02-November-2023-Special-Article

STOCKTAKING CLIMATE FINANCE — A CASE OF CIRCLES IN RED INK

The state of climate finance in global discourse is a pivotal matter, especially when considering the challenges and commitments pertaining to mitigation and adaptation. With a focus on commitments made and the need for global action, the issue of adequate climate finance remains a central concern.

What is Climate Finance?

Climate finance, as defined by the UNFCCC, encompasses financial resources drawn from diverse public and private sources to support actions addressing climate change, particularly for mitigation and adaptation endeavors.

Purpose: This financial support primarily aids activities like renewable energy generation, crucial in curbing climate change and aligning with the goal to limit global warming to a 1.5°C increase from pre-industrial levels.

Institutional Mechanisms:

Global Environment Facility (GEF): A UNFCCC-designated funding agency providing grants and concessional loans to support climate-related projects in developing countries.

Green Climate Fund (GCF): Administering a segment of the $100 billion for developing countries to transition to low-emission, climate-resilient pathways.

Climate Finance and Global Scenario:

Developed countries extracted $79.6 billion instead of the $100 billion commitment at the 26th UN Climate Change conference in 2021, signifying an inadequacy in meeting targets.

The Paris Agreement necessitates each country to detail their financial contributions and projected resources in the Biennial Update Reports.

Legal Framework of Climate Finance:

Climate finance is a realization of the Common but Differentiated Responsibilities principle, as per the Paris Agreement’s decision, obliging developed nations to collectively mobilize $100 billion by 2025. Subsequently, a New Collective Quantified Goal (NCQG) is set to be established by late 2024.

Challenges and Obligations in Climate Finance:

Unclear Burden Sharing Formula: Developed countries are mandated to provide financial resources to developing countries, but there is no defined approach among developed nations in distributing this burden. The United States, for instance, contributed just 5% of its expected share in 2020.

Mandatory Financial Mobilization: There is no explicit criterion or agreed method to mobilize funds under the UNFCCC or the Paris Agreement, leaving predictions and subsequent contributions uncertain.

Estimating Adequate Climate Finance:

Global South countries’ NDCs project a financial need nearing $6 trillion until 2030, surpassing the current $100 billion commitment.

India, through its third BUR, emphasizes financial needs of $206 billion for adaptation and $834 billion for mitigation. India also calls for a just transition to support those in fossil fuel-related sectors with new economic opportunities and livelihoods.

Replenishment and Global Financial Mechanisms:

The Global Environment Facility and Green Climate Fund (GCF) serve as financial avenues to support low-emission and climate-resilient pathways. However, the second replenishment of the GCF witnessed contributions from only 25 out of 37 developed countries.

The replenishment process is crucial for mobilizing financial resources, yet it lacks a uniform, agreed-upon formula for collection.

Conclusion:

The case of climate finance mirrors a critical juncture in global climate action, demanding immediate attention and global collaboration. The existing financial commitments and practices demonstrate an inadequate scale of response required for climate-related concerns, especially when compared to past financial emergencies.