Climate finance remains an area of contention within the G20 as there is an uneven distribution of financial resources to countries that are most vulnerable to the impacts of climate change
G20 economies need adequate finance to combat vulnerabilities associated with climatic changes, necessitating a higher allocation in climate adaptation funds and technology. Photo: iStock.
This is the first of a two-part series.
Countries comprising the ‘Group of 20’ (G20) intergovernmental forum, representing the world’s major advanced and developing economies, is responsible for about three-quarters of global emissions. Incidentally, they also account for around 85 per cent of global gross domestic product (GDP), 75 per cent of international trade and two-thirds of the world’s population.
Recognising their diverse economic structures, level of development and the large share of the emissions, it is obligatory for the G20 to address and tackle the issue of climate change.
After the pandemic, the organisation has recognised the importance of collective action in addressing environmental challenges and climate change. It started focusing on green growth, climate-resilient infrastructure, doing away with fossil fuel subsidies, green finance and investment and Environmental, Social and Governance, among the many pivotal areas which require cooperation.
Climate adaptation measures could cost developing countries around $160-340 billion annually by 2030. This number is likely to increase to $565 billion by 2050, if climate mitigation efforts are not implemented, according to the UN Environment Programme’s (UNEP) 2022 Adaptation Gap Report.
Also read: G-20 spent nearly $700 billion supporting fossil fuels in 2021
Policy measures undertaken must be well aligned with the long-term climate objectives to build resilience. The G20 economies need adequate finance to combat vulnerabilities associated with climatic changes, necessitating a higher allocation in climate adaptation funds and technology for a sustainable post-pandemic recovery. This requires a time-bound plan by developed countries to ensure climate finance delivery and help the developing countries in their mitigation and adaptation efforts.
However, developed countries have not accepted the necessary accountability for their actions. This is evident from their Nationally Determined Contributions (NDC) to address global warming, which is insufficient to keep the target temperature rise to within 1.5 degrees Celsius. Hence, aligning the short-term policy goals with the long-term climate-friendly objectives remains a formidable challenge for the G20.
The G20 has been deliberating on global economic issues, particularly climate change, global health, food security and sustainable development. However, climate finance remains an area of contention within the G20 as there is an uneven distribution of financial resources to countries that are most vulnerable to the impacts of climate change.
One of the major factors deterring a consensus on climate change at the global level is that there are disagreements between developed, developing and the least developed nations over sharing the burden of greenhouse emissions.
Also read: US, Japan & others to fund Indonesia’s transition to clean energy
Other contentious issues, besides climate financing, pertain to the procedures to reduce carbon footprint and access to technology.
Moreover, there remains a lack of commitment on the part of the biggest emitters, the US, over the Kyoto Protocol and the Paris Agreement, thus casting serious doubts on its ability to address climate change.
Time and again, proponents of climate finance have emphasised clean energy transition in developing countries by persuading the developed nations to invest in renewable energy and technology sharing.
At the 2009 Copenhagen climate talks, developed countries pledged to provide $100 billion annually until 2020 as a part of climate change mitigation efforts to member nations suffering from climate change hazards. But they have failed to meet their targets.
In the G20 Hamburg communique, measures were undertaken to enact the Paris Agreement and steadfastly pursue the global energy transition in accordance with the 2030 Agenda for Sustainable Development.
These proposals mandated a ceiling on the global average temperature to two degrees and made concerted efforts to cap temperature increase to under 1.5 degrees. However, these have not been achieved in practice.
Also read: Least Developed Countries want major emitters, G20 to increase climate efforts
Discussions on climate finance have assumed paramount importance in recent years, with the G20 member countries playing a crucial role in climate negotiation, which, however, have remained inconclusive.
It is an anomaly that 92 per cent of the greenhouse gas emissions originate from the developed countries. Yet, the economic impact of climate change is disproportionately borne by the vulnerable developing countries.
The costs of shifting away from fossil fuels and moving to a low-carbon economy are further aggravated as developing countries face the brunt of the ongoing crises emanating from a prolonged slowdown, inflation and excess sovereign debt.
G20 countries can turn to a wide array of policy measures to streamline a decisive transition towards sustainable economic growth while simultaneously reacquainting the member nations with low-emission and climate-resilient recovery. This can be made possible by reorienting the structural reform policies that help them stay on low-emission and climate-resilient pathways through better allocation of resources.
At the same time, the G20 member nations can reassess and accordingly formulate their national fiscal policies to increase their investments in low-emission and climate-resilient infrastructures. This can be done by allocating funds for research, keeping in mind the potential of these financial measures to revive economic growth and signal climate-friendly investment goals.
However, in order to ensure sustainable and inclusive growth, the transition towards a low-emission and climate-resilient economy should be made inclusive and socially-progressive.
Also read: G20 climate goals just won't do the job, claims new report
G20 countries should also work on implementing infrastructure projects consistent with long-term policy goals and low-emission development strategies to route investments into climate-resilient infrastructure.
Coordinated efforts are further required to do away with inefficient fossil-fuel subsidies that lead to wasteful consumption and misallocation of resources.
Steps should also be undertaken towards a climate-consistent global financial system by addressing the mismanagement of financial regulations and practises, exposing the financial markets to climate change risks and reviewing the threats that climate change hazards pose to financial stability.
For this, it is necessary to ensure that the banking and financial market institutions — multilateral, bilateral and national — should formulate policies and implement action plans.
These institutions can assist in creating low-emission infrastructure, providing signals on climate risks, and increasing private investment. They can also frame developmental planning guidelines for climate-resilient infrastructure, especially in low-income and vulnerable countries.
Read more:
Pravakar Sahoo is professor while Samahita Phul is consultant, Institute of Economic Growth (IEG), Delhi.
Views expressed are personal and don’t necessarily reflect those of Down To Earth
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