Why emerging markets need billions in climate funding -Report
By Godwin Anyebe
Demands from developing countries for richer nations to help them pay for the damage caused by climate change and fund the shift towards a low-carbon future look set to dominate the ongoing global climate talks in Egypt.
Despite repeated calls for more help, actual financing offered to date has come nowhere near the estimated $1 trillion a year needed.
The world’s biggest multilateral development banks increased their climate-related financing 24 per cent to $82 billion in 2021 versus 2020 levels. Nearly two-thirds of the money went to low and middle-income countries, the banks said in a recent report, DailyTimeNGR gathered.
The 2021 figure, however, remains a long way short of the estimated finance needed by emerging markets, and this year’s summit includes discussions of reforming development banks to accelerate climate financing.
A report by the world’s biggest asset manager BlackRock last year put the overall need at $1 trillion a year of public and private finance.
Set up in 2010 to disperse climate finance, the multibillion-dollar Green Climate Fund is one of the vehicles for handling the $100 billion a year pledged by rich nations to the poor.
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The funds are meant to fuel the transition to clean energy and fund projects to help vulnerable countries adapt to a warmer world. But rich countries’ failure to meet a 2020 deadline for producing that funding in full angered many at COP26 and has become a key bone of contention in Egypt.
In 2020, rich countries provided $83.3 billion – falling $16.7 billion short of the target, the Organisation for Economic Co-operation and Development (OECD) said earlier this year. Rich nations say they will be paying the full $100 billion by 2023.
While $46 billion of adaptation finance was delivered in 2019-2020, according to to think tank Climate Policy Initiative (CPI), this is just a tiny fraction of the $340 billion needed annually for adaptation in developing countries by 2030, as estimated by the U.N. Barriers to investment include a lack of common impact metrics, perceived lower returns and highly localized projects.
However, climate-related flows fell to $14 billion in 2019-2021 from $36.5 billion between 2016-2018, a 60 per cent decrease, according to a recent report by data tracker Convergence.
Egypt has made the issue of providing finance for “loss and damage,” – climate-related destruction to homes, infrastructure, and livelihoods in the poorest countries that have contributed least to global warming – a key focus for this year’s summit.
It will be the first time the issue has been added to the formal agenda, as wealthy countries have historically resisted creating a funding mechanism that could suggest liability for climate damages.
The United States and European Union remain wary of creating a special L&D fund, though, with Washington preferring to use other pots of money to help, as well as reforming multilateral development banks so they can provide more help.
Developed market countries have lent billions of dollars to emerging market countries that could be written off, written down or repaid under more climate-friendly terms. While not a direct cash transfer, such debt forgiveness could, for example, include requirements for protecting natural resources.
Governments see so-called debt-for-nature swaps as a way to spur action on climate change, help the natural environment and support green growth in the developing world.
In a bid to help conserve some of the world’s most vulnerable marine ecosystems, Belize last year swapped a promise to protect the northern hemisphere’s biggest barrier reef for much-needed debt relief.
But examples of debt forgiveness linked to environmental commitments remain rare and progress on striking new deals has proven slow.
Many emerging market countries are also pinning their hopes on scaling up the still nascent market for carbon credits, both between nation-states and between countries and companies, which are keen to offset some of their carbon emissions.
A credit could be generated by, for example, protecting a rainforest from being cut down, or by committing to rehabilitate degraded land.
While some campaigners have criticized the practice for what they see as enabling companies to avoid making hard decisions to stop emitting in the first place, the market could provide a way for cash-poor but nature-rich countries to raise revenues.
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