowledging the significant macroeconomic costs of the physical impact of climate change, the New Delhi Leaders Declaration of the G20 affirmed scaling up blended finance and risk-sharing facilities, including the enhanced role of multilateral development banks in mobilising climate finance. It recognised the significant role of public finance as an important enabler of climate actions, such as leveraging much-needed private finance through blended financial instruments, mechanisms and risk-sharing facilities to address both adaptation and mitigation efforts in a balanced manner. 

It reiterated the importance of a policy mix consisting of fiscal, market and regulatory mechanisms, including, as appropriate, the use of carbon pricing and non-pricing mechanisms and incentives toward carbon neutrality and net zero. The G20 summit endorsed the Green Development Pact, which included elements relating to financing such as doubling of adaptation finance by 2025.

Building on the stance adopted at COP 26 where India had highlighted the vexatious issue of climate finance while presenting the Panchamrit of India’s climate action and the mantra of LiFE - Lifestyle for Environment to combat climate change, at COP 28 in 2023, India sought a clear road map for climate finance as an imperative for delivering on quantified goals. India has consistently voiced the concerns of the Global South, whereby capital needs to flow from the Global North to climate investments in developing countries.

From all this, it is clear that climate finance is a scarce resource with alternative uses. No wonder the UNFCCC and Paris Agreement's monitoring, reporting and verification mechanisms are vital for trust and transparency among nations. Transparent reporting builds confidence, ensures accountability and globally assesses financial and technological support from developed to developing nations.

The scarcity of finance requires the development of a green finance ecosystem, including innovative financial instruments, green budgeting, targeted interventions, incentives and monitoring. As scarcity warrants optimal utilisation, this green finance needs to be combined with the SAI’s role of facilitating transparency and accountability. SAIs with their mandate of stewards of public finance, have the responsibility and the opportunity to ensure that financial resources allocated to address climate change are used transparently, efficiently and effectively.

SAIs need to evaluate the efficiency of financial mechanisms and scrutinise overall governance and decision-making processes involved in the broad spectrum of public sector climate financing, to ensure that these are accountable, participatory and responsive to the needs of affected communities. The audits should bring out recommendations to ensure that investments deliver the intended environmental and social outcomes and benefits that reach the communities most vulnerable to climate change impacts.

India is committed to development choices along low carbon pathways, coupling socio-economic developmental goals with sustainability goals, as exemplified by the National Action Plan on Climate Change (NAPCC) 2008. The Delhi Metro Network's reliance on solar energy illustrates an implementation of these principles. 

The Delhi Metro meets 60 per cent of its daytime energy demand through solar power generated at the Ultra Mega Solar Park in Rewa, Madhya Pradesh. Although the 3rd largest energy-consuming country in the world, India stands 4 globally in Renewable Energy Installed Capacity (including Large Hydro). 

The National Adaptation Fund for Climate Change and the National Clean Energy Fund, are instrumental in driving India's transition towards a low-carbon economy. Climate action must percolate to the private sector also. Similar initiatives are expected to be adopted by the private sector which will prove to be a force multiplier.

“As SAI India, we have undertaken multiple audits related to environmental and climate issues in the country. Some of these audits include Compliance audit on Compensatory Afforestation in India; Performance audits on the Renewable Energy Sector in India,” stated Murmu.