COP28 Dubai: Climate finance to developing countries needs to quadruple by 2030 to reach Paris goals, says new report

Climate finance for Emerging Markets and Developing Countries (EMDCs) will need to quadruple between now and 2030, according to a new report released at the 28th Conference on Parties (COP28) to the United Nations Framework Convention on Climate Change.

Bilateral climate finance from developed donor nations should increase to $60 billion by 2025 and $90 billion by 2030 from the 2020 levels, stated the findings by the Independent High-Level Expert Group on Climate Finance.

Climate finance to help EMDC from private sources should go up by more than 15 times on current levels to deliver on climate mitigation goals, the report, commissioned by the COP27 and COP28 Presidencies and the United Nations High-Level Climate Champions, stressed.

“While global efforts to tackle climate change are increasing, albeit more slowly than necessary, EMDCs are facing setbacks and obstacles in every critical aspect of the low-carbon transition,” the report read.

This affects the shift to clean energy in both its supply and use, adaptation and resilience, addressing loss and damage, the protection and restoration of nature, and ensuring a just transition.

This is the second installment of the report. In its first report released at COP27 in Egypt, the Independent High-Level Expert Group on Climate Finance concluded that EMDCs, excluding China, need $2.4 trillion of investment a year for just energy transition, adaptation and resilience, loss and damage, and the conservation and restoration of nature by 2030.

The total climate finance provided and mobilised by developed countries for developing countries in 2021 was $89.6 billion, according to a new report released by the Organization for Economic Cooperation and Development (OECD) November 16, 2023.

In 2009, at COP15, developed countries committed to jointly mobilising and providing developing countries with $100 billion per year starting from 2020 through 2025 to address their climate needs.

The new report focuses on the acceleration and implementation of investment in key climate priorities in EMDCs. The experts warned that failing to scale up investments in EMDCs would impact the achievement of the 2015 Paris Agreement goals.

Though global clean energy investments, particularly in solar photovoltaic and electric vehicles, hit an all-time peak in 2023, more than 90 per cent of that increase since 2021 was recorded in developed economies and China.

In 2022, low- and lower-middle income countries accounted for only seven per cent of clean energy spending in 2022.

This slow growth in clean energy investments in developing nations can be explained by a host of reasons, including higher interest rates, unclear policy frameworks and market design, and a high cost of capital.

The report calls for a massive increase in funding for renewable energy as it is key to the energy transition strategy for EMDCs that delivers on both Paris and development goals.

It also drew attention to the insufficient funding for the adaptation needs of developing countries. Though adaptation costs or needs are now estimated at around 10-18 times as much as current flows, international public finance commitments for adaptation in EMDCs fell by 15 per cent in 2021.

As for loss and damage, the report noted that pledges by developed countries are well below even the lowest estimates of financing needs in EMDCs. On November 30, delegates at COP28 agreed to operationalise the loss and damage fund and funding arrangements.

Another issue is the lack of transparency around how climate finance is measured and delivered.  Also, the OECD report stated that the goal of developed countries providing $100 billion to developing countries may have been met in 2022 without providing conclusive data to support the claim.

“There has been legitimate concern that climate finance and especially climate finance from some bilateral providers may be overstated and there is lack of accountability for what is actually delivered,” the report highlighted.

In its recommendations, the authors of the report urged countries, the private sector, the multilateral development banks (MDBs), donors, and private philanthropy to provide strong and committed engagement.

It also called for tackling the immediate debt constraints and lack of fiscal space that are impeding the ability of many countries to make investments, especially poor and vulnerable countries.

The authors said there should be a fivefold increase in concessional finance by 2030. Developed countries, they added, must lead by tripling the amount of bilateral concessional finance by 2030. A lion’s share of current climate finance is provided through loans, pushing developing nations into a debt trap.

They also highlighted the importance of breaking the vicious cycle between debt and climate vulnerability faced by developing nations.

These include providing immediate short-term liquidity to nations facing losses due to a disaster by adding disaster- and pandemic-related clauses in debt contracts. Channelling concessional assistance to compensate climate-vulnerable countries through a Loss and Damage Fund is morally appropriate, the authors wrote.

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