From UPSC perspective, the following things are important :
Prelims level : Adaptation Gap Report
Mains level : Paper 3- Climate finance
In the run-up to the 26th UNFCCC media reports have claimed that developed countries are inching closer to the target of providing $100 billion annually. This view has been bolstered by the Organisation for Economic Co-operation and Development (OECD), which claimed that climate finance provided by developed countries had reached $78.9 billion in 2018.
Issue of climate financing and claim of reaching the target of $100 billion
- These claims reaching the target of $100 billion annually is erroneous.
- First, the OECD figure includes private finance and export credits.
- Public finance: Developing countries have insisted that developed country climate finance should be from public sources and should be provided as grants or as concessional loans.
- However, the OECD report makes it clear that the public finance component amounted to only $62.2 billion in 2018, with bilateral funding of about $32.7 billion and $29.2 billion through multilateral institutions.
- Nature of finance: Significantly, the final figure comes by adding loans and grants. Of the public finance component, loans comprise 74%, while grants make up only 20%.
- The report does not say how much of the total loan component of $46.3 billion is concessional.
- Non-concessional loans: From 2016 to 2018, 20% of bilateral loans, 76% of loans provided by multilateral development banks and 46% of loans provided by multilateral climate funds were non-concessional.
- Between 2013 and 2018, the share of loans has continued to rise, while the share of grants decreased.
- The OECD reports on climate finance have long been criticised for inflating climate finance figures.
- In contrast to the OECD report, Oxfam estimates that in 2017-18, out of an average of $59.5 billion of public climate finance reported by developed countries, the climate-specific net assistance ranged only between $19 and $22.5 billion per year.
- The 2018 Biennial Assessment of UNFCCC’s Standing Committee on Finance reports that on average, developed countries provided only $26 billion per year as climate-specific finance between 2011-2016.
Broken commitments from the US on climate financing
- U.S. President Joe Biden recently said that the U.S. will double its climate finance by $11.4 billion annually by 2024.
- It is Congress that will decide on the quantum after all.
- The U.S. also has a history of broken commitments, having promised $3 billion to the Green Climate Fund (GCF) under President Barack Obama, but delivering only $1 billion.
- The future focus of U.S. climate finance is the mobilisation of private sector investment.
- The bulk of the money coming in would be through private funds, directed to those projects judged “bankable” and not selected based on developing countries’ priorities and needs.
Finance skews toward mitigation
- Climate finance has also remained skewed towards mitigation, despite the repeated calls for maintaining a balance between adaptation and mitigation.
- The 2016 Adaptation Gap Report of the UN Environment Programme had noted that the annual costs of adaptation in developing countries could range from $140 to $300 billion annually by 2030 and rise to $500 billion by 2050.
- Currently available adaptation finance is significantly lower than the needs expressed in the Nationally Determined Contributions submitted by developing countries.
Delivering on climate finance is fundamental to trust in the multilateral process. Regrettably, while developing countries will continue to pressure developed countries to live up to their promises, the history of climate negotiations is not in their favour.