Vol 1, Nov 2022 | COP27: All eyes on Egypt

While developed nations are confident that the $100 billion target will be met by 2023, the figure currently stands at $83.3 billion, according to OECD’s most recent estimates.

A breakdown of the agenda points at COP27 reveals the precedence geopolitics and short-termism are taking over climate action, which is likely to create obstructions during negotiations for the Global South. Read more

While developed nations are confident that the $100 billion in climate finance target will be met by 2023, the figure currently stands at $83.3 billion, according to OECD’s most recent estimates.

Curtain raiser: Will this be a COP of implementation or frustration?

A breakdown of the agenda points at COP27 reveals the precedence geopolitics and protectionism are taking over climate action, which is likely to create obstructions during negotiations for the Global South

Europe’s hottest summer, Pakistan’s devastating floods, Hurricane Ian wreaking havoc in the US, winter and summer crops destroyed in India because of heatwaves and incessant rain–2022 relentlessly reminded the world of the impacts of climate change. But while “climate chaos gallops ahead, climate action has stalled,” warned UN secretary general António Guterres

“The actions of the wealthiest developed and emerging economies simply don’t add up,” he said. In fact, they are “woefully inadequate”, according to a recent UN report. Current climate pledges by governments across the globe put the world on the 2.8°C warming path–much hotter than the 1.5°C limit set by the Paris Agreement.  

This makes this year’s COP, the UN’s annual climate meet, to be held in Egypt even more crucial. The vision and mission set forth by this year’s COP representatives highlight all the right buzzwords–adaptation, mitigation, climate finance, just transition. “As the incoming Presidency, Egypt will spare no effort to ensure that COP27 becomes the moment when the world moves from negotiation to implementation,” Egypt’s president Abdel Fattah El-Sisi has boldly stated. But if geopolitics, not climate change, is determining the course of adaptation, mitigation, transition from oil and gas, and climate finance, implementation, especially on the scale that is required, is likely to be a tall order at COP27.

The agenda standouts 

Climate finance: Another bumpy road ahead?

In 2010, developed countries had promised to mobilise $100 billion per year by 2020 to help vulnerable, low-income nations to fight climate change. While developed nations are confident that the $100 billion target will be met by 2023, the figure currently stands at $83.3 billion, according to OECD’s most recent estimates. 

While the Paris Agreement defines this $100 billion to be the floor for climate finance targets beyond 2025, there is little further clarity on what the new number would be. With the figure set for revision by 2024, it is likely to become the new bone of contention when it comes to the provision and allocation of climate finance. India wants it to be upgraded to $1 trillion annually. But if the past decade is any indication, commitments are hardly an indication of delivery when it comes to climate finance. 

A primary reason that this hesitancy has gone unchecked is the lack of a clear definition of what comes under climate finance. This lack of definition was recognised by the IPCC as well in its recent report. This has meant there is no way to track what grants and loans given to poorer countries are meant for climate change, and which ones are granted to simply gain green credits. At COP26, the reluctance to discuss long-term climate finance (LTF) was more than evident. In fact, there were attempts made last year by developed nations to push LTF off the COP agenda under UNFCCC and relegate it to the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA). Eventually, it was decided, much against the wishes of the developed world, that the discussion on LTF will continue till 2027. 

Within the ambit of the Paris Agreement, too, discussions are likely to be thick with contention. Particularly significance when it comes to discussions around setting a new collective quantified goal for climate finance will be Article 2.1(c) (which seeks to ensure making finance flows consistent with lower GHG emissions) and Article 9 (which deals with the setting up of financial support mechanisms under the Paris Agreement), both of which suffer from the same kind of lack of clarity that is likely to scupper talks on long term finance.

Like last year, climate vulnerable countries, including small island nations, are likely to push for a finance facility that can at least compensate for the loss and damage caused by extreme events. This would be separate from any humanitarian aid that is given. Some funds would be diverted towards slow-onset events such as sea level rise or desertification, which would give the affected people a chance to relocate successfully. But the ball has remained in the Global North’s court on this.

