COP26: Climate adaptation financing remains elusive goal for developing countries
The funds from a global plan for disbursing $100 billion a year in climate financing remain out of the reach of the countries most in need of assistance and that have done the least to drive climate change, ministers told the COP26 meeting 8 November.
Released by the UK COP26 Presidency, Climate Finance Delivery Plan: Meeting the US$100 Billion Goal indicates that the funding that developed countries pledged to deliver at the COP15 meeting in 2009 will fall short of its backers' goal in 2022, only materializing fully in 2023.
Developing countries were promised $100 billion a year in financing for mitigation and adaptation every year by 2020 in line with Article 9 of the Paris Agreement at the 2015 meeting.
Ministers from smaller nations such as Bhutan and Fiji to large populous countries like Egypt on 8 November called for greater clarity on whether the promised climate financing would take the form of loans or grants, and what procedures would be used for identifying climate adaptation projects. They also want it to be easier to access to these funds given the climate urgency and also sought clarification on how private sector financing can be tapped alongside these funds to tackle multi-million-dollar projects.
The ministers' remarks underscored the urgency their countries face as they emerge from the COVID-19 pandemic.
"The delay in the delivery of the $100 billion is discouraging considering this commitment was made over a decade ago," Lyonpo Yeshey Penjor, Bhutan minister for agriculture and forests, said at a high-level ministerial dialogue at the UN climate meeting in Glasgow.
Bhutan chairs the Least Developed Countries (LDC) Group, which refers to 47 nations that are especially vulnerable to climate change despite having done the least to cause the problem.
Bhutan, along with other members of this group, are anxious to see the $100 billion pledge materialize as they lack the resources to adapt to climate change, which US President Joe Biden a week earlier said is "ravaging the world."
Penjor said the plan, though a step forward, was still hazy on how these long-awaited funds will be disbursed.
"We don't know if these resources will be channeled as loans or grants," Penjor said, adding that the LDCs don't even know what portion of these funds will be available for adaptation.
The plan talks about making LDCs and other vulnerable countries a priority, but stops short of explaining "what this really means in terms of the amounts to be provided, the activities to be funded, or the types of financial instruments" that will be leveraged, he said.
Also participating in the dialogue was Egyptian Environment Minister Yasmin Fouad, who said the climate financing plan released earlier in the day is mainly related to policies. What is needed is a clearer definition of climate finance that includes the ability to track progress and to mobilize resources from the private sector, which remains largely untapped, she said.
Support for concessional loans, grants
Mobilizing climate financing should not in the form of "punishing high-interest loans and expensive consultant fees," noted Fiji Attorney General Aiyaz Sayed-Khaiyum, who also is the Pacific island nation's minister for economy, civil service and communications.
Rather, he said it should be in the form of concessional arrangements, grants, responsible market mechanisms, and blended finance solutions, or the strategic use of public capital to increase private sector investment in sustainable development.
Responding to the concerns raised by Penjor and Fouad, newly installed Canadian Environment Minister Steven Guilbeault said the country, which pledged earlier in November to double its international climate financing to $5.3 billion over a five-year period, will set aside 40% of its financing to address the adaptation needs of the poorest and most vulnerable countries through critical, on-the-ground projects related to water, agriculture and food security, disaster risk management and prevention, and fragile ecosystems.
"Climate change and biodiversity loss are two sides of the same coin, so Canada will allocate over $1 billion in climate finance to support nature-based, climate solutions with biodiversity cobenefits in developing countries," said Guilbeault, a former Greenpeace activist.
Streamlining accessibility to funds
Penjor said the LDCs have already submitted detailed plans about their adaptation needs in their Nationally Determined Contributions to the UN that need to be reviewed and prioritized for funding.
Climate change has resulted in diverse regional impacts as well as some common effects, he said, adding: "It would be very nice for the developed country partners to focus on common challenges that the LDCs are facing and slowly step into country specific challenges."
Delivering the pledged funds to the countries is not enough, Fouad agreed. The developed countries also need to consider approaches for streamlining the process so these funds can be easily accessed by communities that truly need them, she said.
A week earlier, Larry Fink, CEO of global investment firm Black Rock, warned world leaders that deploying private capital is the challenge, not securing it. He was alluding to the $130 trillion in private capital commitments that the Glasgow Financial Alliance for Net-Zero (GFANZ) said it has secured to help economies transition to net zero.
Fiji's Sayed-Khaiyum said global leaders need to also change their approach to tackling adaptation projects, saying you can't build resilience in a piecemeal fashion.
"You can't build a house one wall a decade and expect to serve it as a shelter. We need that shelter now," he said.
Guilbeault agreed, noting that the vast majority of projects funded under the Clean Development Mechanism (CDM) of the Paris Agreement's predecessor, the Kyoto Treaty, went to a handful of countries, while Africa, Southeast Asia and Latin America got "very few projects."
The CDM is a UN-run carbon offset scheme allowing countries to fund GHG-reducing projects in other countries while claiming the saved emissions as part of their own efforts to meet international emissions targets.
Guilbeault also agreed on the need for governments, especially in developed countries, to find a way to streamline and mobilize private sector finance.
De-risking capital-intensive projects
He floated the idea of governments helping de-risk climate adaptation projects as a way to encourage private investment.
Bankers, investors, and pension funds—especially in the developed world—are warming to the idea of using the strong credit ratings of multilateral development banks to help reduce the risk of climate adaptation projects in low-income countries.
Governments can play a role in making investments in these projects more secure through their central banks, which can require a consideration of climate risk and climate stress tests, he added.
To move away from project-scale improvements to large-scale, countrywide resilience, countries need to develop entire portfolios of "transformational projects" that will drive the clean energy transition, said Mari Pangestu, managing director of development policy and partnerships at the World Bank Group.
Going forward, she said countries need to focus less on "bean counting" and more on "how to make it really work for the countries in question."
UK COP26 President Alok Sharma said all parties have to agree on a new goal for a post-COP26 approach to climate finance that scales ambition with finance.
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