When the world meets today in Baku the four primary focus will be on climate financing which has been an issue in tackling climate change for developing countries it will discuss the gap in the commitment and reality between adaptation and goal.
“There can be no comprehensive approach without the involvement of the entire economy and our societies. And that means we need Parties and non-party stakeholders to work together, to join efforts, communicating on best ways forward, systematically,” said UN Climate Change Executive Secretary Simon Stiell.
Why Is Climate Finance Urgent?
As per the International Monetary Fund (IMF), global progress is too slow. Global temperature is set to surpass the critical 1.5 degrees Celsius threshold limit, above pre-industrial levels. The efforts to reach half of 2019 levels of greenhouse gas emissions by 2030 are falling alarmingly short. IMF warned that without stronger action, the warming planet will imperil home, health, and food security. The report said that mobilising more climate finance is essential for mitigating emissions and building adaptive capacity through investments in climate-resilient infrastructure. The report highlighted the growing concern in Asia, which is home to several of the largest emitters and a region acutely vulnerable to climate change due to high population density and geography.
How Significant Is The Funding Gap?
IMF report found that Asia’s emerging market and developing economies need investment of at least USD 1.1 trillion annually to meet mitigation and adaptation needs. This was also found by a high-level expert group at a conference of parties 26 (COP26) and COP27 that determined that developing countries (excluding China) will need around USD 1 trillion in external climate finance annually by 2030.
But as per IMF, they’re only getting USD 333 billion, mostly from sustainable debt instruments like green bonds, and public sources contribute more than half. Such a scenario of lower accountability of developed nations leaves these economies with a funding gap of at least USD 815 billion.
Global South And Climate Funding
Global South particularly represents countries that are in the developing phase and have a lesser chance to benefit from the industrialisation era as they were mainly colonised by European countries. India acts as a leader of the global south, and the issue is the same for India too.
Though climate finance can come from different sources: public or private, national or international, bilateral or multilateral. It can employ different instruments such as grants and donations, green bonds, equities, debt swaps, guarantees, and concessional loans. And it can be used for different activities, including mitigation, adaptation, and resilience-building and even some multilateral funds that developing countries can access include the Green Climate Fund (GCF), the Global Environment Facility (GEF), and the Adaptation Fund (AF). These funds were established throughout the years as financial instruments of the United Nations Framework Convention on Climate Change (UNFCCC) to provide resources to developing countries.
Still, they are not getting the amount they need. The uncertainties such as the recent refusal of the US to pay USD 2 billion of its pledge has created a shortage of funds at the available GCF level. These countries often bear the brunt of climate impacts, such as floods, droughts, and extreme weather events, while having contributed the least to global emissions. However, this goal has not been fully realised. Key issues with this commitment include over-reporting, and reclassification of aid, and loans or grants. For example, in 2022, 69.4 per cent of international public climate finance was in the form of loans, with only 28 per cent provided as grants.
Adaptation Gap Led By Funding Gap
The latest adaptation gap report found that progress in adaptation financing is not fast enough to close the gap between need and supply, which is accountable for the increasing lag in adaptation planning and implementation efforts, especially for developing and underdeveloped countries. UNEP’s Emissions Gap Report warned that if needed actions would not be taken the world would see a rise of 2.6-3.1°C this century, without immediate and major cuts to greenhouse gas emissions.
Released just ahead of the COP29 climate talks in Baku, Azerbaijan, the report highlights an urgent need to scale up adaptation this decade to address rising impacts that are highly being impacted negatively by the huge gap that exists between adaptation finance needs and current international public adaptation finance flows.
As per the UNEP adaptation gap report, international public adaptation finance access to developing countries increased from USD 22 billion in 2021 to USD 28 billion in 2022, the largest absolute and relative year-on-year increase since the Paris Agreement. This also reflects the progress towards the Glasgow Climate Pact, which urged developed nations to at least double adaptation finance to developing countries from about USD 19 billion in 2019 by 2025. However, the study found that even achieving the Glasgow Climate Pact goal would only reduce the adaptation finance gap, which is estimated at USD 187-359 billion per year, by approximately 5 per cent.
New Collective Quantified Goal (NCQG)
As the current USD 100 billion climate finance target expires in 2025, countries especially developing are pushing for a new, more ambitious goal, called the New Collective Quantified Goal (NCQG). Several submissions presented and reiterated views on the context and principles of the NCQG, drawing on the provisions of the Convention and the Paris Agreement, including the urgent need for adequate, high-quality, and additional public, grants-based climate finance. These submissions emphasised the importance of equity, historical responsibility, and the polluter pays principle, with an emphasis on the continued obligation of developed countries under the Paris Agreement to lead the provision and mobilisation of climate finance.
India too has emphasised that developed nations need to provide at least USD 1 trillion annually for climate finance, as stated in the G20 New Delhi Declaration.
The global climate finance gap remains a crucial issue, with developing nations, particularly in the Global South, that is facing the heat of climate impacts. Tuvalu was the first country destroyed by rising sea levels. Despite efforts through multilateral funds and pledges, the funding available is far from meeting the needs for both mitigation and adaptation. Developed nations must honour their historical responsibility and increase their contributions, ensuring that equitable, high-quality, and grants-based finance is mobilised to address the growing climate crisis
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