The oil rush imprint

A recent report revealed the US government invested $9 billion in oil and gas projects in Africa—which is most vulnerable to climate impacts—since the Paris Agreement. Its investment in clean energy during the same period was a paltry $682 million. According to data released by CREA, the EU and China purchased the most amount of fossil fuels from Russia. With the Ukraine crisis triggering a rise in oil prices, major emitters are jostling for fossil fuel supply ahead of a harsh winter. China’s president Xi Jinping’s recent speech made it clear that the country’s priority remained energy security over climate change. His carefully worded speech implied China is unlikely to move away from fossil fuels until it is confident that renewable energy can successfully fill in the gaps. Plans for expansions of exploration, drilling, refining and transport of oil and gas have sprung up across the world.

The oil industry has made money hands over fist this year. Take for example energy majors Shell and TotalEnergies who doubled their quarterly profits to $10 billion. UN secretary general António Guterres urged rich countries to levy a tax on the windfall profits made by oil companies, and use the revenue to fund climate finance. But such temporary levies are short-term measures, at best.

Beyond the backslide in climate ambition, oil and gas expansions are threatening to expose new fault lines within the negotiating space at COP. This seems to be true in Africa, more than any other geography. While a technical committee of the African Union is pushing for an oil and gas friendly position at the COP, there is resistance from within Africa’s climate change delegation. The latest sign that oil and gas is likely to be a major factor in African nations’ negotiating position came from the Africa Energy Week where the rift within the continent’s developmental and climate priorities were clear and apparent. The Egypt Presidency, for its part, seems clear on its support for gas as a “transition fuel.”

This fraught situation presents a murky backdrop for the adoption of the “mitigation work programme”— which is supposed to set the path to scale up mitigation ambition and emission reductions up to 2030. The situation this year is a far cry from the enthusiasm that fanned the furore over the dilution of language regarding the future of coal in the final decision text from COP26. 

So far, the writing on the wall seems clear—the world’s top emitters are far from committing any significant cuts to fossil fuels this year. Short-term protectionism and imminent energy security concerns, particularly in the Global North, will likely supersede any concerns regarding the longer term measures to mitigate the global climate crisis.  

Adaptation determines food security

The Paris Agreement recognised the important role that adaptation will play in mitigating the effects of climate change, especially with regards to food security. Article 7 of the PA established a global goal on adaptation (GGA). This got maximum attention at COP26 where a two-year Glasgow–Sharm el-Sheikh work programme on the GGA was announced that will work to shape the GGA and its implementation till COP28. Adaptation includes building climate-resilient infrastructure, but the more immediate threat remains food security.  

Across the Global South, farmers, especially, are struggling to cope with both climate change (heatwaves, changing rainfall patterns) and non-climate stressors such as population growth. According to the IPCC’s 2019 report on climate change and land, these stresses are impacting the four pillars of food security (availability, access, utilisation, and stability). It identified low-income consumers to be particularly at risk, and predicted higher levels of CO2 in the atmosphere will lower the nutritional value of crops. The need of the hour is investments in crop varieties that are resistant to heat and droughts, and early warning systems that can predict hurricanes and rainfall patterns. Some estimates suggest adaptation costs in the Global South could add up to $300 billion a year by 2030. This is much, much more than the $100 billion a year promised by the Global North, which still remains unfulfilled. An immediate resolution is a must, or the inter-dependencies of global food system will ensure food insecurity leaves few unaffected. 

India’s stand at COP27

At the Ministerial Meeting of the Like Minded Developing Countries (LMDC) held in October this year, Union minister for Environment, Forest and Climate Change Bhupender Yadav laid down India’s agenda at COP27. He expressed his disappointment at developed nations’ decision to enhance their use of fossil fuels and “and urged that the cumulative emissions of every country or carbon budget partaken, must be within their fair and equitable share”, according to the government’s press release. Yadav urged developed nations to show their roadmap to the $100 billion a year goal. The latest press release by the environment ministry reiterated the emphasis on climate finance as one of the main agenda points for India, especially with regards to clarity on its definition. Adaptation and loss and damage will be two other points of focus for India, which will look to push for funding for both. Most of the agenda points put forth in the meeting are not new, except one–the LIFE mission. 

