Half-Hearted Financing Efforts at COP 26 Climate Conference

Delegates talk during the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain November 13, 2021.(Photo source: Reuters)

By Dr Anwar Sadat, 

The issue of finance, especially adaptation finance has kept the negotiators at the recently concluded COP 26 climate change conference at Glasgow quite busy. Scaling up of finance is badly needed to accelerate ambitious climate mitigation and adaptation action in developing countries. The demand is legally founded as article 4(7) of the United Nations Framework Convention on Climate Change (UNFCCC) clearly states that “the extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology”. The developed countries pledged at the UNFCCC Copenhagen climate change conference in 2009 to mobilize 100 billion dollars by 2020 to help the developing countries to adapt to climate change and mitigate further rises in temperature. The developed countries have fallen short of their commitment to mobilize the said amount. In the context of climate science imperatives, there is consequently a demand to ratchet up cuts in greenhouse gases in developing countries as well which in its turn is accompanied by demand to start deliberations on the new collective quantified goal of climate finance.

Predictability and Method of Accounting Finance

Perhaps the most important component of the climate finance decision which did not get much attention and which is not part of the decision of the COP 26 relates to the predictability of source finance. Predictability of finance is needed to build trust among various stakeholders including governments and investors. Without any mandatory formula for collecting money, it is difficult to predict how the said money will be mobilised. Unlike the criterion governing contributions to the United Nations by the member states, there is no criterion mentioned either in the UNFCCC or the Kyoto Protocol or the Paris Agreement governing contributions to either the existing financial mechanism or any such mechanism of the future. The developed countries are not reconciled to the idea of parting away a certain percentage of their GNP towards climate finance. As in the case of Global Environment Facility, there is no similar criterion of replenishment in Green Climate Fund to be done after three or four years. Failure to mobilize $100 billion gives rise to genuine concern as without a fixed criterion of mobilization of finance, it is very difficult to predict how trillions of dollars needed to restrict global warming to well below 2 degrees Celsius, if not 1.5 degree Celsius, would be mobilized.

New Collective Quantified Goal with More Teeth

It is a significant development that the COP 26 decision relating to climate finance is being considered in the context of climate science imperatives. It underlines the need for large financial flows to engage developing country parties in ratcheting up their emission reduction ambition without compromising economic development and poverty reduction. The current nationally determined contributions projecting global surface temperature overshooting 2.7 degree Celsius was also a consideration amongst the climate change negotiators. The target of restricting global average temperature or required emission reduction so as to remain below 2 degrees Celsius is urgently needed within a timeframe to ensure security of food production and sustainable economic development.

While the COP 26 regrets the falling short of mobilization of $100 billion but it welcomes the initiation of the deliberations for laying down a new collective quantified goal. So far, they have contributed $ 80 billion. The decision encourages the developed country Parties to square the deficit. How to decide the needs and priorities of developing countries in the context of climate science imperatives is not decided? As in the case of understanding severity of impacts of climate change in every part of the world and in building consensus about the magnitude of efforts required to prevent dangerous anthropogenic interference with the climate system, intergovernmental panel on climate change (IPCC) reports are given weightage by the countries and the reports serve the purpose officially in the preparation of national communication relating to greenhouse gas inventories. A similar dedicated body is required to be set up who will lay down the financial needs and priorities of each developing country, especially the most vulnerable country. Building of criteria as to the sector, regions and the people most exposed to the risk of climate change will be resolved by the body.

If the new collective quantified goal is to show its effectiveness, it is important to align climate finance with a country or a community’s own priorities and objectives. The developed countries have accepted the principle with respect to aid utilization prescribed in the 2005 Paris Declaration on Aid Effectiveness and the subsequent 2008 Accra Agenda for Action. The more a policy or project is owned by those who implement it, and the more closely a project or policy reflects local priorities, the more likely it is to succeed. The principle must be extended in the case of climate finance wholeheartedly so as to align with local priorities and objectives.

Defining climate finance was needed at the Conference as there are other ways and channels to allocate – green finance and sustainable finance. Climate finance is about transfer of finance (grants or concessional loans) from one developed country to another for either mitigation or adaptation action. Green finance has a broader scope as it also covers other environmental goals (e. g. biodiversity protection/restoration), while sustainable finance extends its domain to environmental, social and governance factors (ESG). For developing countries climate finance is meant for mitigation and adaptation and that money should not come at the expense of existing developmental aid. Reporting by the developed countries covering financial, technology transfer and capacity-building should reflect transparency with respect to information that the support is not at the expense of existing development aid.

(The author is Senior Assistant Professor at the Indian Society of International Law, New Delhi Email: [email protected] Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).