By Sayanthana K
The recently concluded Summit for a New Global Financing Pact, which took place in Paris, France, may not have yielded revolutionary solutions, but it did effectively initiate a crucial dialogue concerning the financial challenges arising from climate change and development. President Emmanuel Macron of France led this summit, which brought together leaders from developing and European nations to confront the urgent issues faced by economically disadvantaged and vulnerable countries grappling with a range of interconnected crises. Indian finance minister Nirmala Sitaraman has also taken part in this meeting which could highly give importance to find some solutions in order to tackle financial instability in developing countries.
It’s very important to understand how relevant the term ‘Climate Finance’ is. It refers to financing at the local, national, or transnational levels, sourced from public, private, and alternative channels. This financing is aimed at supporting actions for both mitigation and adaptation to address the challenges posed by climate change. As a global element of discussion the UNFCCC, Kyoto Protocol, and the Paris Agreement emphasize the need for financial support to be provided by Developed Countries, who possess greater financial resources, to Developing Countries that are less economically endowed and more susceptible to vulnerability. Which can be considered as a compliance with the principle of Common but Differentiated Responsibility and Respective Capabilities (CBDR). During the UNFCCC COP26, fresh commitments were announced to provide financial assistance to developing nations in their pursuit of the global objective of adapting to the impacts of climate change.
The year of 2022 wa not easy for the developing countries as the lives have severely affected by catastrophes globally like the flood in pakistan, hurricane lan in us and other natural disasters occurred in india.thus the developing countries started asking for a climate finance at cop27 which led to this paris meet.
Let’s dive deep into the key highlights and struggles of this meet. As a vital point of discussion , all the crises that create turbulence in developing nations set a platform for revisiting global politics. Developing nations are facing a multitude of challenges, encompassing poverty, mounting debt burdens, and inflation resulting from events like the Russia-Ukraine Conflict. In addition to these economic hurdles, there is a growing demand for these countries to transition to low-carbon economies, despite lacking adequate Climate Finance to support such endeavors. India had gone through dramatic change in all its sectors due to the covid 19 pandemic. As a struggling developing country out of such a contagious trauma India still could give a helping hand to other neighboring countries.
Leaders representing the Global South are calling for Multilateral Development Banks (MDBs) to tackle cross-border obstacles and allocate greater resources for development, including climate finance. Developing nations are urging for increased concessional and grant financing to alleviate their debt burdens, alongside advocating for debt relief, specifically for the least developed countries. While recognizing the potential of private sector investments, they underscore the importance of long-term development funds as a necessary complement to private sector financing.
In regard the summit has announced a lot of milestone projects and programs such as the expansion of lending capacity for emerging economies, with an additional USD 200 billion being made available. The World Bank implemented disaster clauses to pause debt repayments in the time of severe weather occurrences. The IMF unveiled a commitment to allocate USD 100 billion in Special Drawing Rights (SDRs) to support vulnerable nations. aiming to increase the share of renewable energy in the country’s electricity mix, the meeting announced A new Just Energy Transition Partnerships (JETP) deal worth 2.5 billion Euros for Senegal. Zambia successfully reached a debt restructuring agreement worth USD 6.3 billion, while simultaneously urging for a comprehensive Global Expert Review on Debt, Nature, and Climate. The European Union (EU) advocated for expanded global coverage of emissions through Carbon Pricing Mechanisms, with a portion of the generated revenues allocated to climate finance. During the Summit, it was announced that the long-anticipated goal of USD 100 billion in climate finance would be met this year. This commitment was originally made at the UNFCCC COP 15 in Copenhagen back in 2009.
Climate finance plays a vital role in both mitigation and adaptation efforts. To make significant strides in reducing emissions and combating climate change, substantial investments on a large scale are required. These investments are essential for implementing mitigation measures that can effectively curb greenhouse gas emissions. At the same time, climate finance is equally crucial for adaptation purposes, as it provides the necessary financial resources to help countries adapt to the adverse impacts of a changing climate. By allocating adequate funding for adaptation initiatives, communities can enhance their resilience and implement strategies to minimize the risks associated with climate change. Recognizing the urgency, the 2018 IPCC report underscores the criticality of climate finance in achieving the ambitious goal of limiting the global average temperature increase to below 2°C above pre-industrial levels. The provision of adequate climate finance is imperative to support sustainable development and safeguard our planet for future generations.
While briefing the history of both the global and indian participation into this climate financing we can see that it’s not far away from its goal of inclusive development. In 2010, during the UNFCCC COP 16, a significant step was taken by the 194 member countries to establish the Green Climate Fund (GCF). The GCF was designed to provide support to developing nations as they confront the challenges of climate change, assisting them in transitioning towards low-emission and climate-resilient development pathways. With its headquarters situated in Incheon, Republic of Korea, the GCF serves as a crucial financial mechanism to channel resources towards climate action in developing countries. Building upon this progress, at the COP27 summit, UN delegates reached an agreement to establish a dedicated ‘Loss and Damages’ fund. This fund aims to compensate the most vulnerable countries for the losses they suffer due to climate-related disasters. By addressing both mitigation and adaptation needs through the GCF and acknowledging the significance of ‘Loss and Damages,’ global efforts are being made to support vulnerable nations in their climate change resilience and recovery endeavors.
While checking the Indian context the first step was , National Adaptation Fund for Climate Change (NAFCC), Established in 2015 with a purpose of providing financial support for climate change adaptation efforts in the Indian State and Union Territories that are most susceptible to the detrimental impacts of climate change. Next one is the National Clean Energy Fund, Formed under the Finance Bill 2010-11. This initiative was established based on the recommendation of the Cabinet Committee of Economic Affairs (CCEA) with the aim of fostering clean energy adoption. Its funding is primarily sourced from an initial carbon tax imposed on coal usage by industries. The governance of this initiative is overseen by an Inter-Ministerial Group, led by the Finance Secretary who serves as the Chairman. The core objective of this initiative is to provide financial support for research and development activities focused on innovative clean energy technologies across both fossil fuel-based and non-fossil fuel-based sectors. By investing in cutting-edge clean energy solutions, this initiative plays a crucial role in driving the transition towards a sustainable and low-carbon future. And finally the national adaptation fund , which was established in 2014 with a corpus of Rs. 100 crores .Its aim is to bridge the gap between the need and the available funds. The Ministry of Environment, Forests, and Climate Change (MoEF&CC) is operating the fund for this.
The summit acknowledges the significant disparity in countries’ contributions to climate change and their abilities to mitigate and address its impacts. Therefore, it emphasizes that developed nations should persist in their role of mobilizing climate finance, employing a range of measures such as backing country-led strategies and considering the specific needs and priorities of developing countries.
Courtesy: Modern Diplomacy
