Climate finance - a sticking point for the COP26?

This article is part of the ISC’s Transform21 series, which features resources from our network of scientists and change-makers to help inform the urgent transformations needed to achieve climate and biodiversity goals.

Over the last month, extreme weather events have compounded the cascading risks already being felt at the health, economic and social levels brought on by the global pandemic. Devastating floods have struck Henan, a Chinese central province preventing access to electricity, fresh water and gas, with the airports, subways and highways closed. People have lost their lives and local authorities are warning one of the region’s stricken dams could collapse threatening the life of seven million people.

Germany was also shocked into the realities of climate change, by a deadly flood ravaging towns with more than 170 people losing their lives and people still unannounced for. Belgium and the Netherlands have been facing similar disasters, while Canada and India have experienced catastrophic heatwaves and North America and Russian’s Siberian province have been battling wildfires.

Climate change remains the most urgent threat for the globe, and those in the north are realizing that no one country can escape its threats that include more frequent extreme weather events. Global coordinated actions around mitigation and adaptation are urgently required. Time is running out for ambitious concrete action at the international level to ensure the existential threats to life on earth are addressed.

This of course, requires adequate financing to resource urgent mitigation actions.

Some ambitious actions have been presented by the European Union Commission at its mid-July deliberations, raises optimism. The European Commission has presented a series of legislative proposals aiming to achieve a 55 % emission reduction target by 2030, and carbon neutrality by 2050, however climate change as a global phenomenon, and must have global collective actions from all countries and economic or regional blocks. If the biggest emitters like China (21%), the United States (15%), India (7%) or Russia (5%) do not make jointly radical plans in order to fight climate change in line with the EU, individual plans will not be able to achieve impactful results at global levels.

Beyond the commitments to radically reduce CO2 emissions, advanced economies must mobilize financial resources towards vulnerable countries to assist in meeting their climate objectives and to protect the livelihoods of their citizens. A 2019 Earth Systems Science Data report found that 79% of CO2 emissions were generated by 20 countries, and of the 21% of CO2 emissions generated by the rest of the world, this figure included mostly low- and middle-income countries.

Climate change is pushing the countries in the Global North to transform their economic models from fossil fuel-based systems, to sustainable, low-carbon and resilient economies, working towards a net zero world. In this context, wealthiest countries need to mobilize significant financial resources through climate finance for vulnerable countries to meet their climate ambitions from their Paris agreement targets. Simply put, without helping emergent markets and developing economies (EMDE) and low-income countries, the high-income countries will not be able to reach carbon neutrality by 2050.

What positive role can climate finance play in the fight against climate change continues to remain a contentious subject between the parties leading up to COP26.

Climate finance in question

Despite reaching an unprecedented accord that will provide $100 billion to fund low-income countries in their mitigation and adaptation efforts, the 15th conference of the parties (COP15) to the United Nation Framework Convention on Climate Change (UNFCCC), left some unanswered questions around climate finance which are now the source of contentions between the Global South and the Global North.

South Africa’s chief negotiator at the United Nations climate talks, Nozipho Joyce Mxakato-Diseko put into question the credibility of a climate finance report released by the Organization for Economic Co-operation and Development (OECD) to the COP 21 in 2015, saying “I am not able to comment on or judge the report because we don’t know the veracity, credibility and the methodology of the report or who was consulted. Developing countries were not”. This was echoed by the Indian finance minister who said, “The figure ($57 billion) reported in by OECD in 2015, was not right and the only credible figure is $2.2 billion”.

Under the Paris agreement, all countries have committed to reduce their greenhouse gases emissions and come back with more ambitious commitments including $100 billion fund by 2020. Not only has the $100 billion target not been reached, but the contentions over climate finance have endured, from the Earth Summit in Rio de Janeiro, Brazil in1992 until now.

Most of the parties use the OECD’s Rio Marker methodology to report on their climate finance commitments to the UNFCCC. However, this methodology was not originally designed to monitor accurately climate finance flows to low-income countries and is why some countries overreported their financial aid for low-income countries. A report released by Oxfam in 2020, shows the public fund estimated $59.5 billion in 2017-2018, may be between 19-22.5 billion.

A role for science

The big challenge for parties at COP26 is therefore to reform the financial reporting framework with an agreed mechanism that is fair for low-income countries. This conference must rebuild the trust by creating a solid and transparent accounting mechanism. One solution could be for all countries to enlist a third party to provide a new climate finance accounting mechanism. This third party could be scientific organizations specialized in financial data accounting providing a framework as an agreed financial mechanism for low-income countries.

COP26 will be running under the shadow of the momentous and historical context which is COVID-19 pandemic, coupled with clearer evidence that increasing climate change impacts are happening in uneven ways across the planet. The parties must engage to significantly reduce their greenhouse gas emissions and double their climate investments in order to accelerate the transformation toward a sustainable future within planetary boundaries.

At the same time, the Global North must raise their climate finance to help low-income countries to conduct a just and inclusive transition. The Global South has been severely impacted by the COVID19, losing some of the recent gains in poverty alleviation. The report, Delivering on the $100 Billion Climate Finance Commitment and Transforming Climate Finance, released by the Independent Expert Group on Climate Finance for the United Nations in December 2020, highlights the pandemic’s deep economic consequences especially for EMDE countries. According to the report, COVID-19 raised unprecedented food insecurity, contracted GDP and pushed 100 million people into extreme poverty in low and middle-income countries. For example, South Africa has lost 30.8% of its GDP and 2.2 million South Africans have lost their jobs in the last quarter of 2020. Similarly other vulnerable countries like Somalia, Afghanistan, and Sudan have been hit in by the pandemic in a similar way.

These countries are facing huge financial deficit and debt crises. They will need significant external finance to provide an enabling environment for them to respond to their debt crisis and to mitigate climate change risks at the same time. Under these cascading risk conditions, the only answer is to significantly increase climate finance.

As the Independent Expert Group’s report recommends, b illions must turn into trillions: “There is an urgent need for large scale international public climate finance that can alleviate these concerns while providing a foundation for long-term transformation aimed net carbon neutrality and climate-resilient development. For 2020–23, Africa is facing cumulative gross external financing needs of about $1.2 trillion. Current commitments from international financial institutions and official bilateral creditors are expected to fill less than a quarter of this need”.

Conclusion

Climate finance must be significantly increased to allow for middle and low-income countries to respond to their debt crises and join the sustainable transformation movement that brings us to a world with a net zero future. COP26 must reform the climate finance system, ensuring a transparent and resilient mechanism that improves the trust between donor and recipient countries, enabling low-income countries the opportunity to meet their climate ambitions.

If high-income countries do not make important collective decisions to significantly reduce greenhouse gases and carbon emissions throughout the world, the Paris agreement targets will not be achieved, and the world could be entering the phase of climate feedback loops and tipping points quicker than scientists anticipated.

Bahram Rawshangar

Bahram is from Afghanistan, where he worked as an independent journalist in human rights and as a Head of Culture at the Civil Society And Human Rights Network.

He arrived in France in 2015 and obtained a refugee status in 2016. Since his arrival in France, Bahram has obtained a Master’s degree in Economics and Social Sciences and is currently pursuing his second Master’s degree in Economic and Financial Communication in Paris 1 Panthéon-Sorbonne university. He has a Bachelor’s degree in Persian literature from Kabul University.

Photo by Visual Stories || Micheile on Unsplash

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