COP28: climate finance needs

Islamabad:

The COP28 climate talks have concluded with so much debate and discussion and have some useful takeaways. But everything requires funding. Things are not done with words alone.

If only the financial zeal to allocate and spend money was as strong as the debate. Unfortunately, this has not happened. Hopefully it will be there in the future. We will take stock of the situation later.

It would be useful here to first summarize the main conclusions and determinations of COP28. These are: fossil fuel transition, tripling renewable energy installation and doubling the growth rate of energy efficient improvements, Loss and Damage Fund, global target for adaptation, global cooling commitment, tripling nuclear power by 2050, accelerating transition to carbon, CHAMP initiative and climate finance.

In 2010, developed countries pledged to provide $100 billion a year in climate finance. Oxfam has made the following comments on the climate finance provided so far. “Developed countries report providing just $83.3 billion of the pledged $100 billion in annual climate finance. Only $21 to $24.5 billion of that could be considered real support. 2. The net economic value of reported climate finance in developing countries – the grant equivalent – ​​may be less than half that reported by developed countries. 3. Due to overestimation of the relevance of reported climate funds, bilateral climate finance may have been as much as 30% lower than reported. 4. Just a quarter of reported public climate finance is provided as a grant. The rest are mostly loans, most of which are not even favorable (representing no better deal than what can be obtained in the market). 5. Only 33% of reported public climate finance was for adaptation, while 59% was for mitigation.”

Loss and Damage Fund

Perhaps, the most important action taken by COP28 concerns the Loss and Damage Fund. It was adopted at COP27 held in Sharm el-Sheikh, Egypt. It has now been launched at COP28.

There are inevitable consequences caused by climate change such as rising sea levels, prolonged heat waves, desertification, crop failure, etc. It is now known and accepted that emissions cause climate change.

Most of the emissions (75%) have been caused by developed countries and the damage is done in developing countries. For example, Pakistan has been damaged by floods, causing losses of $30 billion, while Pakistan’s emissions are less than 1% of global emissions. Similar is the case of the African continent as a whole.

So some compensation should come from the developed countries that caused the damage and should go to the countries that have been damaged and will continue to be damaged unless and until emissions are controlled.

The funding actually made available was up to five times less than needed. By the year 2030, $300 billion will be required.

How are such compensatory funds provided? Many suggestions have been made. The Loss and Damage Fund is intended to fund such needs. UN Secretary-General Antonio Guterres has proposed taxes on windfall profits made by oil companies.

An amount of $700 million has been agreed to fund the Loss and Damage Fund, which is estimated to be less than 0.2% of the need. Of the total, $100 million has been pledged by the United Arab Emirates, the US – the largest emitter of greenhouse gases – has pledged only $17.5 million, Japan $10 million, Denmark, a small country by comparison, has offered $50 million and Norway $25 million. The numbers do not add up. There may be other countries, but data on their grants is not available. It is not certain that even this meager funding can be forthcoming.

Reading COP28: a non-binding agreement but an agreement nonetheless

Some existing funding programs are reformulated and the net funding effect becomes zero in such cases. In some cases, financing conditions become too difficult. It is hoped that the GST commission will be able to make effective rules in this regard.

Fossil fuels are the largest contributors to global climate change, accounting for over 75% of global greenhouse gas emissions. Most (80%) come from the developed world. Thus, developed countries have to put their own house in order, while pressuring developing countries and tending to demand unexpected actions on the fast track.

Although most developing countries would need external financing, it would be more useful to become self-sustaining. Technical assistance and technology transfer would be more effective and feasible.

However, the technology is available with companies and not with governments or intergovernmental bodies. Therefore, a program to fund technical assistance can be included in such funding programs. It would be more efficient and it would be faster.

It has become known that the World Bank is taking over the responsibility of managing the Loss and Damage Fund. Many people at COP28 have expressed skepticism about the World Bank’s ability to successfully manage the fund in light of its management of Green Funds earlier.

They say the World Bank is slow and expensive. Although the World Bank has developed the ability to understand the conditions of developing countries and match programs accordingly, it is considered too bureaucratic while using expensive human resources.

A service charge of 20% (of the project cost) is considered too high. It’s really high. Perhaps a competitive approach between international organizations can be considered, it is argued.

Also, such a large funding requirement cannot be financed by grants alone. Only those programs that do not generate cash income can be considered grant income. Others should be interest-free or low-interest, where cash income is collected.

Also, the role of intermediary companies should be reduced. It is argued that in carbon market projects, intermediaries consume most of the funding. If the world is to change on such a massive scale and so rapidly in a short period of time, traditional work methods will have to change.

The author is a former member of the Energy Planning Commission and has authored several books on the energy sector

Published in The Express Tribune, December 25^u2023.

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