Climate Change

COP27 diary (November 9): $2 trillion needed to finance climate action in developing economies

A round-up of what went on at the Sharm El-Sheikh summit  

 
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The 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change in Sharm El-Sheikh, Egypt, began November 7, 2022. Finance dominated discussions on day three of COP27 climate talks. Here’s a look at what happened.

 

COP26 and COP27 presidencies released a report on finance for climate action, capturing the needs of developing and emerging economies, except China.

The cost of energy transition, adaptation resilience, loss and damage and sustainable agriculture for these nations would amount to $2 trillion (Rs 1,63,675 crore) per year by 2030, according to the report.

Of this, $1 trillion could be raised from domestic sources, stated the Finance for climate action: Scaling up investment for climate and development report.


Read more: Run-up to COP27: Loss and damage in Madagascar needs robust assessment


The remaining should come from external sources like developed countries or multilateral development banks, it added.

In 2009, developed countries pledged to mobilise $100 billion a year in climate finance to developing countries. The goal is yet to be achieved so far.

“The world needs a breakthrough and a new roadmap on climate finance that can mobilise $1 trillion per year in external finance that will be needed by 2030,” the report read.

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The Prime Minister of Antigua and Barbuda, Gaston Browne, stated that India and China should pay loss and damage funds due to their status as major polluters.

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Egypt’s environment minister Yasmine Fouad, led an event on financing adaptation. The minister called for a global target on adaptation — similar to mitigation, which has a 1.5 degrees Celsius goal.

She also highlighted the importance of adaptation finance for countries, as implementing National Adaptation Plans (NAP) is impossible without money. 

Experts from various banking organisations, mostly private banks, urged the need for markets and profit-driven mechanisms for getting adaptation finance in the same meeting. For instance, building climate-resilient infrastructure through Public Private Partnership models. 

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Read more: Run-up to COP27: DTE’s coverage of loss and damage in Africa due to climate change


An overview at an event on how the United Nations system can help countries get technical help for improving their NAPs was presented by a UN representative.

The impacts of climate change in Senegal were brought by a representative from the primarily coastal country and the importance of getting information on the effects to forecast events and create early warning systems. 

Ian Lisk, president of the Commission for Weather, Water, Climate and Environmental Services of the World Meteorological Organization (WMO), talked about the various examples of enhanced adaptation plans.

For instance, inundation forecasting guidelines were recently uploaded on the WMO website, he said.  

Many national adaptation plans do not consult with the national meteorological and hydrological organisations, said Celeste Saulo, first vice-president, WMO. 

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The Nordic Development Fund, along with the WMO, the UN Environment Programme (UNEP) and the UN Development Programme (UNDP), launched a systematic observations financing facility.

The facility will help fill the gaps in weather and climate data for least developed countries (LDC) and small island developing states (SIDS).

The need for better weather and climate data collection, collation and analysis for improved disaster risk reduction and early warning systems was stressed by experts of these organisations. 

A small investment by Nordic countries would bring in many benefits that could help reduce risk from climate change-induced disasters, said the managing director for International Monetary Fund. 

Many representatives from countries such as Madagascar, Mozambique and East Timor talked about the shortfalls of the surface weather observation network and how SOFF would help them solve it. 

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The Indian Pavilion hosted an event, Financing India’s Climate Announcements: World Bank and Ministry of Environment, Forest and Climate Change (MoEFCC).

The World Bank is working on a country climate development report for India, said Country Director of the World Bank Auguste Tano Kouamé. The group has already produced 20 such reports for other countries.

India faces significant threats of climate change but also has opportunities to decarbonise, said John Roome, South Asia regional director of World Bank, at the event. 

“We must understand the costs of setting them up and ways to finance them,” he said. Past reports have brought out some very good ideas but pointed out that finance has been lacking, Roome added. 


Read more: Run up to COP27: Only a quarter of global climate finance flows into Asia; much of that in loan


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The International Energy Agency (IEA) World Energy Outlook report was discussed by several experts. The participants were IEA Executive Director Fatih Barol; Ruth Nankabirwa Ssentamu, minister of energy and mineral, Uganda and Tarek el Molla, minister of petroleum and mineral, Egypt.

The current energy crisis would accelerate the clean energy transition, Barol said, adding clean energy investment would increase by 50 per cent.

African countries like Uganda are facing a huge challenge of how to stop people from cutting trees — their carbon sink — for cooking fuel, said Ssentamu. Fossil fuel is a source of revenue for many economies and countries in the continent, she said, calling for ‘affordable’ investments. 

The Middle East and Africa are fossil fuel dependent, pointed out Molla. Their transition to cleaner fuels should happen in a way that doesn't pressure their economies. Africa should be given preferential financial packages as 600 million people in Africa lack access to electricity, he added.

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Climate Envoy for the United States John Kerry announced a new plan, Energy Transition Accelerator (ETA), to help developing countries wean off fossil energy. 

It was announced in partnership with the Rockefeller Foundation and the Bezos Earth Fund and is “intended to catalyse private capital to accelerate the clean energy transition in developing countries”. 

The ETA “will produce verified greenhouse gas emission reductions, which participating jurisdictions will have the option of issuing as marketable carbon credits,” according to the official announcement. 

Essentially, it is a voluntary carbon offset initiative. Revenue raised from the ETA is intended to support the development of renewable energy projects in developing countries. 

However, critics are sceptical due to the problematic nature of the voluntary carbon offsets market.

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The Arab Coordination Group (ACG), a strategic alliance of financial institutions that provide a coordinated response to development finance, pledged to provide $24 billion of climate action financing by 2030.

The group aims to provide funds to help accelerate the energy transition, increase the resilience of food, transport, water and urban systems and promote energy security in countries, including the least developed countries and small island developing states. 

They also aim to use concessional finance to attract private sector finance and use financial instruments such as loans, blended finance, guarantees and various Islamic financing instruments.

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The UNEP released a report on the building and construction sector, which experienced a lull due to the COVID-19 pandemic. The sector’s energy consumption and carbon dioxide emissions reached a record high in 2021, according to the report. 

Over 34 per cent of energy demand and around 37 per cent of energy and process-related CO2 emissions can be attributed to this sector, the 2022 Global Status Report for Buildings and Construction found.

The sector’s operational energy-related CO2 emissions reached 10 gigatonnes of CO2 equivalent. This is five per cent over 2020 levels and two per cent over the pre-pandemic peak in 2019, the report highlighted.

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IEA hosted an event “Net zero for the industrial sector, where hard-to-abate sectors like steel, cement, chemical, aviation and shipping were discussed.

Options like wood waste and plastic waste were suggested as fuel for the steel sector. Options of green ammonia and green methanol were also brought up.

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Read more: Less than a quarter of emission targets from Paris climate agreement met in 7 years


A new initiative, “Reducing the Cost of Green and Sustainable Borrowing”, was launched by Egypt’s CoP27 presidency and the UN Economic Commission for Africa to help climate-vulnerable countries.

The initiative proposed a few mechanisms to help these nations address larger issues of deteriorating fiscal health.

The Egyptian COP27 presidency said that liquidity constraints [a potential market failure that can dampen investments] remain some of the foremost barriers to allowing African countries to set aside money for climate resilience and the Sustainable Development Goals (SDG).

“The focus will be on Green and Social and Sustainable Bonds to fill the SDG financial gaps. These bonds can exclusively direct financing to projects with favourable climate and environmental outcomes,” said according to the World Bank.

The initiative will strengthen the ability of African states to borrow at an affordable rate, mobilise more green funding, and attract private capital, according to the Egypt Presidency.

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