Climate finance has a crucial role in retaining the trust of the developing countries in future climate change negotiations. The issues relating to climate finance are likely to be prominent in the Conference of the Parties (COP 28) meeting (November 30–December 12), in Dubai, in the context of Climate Change 2023: Synthesis Report providing the main scientific input to the global stocktake at COP. The report which says that the current temperature increase at 1.1° Celsius is responsible for frequent hazardous weather will feed into the global stocktake. Thus, the developed countries and climate vulnerable countries are likely to demand a ramping up of mitigation action by the developing countries — which is likely to be countered with the demand that the developed countries have not been able to meet the mark of a mobilisation of $100 billion climate finance. The sum is inadequate in terms of the challenges faced by the developing countries in switching over to a low carbon development path and climate resilient development. Providing finance to developing countries is the operationalisation of the anchor sheet principle of the Common but Differentiated Responsibilities and Respective Capabilities.
Estimating adequate climate finance
The developed countries are required in mandatory terms to provide financial resources to developing country parties. Under Article 9 of the Paris Agreement on Climate Change, it is also mandatory for the developed countries to provide in their Biennial Update Reports (BUR), information relating to the financial resources which they have provided and, also, the projected levels of public financial resources to be provided to developing country parties. At the Copenhagen Change Conference in 2009, the developed countries made the commitment to mobilise $100 billion per year by 2020. Further, the developed countries are required, in accordance with the decision accompanying the Paris Agreement, to collectively mobilise $100 billion through 2025, before a new collective quantified goal (NCQG) ‘from a floor of $100 billion per year is to be set at the end of 2024’. At the 26th United Nations Climate Change conference in Glasgow in 2021, the developed countries noted, with deep regret, of being able to mobilise only a total of $79.6 billion.
The Paris Agreement is based on the self-determined efforts of all the parties inscribed in the nationally determined contributions (NDCs), which contain the mitigation efforts to be made by a party for the next five years. Entire NDCs put together project a picture of overshooting the 1.5° C temperature goal. Going by the needs of countries in the Global South expressed in their NDCs, the amount quantified for the first time touches close to $6 trillion until 2030. For India, its third BUR says that its financial needs derived from its NDCs for adaptation and mitigation purposes for 2015-30 are $206 billion and $834 billion, respectively. Most of the financial needs are required in transitioning towards low-carbon, cleaner energy systems from traditional systems, which will not be funded by the designated financial mechanisms of the United Nations Framework Convention on Climate Change (UNFCCC). Additionally, India has reiterated its demand for a just transition at COP27 as ‘3.6 million people in 159 districts in India are entrenched in the fossil fuel economy through direct or indirect jobs related to the coal mining and power sector’. They will have to be supported with suitable economic opportunities and livelihoods.
Unclear burden sharing formula
The developed countries are mandatorily required to provide financial resources to developing country parties, but there is no agreed approach among developed countries to share the burden of this goal. One analysis suggests that the United States provided just 5% of its fair share in 2020. Without any mandatory formula for collecting money, it is difficult to predict how the said money or the NCQG for climate finance will be mobilised. Neither the UNFCCC nor the Paris Agreement mention the criterion for mobilisation. Instead, the mobilisation is done with the help of a replenishment process.
The Global Environment Facility, a UNFCCC-designated funding agency providing grant and concessional loan to developing countries, is replenished every four years. A similar approach has been borrowed into the Green Climate Fund (GCF) by the developed countries to mobilise finance. The GCF, set up to administer a portion of the $100 billion for developing country parties to switch over to low-emissions and climate resilient development path, had its second replenishment on October 5, 2023. In the second pledging conference, only 25 countries out of 37 developed countries met in Bonn, pledging to contribute $9.3 billion in new contributions. Interestingly, the GCF includes voluntary contributions by nine developing countries. More contributions in the GCF serve the purpose of counting international public climate finance more easily as it has been subject of debate as to what counts as international public climate finance.
Replicate this action
Strong political will, perceived urgency and enlightened self-interest of the elite Global North were writ large in the case of a perceived collapse of global public good (global financial stability) in 2009-10 when the G-20 governments quickly responded to the global financial crisis, getting $1.1 trillion in a few weeks to support the International Monetary Fund and multilateral development banks to save the global financial system. Unfortunately, these factors are missing when it comes to the necessary climate finance transfers from developed to developing countries to safeguard another global common — the atmosphere.
Anwar Sadat is a senior Assistant Professor in International Law, specialising in environmental law, at the Indian Society of International Law, New Delhi
