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Climate Finance: Are the Rich Nations Doing Enough?

by Shachi Wadhawan Global Commons Nov 11th 20214 mins
Climate Finance: Are the Rich Nations Doing Enough?

While all nations need to commit to reducing emissions going forward, it is the developing countries that are particularly vulnerable to the consequences of past emissions, largely attributable to the developed world. For an equitable and climate-safe future, rich countries need to put a lot more money on the table, specifically climate finance,  for both mitigation and adaption of the developing countries.

With COP26 well underway in Glasgow, many nation states have come forward with their respective net-zero emission pledges, which by itself may not be enough. With dire projections around the global warming of our planet by the end of the century, focus is clearly on the mitigation of emissions. However, damage already resulting from increasing frequency of extreme weather events, and those likely to be caused by the gradual effects of climate change, say droughts, is immediate, palpable, and permanent.

Emissions made in the past are already baked into the Earth’s system, resulting in extreme weather events. In the year 2020 alone, climate change is touted to have caused USD$210 billion worth of damages globally. One study estimates climate change to cause $580 billion in economic losses each year by 2030, possibly surpassing $1 trillion by 2040. Developing countries are far more vulnerable to these impacts, as is also witnessed in the past and assessed by Maplecroft’s Climate Change Vulnerability Index, and further highlighted by Germanwatch in their Global Climate Risk Index 2021 study.

Global economic output, as such, is likely to be hit. Research estimates that with continued climate change, by 2050, the global economy is likely to shrink by anywhere between 11% and 14%, compared to the scenario without climate change. The impact on developing countries is likely to be much more pronounced, with up to one-third reduction in output.

The fact remains that past emissions followed economic development achieved primarily by the rich countries of today, which has disproportionately impacted the developing countries. While the overall share of incremental emissions may be tilting towards the developing countries, mainly China and India, the richer nations have significantly higher per capita emissions. In 2019, countries with per capita fossil CO2 emissions below the world average, and 60% of the world’s population, contributed to only 22% of global fossil CO2 emissions.

Hence, the call for fairness and equity in fixing the financial responsibility of bearing losses and damages caused by anthropogenic climate change. In simple terms, policymakers are calling for the polluters to bear the liability of adaptation and mitigation of climate change in proportion to their historical emissions. However, the reality is more complex than that. Not only is it a matter of political negotiation, it is also the technical complexity of proving linkage to the polluting source, that makes determining accountability a tricky subject.

You might also like: Climate Debt and Justice: How Much Do We Really Owe?

Back in 2009, at the UN climate conference held in Copenhagen, developed countries collectively committed to jointly mobilise USD$100 billion of public and private climate finance per year by 2020 towards facilitating mitigation and adaptation measures by the developing countries. Over the past years, the contribution has fallen far short of the promise. As per the Organisation for Economic Co-operation and Development (OECD), the developing countries received  about  $80bn by 2020  against the promised $100bn. Accounting for inflation since 2010, the shortfall more than doubles in today’s terms. Moreover, applying the principle of fairness, the US’ climate aid commitment of $11.4 billion by 2024 is far short of an estimated $S43 billion that the US should contribute each year. Other rich nations are not doing much better either (see the graphic below).

climate finance

Gap between fair and actual climate finance contributions by developed countries. Source: Dw.com

Most of the taxonomy and attention around climate finance remains skewed towards deterrence and, accordingly, three-fourths of climate finance is targeted at mitigation measures. Recently countries like the UK, Canada, the US, and Germany have committed to increase their contribution towards climate finance. Considering the projected climate change-induced damages, $100 billion annually is only a fraction of what vulnerable countries need to decarbonise and build resilience to climate impacts. These countries are already on a long road of development and the added climate risk, not of their own making, is weighing them down further.

The pandemic and the inequitable access to COVID-19 vaccines has yet again validated the concerns of the developing countries. With the right technology, the means to innovate and access to finances needed to back sustainable development, the developed countries are well placed to facilitate the process of both mitigation and adaptation, globally. The moral obligation the rich nations carry, for their historical emissions, needs to be backed by the right intent and concrete, proactive action. Only then would the developing countries – as they now have their chance at development – be amenable to reducing emissions going forward. After all, if we want to continue having a real shot at avoiding a climate disaster, confidence building and developing trust in the international community is a much-needed currency, now at the COP26 and beyond.

Tagged: climate finance

About the Author

Shachi Wadhawan

Shachi is a general management and strategy professional currently employed with a global MNC. At the moment, she in the process of discovering how climate change would impact our lives and the potential mechanisms for businesses to play a central role in mitigation and adaptation.

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