On October 20 this year, Prime Minister Narendra Modi launched the Lifestyle for the Environment or LIFE mission, which is supported by the Bill and Melinda Gates Foundation. According to its website, the mission’s objective is to replace “the prevalent ‘use-and-dispose’ economy—governed by mindless and destructive consumption—with a circular economy, which would be defined by mindful and deliberate utilisation”. 

During its high-profile launch last month, the Indian PM stated the dissolution of the binary developed-developing paradigm in climate action as one of the objectives of the mission. The mission, which interestingly found endorsements from several western heads of states and high level government officials at its launch, purports to achieve this by drawing the spotlight once again toward individual consumption and per-capita emissions. The move, if sustained, could be read as being politically savvy. What better way to respond to claims of India being developed than to show a mirror to yawning gulf in per capita emissions that separate developed countries from developing ones like India? If it manages to shift the frame of reference to one that is more favourable, even better. Either way, LIFE could very well push developed nations on the defensive.

From the little preliminary information available on the mission, emphasis is placed on individual and collective action to tackle climate change. The government released a list of 75 actions that individuals could follow in order to make a difference. Some of them include using public transport, keeping AC temperatures to 24°C, keeping electronic devices on energy saving mode and running outdoors instead on the treadmill. Yadav is likely to push other countries to join the mission at COP27. 

Last year’s COP was meant to be momentous. It was held after two years of global suffering because of COVID-19, and the world was watching for some hope for a better future. What it got was a slew of net-zero commitments, the details of which still remain sketchy, and a widening gap between the Global North and South. This year is being touted as the ‘COP of Implementation’. Ambassador Mohamed Nasr, Egypt’s chief climate negotiator, said Egypt was well and uniquely placed to become “a bridge between the Global North and South”. With expectations from this year’s COP so low, one wonders if it opens up room for some pleasant surprises. 

According to experts, if the agenda item is adopted, the best outcome would be an agreement to establish a Finance Facility for Loss and Damage.

Will Egypt COP end rich nations’ deafening silence on loss and damage fund?

Vulnerable nations want a formal loss-and-damage financing mechanism, but the Global North needs to let go of its fear of legal liabilities and litigation for that to happen

The 27th UNFCCC Conference of the Parties (COP27) is set to kick off at a time of global churn. The meeting, being held in Egypt this year, comes with a backdrop of raging geopolitical and economic uncertainties. To make matters worse, the impacts of climate change have been felt relentlessly through the year, as reports of extensive damage and loss of life have flooded in from around the globe due to extreme weather. As scientists warn of fast approaching “points of no return” in the earth system due to climate change, the current context has undoubtedly sharpened the pitch for a separate redressal mechanism to resolve the “Loss and Damage” bottleneck at COP27.

According to the IPCC, Loss and damage (L&D) refers to “the impacts of climate change that cannot, or will not, be adapted.” It is also now well established in IPCC’s reports as well as independent studies that the impacts of climate change are worst felt in geographies and communities that are least responsible for emission increases. Primarily located in least developed and developing regions of the world, the capacity to absorb and adapt to these impacts is also limited. The misalignment of cause and effect has for a long time lent itself to a demand from the most vulnerable countries for a redressal mechanism, including a separate financing facility, to deal with L&D. And the case is becoming more compelling every year. Will COP27 be the tipping point as far as these demands are concerned?

Saleemul Haq, director of the International Centre for Climate Change and Development in Bangladesh, certainly thinks so. “COP27 in Egypt will be the COP1 of this new era,” he said. While the claim for such a redressal mechanism is firmly protected by the principles enshrined in the overarching UNFCCC agreement, the path to ensuring this will likely have to navigate roadblocks posed by political, economic and legal realities.

Loss & damage is ‘not mitigation, adaptation’

Paying for climate loss is not the same as financing for mitigation or adaptation. Mitigation involves efforts to reduce emissions, for example, by replacing coal with solar power to reduce CO2 emissions. Meanwhile, adaptation finance refers to money meant to increase the capacity to prepare for and absorb current and impending impacts of climate change. But what about the havoc wreaked by the impacts of climate change anyway—which tend to disproportionately affect those that are least protected from these impacts? This is where the label of Loss and Damage comes in. It could be said that L&D comes into play when mitigation and adaptation miss the mark.

