Activist countries

Rich countries must dig deep into climate finance

The green transition was once the main concern of activists and scientists. One of the results of Vladimir Putin’s weaponization of energy in his war against Ukraine has been to put it at the heart of the geosecurity agenda, at least in advanced democracies. Soaring prices have finally prompted governments to make determined efforts to reduce their dependence on fossil fuels, even if in the short term some have to use more coal. Rather than a setback for climate action, according to the International Energy Agency, the energy crisis may be a “historic turning point”.

It is a positive element in the backdrop of the ongoing COP27 summit in Sharm el-Sheikh which otherwise looks bleak. Inflation and economic slowdown hardly provide a favorable environment. Extreme weather events this year, such as the appalling floods in Pakistan, have highlighted the damage caused by even 1.1°C of global warming to date. A UN report has warned, meanwhile, that ‘woefully insufficient’ climate efforts mean the world is still on track for warming of at least 2.4C – well above the 2°C, or ideally 1.5°C, target of the 2015 Paris Agreement.

The $370 billion in funding for the green transition in the US Cut Inflation Act and the EU’s REPowerEU program are signs that the rich world is, belatedly, starting to put its money in its mouth. This will give advanced economies more authority to try to persuade poorer countries – which have had less time to benefit from carbon-fueled industrialization – to switch to green energy. As of September, only 24 countries out of more than 190 had tabled stronger action plans to cut emissions this year, as agreed at last year’s COP26.

However, in addition to spending more at home, rich countries will also need to provide much greater financial support to poorer countries to mitigate and adapt to climate change; financing should be the keystone of this COP. Rich countries have pledged to raise $100 billion a year by 2020, but they are still short about $17 billion. Last year they pledged to reach the target by 2023 and to negotiate a new deal to start in 2025. They need to go much further.

In addition, a much larger share of funding should be devoted to adapting to the effects of climate change – from weather warning systems to climate-resilient infrastructure and new farming methods – for which the UN has said countries in development will need 340 billion dollars a year. by 2030. More should also come in the form of grants, rather than loans that push poor countries deeper into debt. If the rich world can dig deep enough to fund mitigation and adaptation, it could offset increasingly vocal calls from poorer countries for funding to cover losses and damages caused by global warming. . While the moral case for this may be strong – and the EU and US have signaled they are ready to discuss it – any deal will be difficult.

The reform of multilateral development banks, first and foremost the World Bank, is a priority for raising financing. Proposals to change the way MDBs operate could unlock several hundred billion dollars of green lending capacity without requiring additional shareholder capital. Another priority is to leverage donor money more effectively to attract private capital to green investments, especially in developing countries. The signs that some of the big banks that joined Mark Carney’s net zero financial alliance at COP26 in Glasgow are preparing to roll back their emissions reduction pledges are unfortunate.

The defining challenge of the 21st century can only be solved through coordinated government action – especially by China and the United States – in concert with the private sector and non-governmental organizations. This is above all what the world expects from COP27.