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Developing countries demand more climate finance as rich nations' $100-billion pledge remains a broken promise

Although developed countries say they are on track to fulfilling the 12-year-old pledge by 2023, analysis of available data suggests that their numbers may be inflated.

September 22, 2022 / 10:42 AM IST
(Representative Image: AP)

(Representative Image: AP)


Countries most vulnerable to climate change are demanding an increase in the climate funding provided to them even as the pledge by rich nations to provide $100 billion annually for the cause remains largely unfulfilled.

The demand comes ahead of the 27th UNFCCC Conference of Parties (COP27) scheduled to be held in Egypt in November. COP, the main decision-making body of the United Nations Framework Convention on Climate Change, assesses the effects of measures introduced by countries to limit climate change against the overall goal of the UNFCCC.

A communique released after a three-day forum for African finance, economy and environment ministers in Cairo earlier this month urged developed economies to meet and increase their climate pledges while the Vulnerable Twenty (V20) Group of Ministers of Finance of the Climate Vulnerable Forum (CVF) also echoed similar sentiments, emphasising on the need for grant-based funding.

The CVF is an international partnership of 55 countries from Africa, Asia, the Caribbean, Latin America and the Pacific which are highly threatened by climate change.

Economic distress induced by Covid-19 and the rising number of extreme climate events have created a dire need to increase climate funding, say experts.

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"Given the scale of the climate crisis, $100 billion is merely the floor of what is needed, the bare minimum to demonstrate political willingness to show solidarity and fulfil promises," said Harjeet Singh, Head of Global Political Strategy, Climate Action Network.

The pledge

Developed countries had made a promise of providing $100 billion as climate finance to developing countries annually by 2020 in the Copenhagen Accord signed at COP15 in 2009. This promise was rooted in the fact that they have historically been the largest emitters of carbon.

But rich countries failed to achieve their original deadline, which has now been extended to 2023.

"It is extremely disappointing that the $100 billion goal has not been met yet. It is a symbol of their historical responsibility for climate change. Only if the developed countries pay their fair share as climate finance can other developing countries be expected to do their bid in international climate action," said Ulka Kelkar, Director (Climate), World Resources Institute India.

A recent report released by the CVF shows that climate change wiped out as much as one-fifth of the wealth of vulnerable economies over the last two decades.

According to an assessment report released by the Standing Committee on Finance (SCF) under the UNFCCC in 2021, developing countries need $5.8 trillion-5.9 trillion until 2030 to finance less than half of the climate actions listed in their Nationally Determined Contributions (NDCs). Since only 41 percent of the listed needs had accompanying costs, the true financial cost of climate action in developing countries is likely to be even higher.

Inflated numbers

The developed countries' claim that they are on track to reaching their stated funding goal by the next year is based on the estimate that $83.3 billion was provided by them as climate finance in 2020, taking them closer to the pledge.


However, closer scrutiny of the available data raises many questions.

A 2015 report by India's Ministry of Finance was one of the first to scrutinise the claims made by developed countries. The report claims that out of the nearly $62 billion that the developed countries claimed to have provided in 2014, a meagre $2.2 billion was actually disbursed.

This figure was reached after subtracting over-reported numbers and funds that were not provided as grants.

Also read: Need less talk, more global co-operation on climate change, says FM Sitharaman

'Climate finance is not charity'

Data provided by Organisation for Economic Co-operation and Development (OECD) makes it clear that the majority of public climate finance that the developed countries claim to provide every year is actually in the form of loans. More desirable instruments, such as grants, do not even make up half of the funds provided. The OECD is an intergovernmental organisation with its membership largely consisting of high-income countries.

Out of the total funds provided by developed countries in 2020, $68.1 billion was public finance, while the rest was attributed as private. Out of the total public climate finance provided, as much as $48.6 billion were actually in the form of loans. Meanwhile, only $17.6 billion were given as grants.

"The skew towards climate finance as loans further entrenches poorer countries into debt and poverty. We must be clear that climate finance is not charity - it is what is owed to developing countries as part of the Paris Agreement," said Singh. The share of loans in public climate finance has grown from 52 percent in 2013 to 71 percent in 2020.

Non-concessional loans

Organisations such as the World Bank give low-cost concessional loans to developing countries for fighting climate change. However, according to data collated by Oxfam, more than half of the $46 billion in loans provided as climate finance in 2017-2018 were non-concessional.

Even before the Covid-19 pandemic, the debt to gross national income (GNI) ratio of low and middle income countries (excluding China) stood at 37 percent, which further jumped to 42 percent in 2020, according to data compiled by the World Bank.

"This has been a major problem and got even more recognition during 2020-21 as a lot of developing countries had to reduce their domestic investments in climate adaptation because they had to repay these loans at a time when their economy was suffering from the pandemic," said Kelkar.

"Many countries are deep in a debt crisis that is bleeding their economies. What we in need is a cancellation of debt, given the multiple social, economic and health crises the world has witnessed since 2020," said Singh.

Need for innovative ways of financing

As the pandemic and Ukraine-Russia war have disrupted the global economy, countries should explore new ways of climate financing, say experts.

"There have been discussions about the need for new sources of finance to reduce the share of loans. Examples for these sources can be windfall tax on fossil fuel companies globally, taxing luxury emissions like business air travel, and instruments like corporate tax," said Kelkar.

Such innovative ways could be used to provide financing even in a situation of economic slowdown caused by the Ukraine war and the after-effects of the pandemic, she said.
Sreedev Krishnakumar
first published: Sep 22, 2022 10:42 am
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