“Now it’s no longer something we are preparing for or trying to prevent. But it’s something we’re going to have to deal with,” Haq warns. Mitigating climate change and adapting to its consequences will remain critical, but loss and damage makes clear there’s an additional requirement that can’t be handled by disaster relief, humanitarian assistance or insurance. It is a distinct issue that needs distinct money, vulnerable countries argue.

The clamour around L&D is not exactly fresh. During negotiations to finalise the Paris Agreement in 2015, developing countries succeeded in demarcating L&D as separate from adaptation in Article 8 of the agreement text. The victory, however, was only partial, as developed nations managed to get their own clause inserted stating that the article does not provide basis for any liability of compensation. 

The Warsaw International Mechanism (WIM) for loss and damage, adopted in 2013, remained a technical body without a mandate for any direct intervention or support about climate change associated losses and damages once they started to occur. At COP25 in Madrid in 2019, developing countries pressed for a new entity to support vulnerable countries dealing with climate-related losses. Resultant from this pressure, in 2019, the Santiago Network on Loss and Damage (SNLD) was born as a facility to provide technical assistance but it is yet to be operationalised, for lack of clarity on funding structures among other reasons.

Not slated to be on the agenda originally, L&D was added later to the provisional agenda at the request of the Group of 77 and China (G77+China)—the negotiating bloc of developing countries. Although an important bit of acknowledgement of the issue, the provisional agenda status means that L&D would be up for formal discussion only if there is absolute consensus among the 193 parties to the Paris Agreement. “If countries fail to agree to this agenda item, proceedings at the climate summit could derail right from the start,” write climate policy researchers at the World Resources Institute. 

Acknowledgment and denial

In Glasgow, during last year’s COP26, developing countries demanded the setting up of a financing mechanism for loss and damage. The proposal for such a mechanism was removed from the final version of the text. Any mention of a separate funding facility was replaced with the provision of a three year dialogue named the “Glasgow Dialogue” as was proposed by developed countries, led by the US. This dialogue, as the text states, will be, “between Parties, relevant organisations and stakeholders to discuss the arrangements for the funding of activities to avert, minimise and address loss and damage associated with the adverse impacts of climate change”. 

Given a chance, developing nations will look to build on last year’s momentum. According to Haq, if the agenda item is adopted, the best outcome would be an agreement to establish a Finance Facility for Loss and Damage. COP27 could either be a beacon of solidarity, in which developed countries recognise the legitimacy of L&D demands, or it could further strain the fragile fabric of trust holding collaborative global climate action together. At the Ministerial Meeting of the Like Minded Developing Countries (LMDC) held in October, India’s environment minister Bhupendra Yadav urged LMDCs to prepare a plan of action in respect of adaptation and loss and damage.

One big roadblock in L&D discussions are fears, primarily in governments of the Global North, of legal liabilities and a deluge of litigation in case such a redressal mechanism offers legal footing for such cases. CarbonCopy reported on the prospects and fears of this hampering progress in L&D discussions in December last year.

Rich countries divert humanitarian aid to meet climate fund targets

According to a 2018 study, total damages in developing countries could reach between $290 billion and $580 billion by 2030. By mid-century, the costs are likely to balloon to between 1 and 1.8 trillion US$. Africa is set to lose 5% to 15% of its gross domestic product annually to climate impacts, according to African Development Bank Group estimates. The report says a group of 55 climate-vulnerable nations have lost a fifth of their wealth over the past 20 years due to climate-fueled disasters. Some countries have begun to price loss and damage into their climate targets. The small Pacific island nation of Vanuatu, with its negligible contribution to global greenhouse gas emissions (0.0016%), is calling for nearly $180 million for loss-and-damage compensation and has grounded its new climate targets on support from developing countries. 

In the absence of a separate funding mechanism, funding for L&D is currently collapsed under humanitarian aid, and have been found to divert budgets meant for education and poverty reduction toward their climate finance pledges. Vulnerable countries say existing methods have failed to stop warming and its climate impacts while emissions continue to rise, falling far short of the pledges made at Paris in 2015.

