The clarion call for climate finance at COP27
The UN Climate Conference (COP27) is currently taking place in Egypt. Tackling climate change requires a global effort; so it is crucial that the quality and quantity of international climate finance for countries in the global south is strengthened. Two key markers of success at COP27 are whether countries agree to a Loss and Damage Finance Facility, and whether the post-2025 climate finance goal will cover loss and damage.
In early September, satellite maps were published showing that unprecedented flooding in Pakistan had submerged an area approximately the size of the United Kingdom. Infrastructure repairs are estimated at $US 10 billion, and this does not even take into account loss of livelihoods, heritage sites, or other socio-economic costs. Unfortunately, in 2022, Pakistan’s climate plight is one shared by many countries.
The unrelenting nature of climate change means that for some families in the global south, food and water are not on the table, and girls’ access to education is off the table. Entire families and communities are displaced as they seek to escape floods and droughts. It is estimated that an additional 35-132 million people will be pushed into extreme poverty by 2030 if climate change is left unchecked. What’s more, there is an almost 50 per cent likelihood that between 2022 and 2026 the world could temporarily exceed a global temperature of 1.5°C. In this scenario communities would experience climate impacts at a far higher magnitudes and frequency.
It is against this backdrop that the two-week UN Climate Conference (COP27) is taking place in Egypt. This year’s COP will include three high-level ministerial opportunities to examine the current climate finance goal; the future goal; and the projects that need to be financed. Additionally, November 9th is Finance Day at COP27. Ministers should consider what is happening in Pakistan, the Cayman Islands, Somalia and other countries impacted this year, and agree on a path forward that adequately supports communities that are facing climate impacts. These are countries that share little historical responsibility for the causes of climate change but are being ravaged by its consequences.
A crucial job for developed countries attending COP27 will be to deliver high quality and sufficient quantities of climate finance. Indeed, the UNFCCC Executive Secretary opened up COP27 by saying “we need to enable enhanced finance to flow to addressing impacts”. One issue at COP27 will be how to get developed countries to deliver on climate finance. It is shocking to see how far behind the agreed goal these countries actually are. To date, they have provided just over half - US$ 418.4 billion out of the US$ 800 billion - of the funding that should have been contributed between 2013 - 2020.
This increases the urgency for discussions at COP27 on setting a new global climate finance goal by 2024 so that countries in the global south do not have to bear the financial burden of tackling climate change on their own. It is particularly pressing as it is estimated that they need between $US 5.8 - 5.9 trillion to implement their Paris climate Agreement action plans by 2030.
Too many loans, mounting debt - why better quality climate finance is vital
One of the major issues that must be addressed at COP27 is the amount of loans that are being used. The way it stands now, once countries in the global south have repaid these loans (in most cases with interest) they will have essentially funded their own climate action, despite historically contributing the least to causing climate change. More than 70 per cent of climate finance was provided as loans in 2020. This has also impacted national debt levels in countries in the global south and driven down funding for public services, such as access to drinking water in the wake of climate impacts. Instead of accruing debt in this way, an automatic debt suspension should be granted after a loss and damage event, as well as debt cancellation for all countries in need.
Making matters worse, developed countries seem intent on including the world’s largest lending institutions, Multilateral Development Banks (MDB), such as the World Bank Group, in strategies to scale-up climate finance. Recent figures show that in 2021, MDBs provided $50.666 billion to low-income and middle income economies (LMICs) and 71 percent of this was in the form of loans. In the current context, a more defined role for MDBs would mean additional loans, which could cause even more indebtedness. This is a huge concern for countries in the global south with unsustainable debt. Instead, developed countries and MDBs should be working to build trust and acting in solidarity, by prioritising grants. MDBs should follow robust responsible lending and borrowing principles, which can help to increase the absorptive capacity of climate finance, and stabilise borrowing costs. More ambition is needed from MDBs to align their operations with the Paris climate Agreement. While in their joint COP27 statement they state they are on track to fulfil their Paris alignment commitments, CSOs have highlighted that they still fall short of what is needed. Additionally, developed countries should also offer guarantees to countries in the global south, in order to provide multilateral development banks and international financial institutions with the confidence to grant those countries access to highly-concessional climate finance for adaptation projects.
Grants are especially important when it comes to finance to address loss and damage, which are the consequences of climate change that cannot be avoided. For decades, developed countries have ignored this issue, which the current global climate finance goal does not cover. Indeed, during the high-level opening ceremony at COP27, the UN Secretary General said ‘’On addressing loss and damage, this COP must agree on a clear, time-bound roadmap reflective of the scale and urgency of the challenge. This roadmap must deliver effective institutional arrangements for financing‘’. Whilst a few wealthy countries have stepped up, including during COP27 itself (Belgium, Scotland,) it is evidently too little, too late.
Bangladesh, for example, has been forced to try to establish a loss and damage mechanism to support its communities after climate-related disasters. Meanwhile Vanuatu is leading a coalition of countries seeking an advisory opinion from the International Court of Justice on climate change; an initiative resulting from these countries experiencing losses and damages. Two key markers of success at COP27 are whether countries agree to a Loss and Damage Finance Facility (LDFF), and whether the post-2025 climate finance goal will cover loss and damage.
The battle for survival in a changing world
In the midst of this unfair situation some countries in the global south are concerned that COP27 will not pave the way for the quantity and quality of climate finance that is needed now and in the future. Much of this concern is based on perceived lack of engagement from developed countries in various climate finance meetings that have taken place in 2022.
But there is a clarion call that must not be ignored for the new global climate finance goal to usher in real change. It must cover mitigation, adaptation and loss and damage measures, and enshrine genuine access to financial grants. This time, those countries and communities most impacted must have a say over how and where finance committed under the goal is used. Once agreed, it must be regularly reviewed to evaluate progress and evolving needs, and be covered by a comprehensive monitoring and reporting framework.
Tackling climate change was always going to require a global effort; so international climate finance was always going to be extremely important. Developed countries must ramp-up their climate finance efforts and ensure people and communities are supported.