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The increase in the number of extreme weather events in recent years seems to have led to some change in the attitude of developed countries towards the global climate finance structure. But ideas rarely match action. The Global Financial Compact on Climate Change summit in Paris last week also asked the right questions. French President Emmanuel Macron set the tone by calling for a “public financial shock”.
Most other delegates agreed that multilateral institutions must find ways to unlock new climate investments and debt arrangements should include catastrophe clauses — for example, a two-year default on repayments after an extreme weather event. However, developing country representatives at the two-day summit couldn’t help shake the feeling that changes to the finance ecosystem are likely to be gradual, at best, in the coming years.
Among the positives at the meeting was President Macron’s announcement that there was a “good probability” that, by the end of this year, rich countries would fulfill their pledge of $100 billion in annual financing for climate change initiatives in the Global South. This commitment was made in 2009 and developing countries are scheduled to receive the funds by 2020.
The failure to deliver on the 14-year pledge has become a symbol of the failure of the global climate finance system and has added to the atmosphere of mistrust in the climate negotiations. A course correction could help repair broken barriers in the run-up to the COP28 conference in Dubai in November when the United Nations Framework Convention on Climate Change will assess progress – or lack thereof – towards achieving the goals of the 2015 Paris Pact.
Yet the enormity of the task at hand is that $100 billion today is a fraction of the amount required by the global south to develop resilience to climate change — a report released at COP27 last year, for example, believes that developing emerging economies, other than China, will need , to $2 trillion annually by 2030 for the energy transition, adaptation, sustainable agriculture, and addressing losses and damages associated with global warming.
The International Monetary Fund announced Special Drawing Rights (SDR) of $100 billion for the Global South. France, Japan and the United Kingdom have also made SDR pledges. The World Bank said it would halt repayments to “countries grappling with climate disasters,” but only for the sake of repayment. These commitments indicate a kind of movement forward. However, any reform of the climate finance architecture should not lose sight of the fact that loans are today the main source of financing. In Paris, last week, vulnerable countries emphasized that they need technology grants and transfers. This message should not be lost.
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