Stark message: ‘Won’t pay trillions of dollars of the debt’

The issue of who pays for losses incurred due to climate change impacts and how is evidently coming to a head. Vulnerable nations want a formal loss-and-damage financing mechanism set up through the UN process to give it legitimacy and account for developing countries’ needs and priorities. The Alliance of Small Island States is seeking to set up a new, stand-alone fund for loss and damage before talks start in Egypt.

A stark message was delivered to major lenders recently amid annual meetings of the World Bank and International Monetary Fund by Mohamed Nasheed, former president of the Maldives and an ambassador for the Vulnerable 20 Group, or V20, who warned that those countries could stop payments on half a trillion dollars in debt if lenders don’t embark on reforms to the global financial architecture. 

“We are living not just on borrowed money but on borrowed time, and that time is running out,” Nasheed said at a meeting of V20 finance ministers, while the group called for sweeping reforms to lending, climate finance and insurance facilities, as well as support of green growth plans they’re developing. 

Debt-relief measures, linked to climate action, thus far have reportedly been a matter of frustration among vulnerable nations. While demands for support to contend with climate impacts have been clear, they have been met by “climate prosperity offers” which are effectively procurement plans for a cleaner economy, explained Sara Jane Ahmed, a finance adviser to the V20 to the ClimateWire.

The World Bank and IMF are also under pressure to overhaul their lending practices to get more money flowing to countries on the front lines of the climate crisis. Climatewire reported that IMF Managing Director Kristalina Georgieva thanked Nasheed, while saying that the IMF is bringing climate change into its operations through a new trust that aims to provide low-interest, long-term financing to developing countries. She was also receptive to the idea of swapping country debt for investments in climate resilience.

Insurance as the last resort?

The strong demands for financing facilities to help tackle mounting losses in vulnerable geographies seem to have begun paying some dividends outside the ambit of the UNFCCC. Developed economies of the G7 recently acknowledged damages to developing countries. The V20 and G7 came to an agreement on a facility for climate risk that has been named the Global Shield. The facility has a stated objective to improve insurance and social protection schemes to enable better response to disasters. 

Experts explain though that climate risk insurance could in effect amount to be a decoy to shift the costs for L&D away from the Global North and onto the victims. The report finds that insurance has a limited role  in addressing loss and damage, and it is ill-equipped to cover slow onset of events. Privatisation of social safety nets, via insurance, places the onus to pay premiums on the most vulnerable, which is less effective than a social safety net provided by the government where risks can be shared fairly across society.

According to the Loss and Damage Collaboration, climate risk insurance is not flexible: if floods wash away farmers’ crops that are insured against drought, there is no pay out. By comparison, social safety nets are found to be more flexible and fairer, adding that the risk premium (profit + cost of business) makes insurance punishing. In rich countries such as the US, state and larger local governments are more likely to self-insure.

On the flipside, there is also the risk of climate disasters crushing the insurance industry. In France, weather-related insurance claims are forecast to increase 5x in most affected regions, in Australia 1 in 7 properties in at-risk regions are uninsurable by 2030. In California wildfires, one insurer losing $500 million. The report says the insurance industry is looking for new markets with climate insurance at the same time contributing to the climate crisis by backing the fossil fuel industry with insurance coverage & investments.

Further, the small loss and damage finance provided by the G7 as part of the InsuResilience Global Partnership, has a significant focus on climate insurance 80% of first three years of payments went to insurance schemes; its target indicators are all insurance focused. The report asks, will the Global Shield launched by Germany & the G7 follow InsuResilience & focus on insurance, or will it have a more inclusive approach with vulnerable country driven solutions that are more equitable?

The V20-G7 partnership could also be a double-edged sword as far as L&D at the COP goes. While it does indicate some progress in the willingness among developed nations to engage with the L&D question, it could also end up undermining discussions of redressal mechanisms within the UNFCCC frameworks. If that happens, it will deal a big blow to demands for an inclusive and equitable process to be applied across developing and vulnerable geographies and any L&D finance would have to come through structured (and likely conditional) deals to exclusive parties.

Measuring the incalculable

The loss and damage of cars and bridges can be compensated, but non-economic loss and damage (NELD) such as loss of knowledge systems or extinction of species which can not be alleviated or repaired pose a particularly tricky challenge, says the Loss & Damage (L&D) policy brief. The brief adds that NELD occurs in almost all cases of L&D and impacts individuals, society, and the environment.

NELD to Indigenous and local knowledge in the Pacific Islands region is increasingly concerning, the paper says. As study participants explained: “The changing climate conditions will affect the reliability of some of the local knowledge which can lead to their disappearance as locals will find them to be useless …Entire ways of life collapse when the material manifestations of deeply grounded Indigenous knowledge, science, and philosophy are deleted by the effects of climate change”.

Heatwaves in March and April in India and Pakistan were 30 times more likely due to climate change. According to the report, the true ecosystem cost cannot be known without reliable data. However, direct deaths, massive crop losses, increased food insecurity, and the growing recognition that these temperatures are likely to be yearly occurrences are causing a range of NELD. 

In the Global North, Germany, Belgium, the Netherlands and Luxembourg faced massive floods in July 2021 with increased intensity. Full NELD impact hasn’t been assessed, but 200 people died and many people lost their homes and belongings, resulting in a range of intangible and emotional losses. The report says the ground floor residents of a German care home were drowned, “demonstrating that people experience NELD differently based on intersectional marginalisation.” 

The report points out that people who experience NELD are not a homogeneous group, but they experience disproportionately depending upon the intersectionalities of race, class, gender factors and structural determinants that create uneven vulnerability to climate change in different contexts. The UNFCCC proposed four different ways to measure NELD: economic valuation, multi-criteria decision analysis, risk indices, and qualitative and semi-quantitative assessments.

The battle of priorities

These tangible, but difficult-to-quantify losses further complicate the negotiation landscape around L&D. Egypt is hosting COP27 in challenging times. The Presidency wants to focus on what countries have committed and delivered so far, and securing the means for implementation of current and future commitments. While the current poly-crises confronting the world have galvanised L&D demands from the Global South, it has also condensed a varying set of priorities among nations. L&D will likely have to jostle with energy and food security, economic uncertainty and tight monetary conditions, and overcome unfavourable odds of making it to the final agenda, in order to carve out some progress under the UNFCCC and Paris Agreement frameworks.

That COP27 will resolve the many standing issues in order to create a robust L&D redressal mechanism is unlikely. The conference though certainly offers a point of convergence for demands to be articulated and amplified. The magnitude of recent losses and its implications on security and economy has forced the Global North to confront L&D as a significant threat. Now there is room for negotiation. If the moment can be capitalised and used to coalesce a sustained demand, it will become nearly impossible to ignore calls for redressal and funding mechanisms in the years to come. In some ways, this itself would be a historic turning point. 

A recent study by CARE shows that merely 6% of climate finance flows that they had studied were ‘new and additional’. Photo: UN

Developing nations battle for clarity as climate finance remains inadequate

No one can yet reliably say which grants or loans to a poor country are truly meant to fight climate change, and which ones are merely greenwashed to claim credit 

By 2024 countries are to set a new climate finance target – money that developed countries should provide to poorer nations to fight climate change. India has demanded that it be revised upwards of USD 1 trillion annually.

It’s a tall order considering the developed countries have failed for the last ten years to provide the mere USD 100 billion annually that they promised in 2010. In 2015, the goalpost was extended to 2025 which means that we are still talking about their 2020 goal in the year 2022. 

But the target in itself may mean little unless developed countries heed the warning scientists gave in the recent report of the Intergovernmental Panel on Climate Change (IPCC): For more than 28 years, countries have not got around to even defining what constitutes climate finance. 

The IPCC report hit the headlines across the world on its release in February 2022 but this significant bit from it – which matters most to developing countries – got lost in the din. 

The scientists on the panel concluded, “The measurement of climate finance flows continues to face definitional, coverage and reliability issues despite progress made by various data providers and collators.”

This means that no one can yet reliably say which grants or loans to a poor country are truly meant to fight climate change, or which ones are merely greenwashed to claim credit despite their unfulfilled promises. 

Take the example of a grant from Italy to India in 2020. A school in Telangana’s Warangal received USD 224,502 for the expansion of a school opened for hearing-impaired students. This was classified as both adaptation-related and mitigation-related finance. The description of the grant, however, makes no mention of climate-related work to be undertaken. 

Another grant of USD 341,000  from the United Kingdom was given to the National Housing Bank to provide loans for low income families. This was labelled as mitigation-related development finance. Another grant to India from Japan meant for “Iran and other neighbouring developing countries” earmarked for Covid relief has featured in the list of climate-related development finance. Japan has also provided a grant to the underprivileged in Mathura for procuring eye medical equipment. 

This data released by the Organisation for Economic Co-operation and Development (OECD) was used in its report measuring where countries stand on their USD 100 billion goal. 

How did these expenses, which are at the most development-related finances, pass off as climate finance? Even as developed countries push for the term to remain ambiguous, what does science have to say about what qualifies as climate finance? 

Land Conflict Watch, an independent network of researchers studying land conflicts, climate change and natural resource governance in India, looked beyond the summary of the IPCC report that most politicians, policymakers and climate activists often read, to find what the scientists have said about climate finance. 

The summary is drawn up after haggling between governments and scientists before a short document called Summary for Policy Makers (in this case of 40 pages) is prepared. 

In reaching consensus, often important scientific findings which may not favour one or the other country’s political stance are left out. The full report – written only by scientists contains truth bombs that get buried.  

What do IPCC scientists have to say on defining climate change?

In its chapter on ‘Investment and Finance’, the IPCC report states that from a climate policy perspective, climate finance refers to finance “whose expected effect is to reduce net GHG emissions and/or enhance resilience to the impacts of climate variability and projected climate change” (UNFCCC 2018a). The report goes on to say that adaptation financing is difficult to define as it ultimately boils down to fulfilling SDG goals. 

Even current estimation methods are not sufficient to be the basis for global negotiations, conclude scientists. They warn that this needs to be resolved to avoid getting into a ‘climate investment trap’, especially in the case of developing countries. Due to their growing energy demand, a huge portion of the world’s climate investment requirements are in low and middle income countries in Africa, Asia, Latin America and the Middle East. Current estimates also do not include information on how climate policies impact the growth of countries and the importance of fiscal and financial policies to nullify their adverse effects. 

Would development-related finances then qualify as climate finance such as the grant from Italy to build a school? 

A later part of the chapter makes a clarification. Scientists observed that the finance provided for climate change must be new and additional, and not at the cost of United Nations-adopted Sustainable Development Goals. In fact, a recent study by CARE shows that merely six per cent of the climate finance flows that they had studied were ‘new and additional’. 

While the Summary for Policy Makers makes only a brief mention that countries are below their collective goals, the IPCC report goes on to say that it is actually difficult to estimate where countries stand due to the lack of a universally accepted definition for climate finance. 

This absence of a definition, has made it impossible to gather accurate data on climate finance flows.    

Currently, the only measure of climate finance flows is the USD 100 billion yardstick. Since the adoption of the goal, several independent reports show drastically different climate finance numbers.

Despite the “significant room for interpretation”, climate finance commitments are nowhere close to what scientists’ estimates of what is actually needed to combat climate change.  The IPCC report warns that  the financial community continues to underestimate climate-related financial risks which is limiting capital reallocation necessary for low-carbon transition. Even investors do not opt for climate-friendly options despite the increased awareness of climate change and its effects.  

Two reports published by the UNFCCC and IPCC in 2018 have estimated that more finance would be required between 2020 to 2035 to contain global temperature rise at levels below 2°C and 1.5° C respectively. While the biennial assessment estimates that 1.75 trillion USD would be required to cap temperature levels below 2°C, the IPCC’s Special Report on Global Warming estimates that 2.4 trillion USD yr-1 would be required for the energy sector alone. In fact, independent reports show that a gap of 67% in mitigation financing was reported in 2015 and was 76% for the energy sector alone in 2017. The gap would be greater if other sectors are included, and their inclusion could also increase finance requirements to curtail global temperature levels by three times the USD 2.4 trillion amount.  

Why is the term ‘climate finance’ open to interpretation?

Scientists observed that since the term climate finance is open to interpretation, differences arise due to what the independent author accepts as “climate” and the different types of “finance” that they take into account. 

If authors are more conservative on what qualifies as activities combating climate change, the number would be much lesser. If the author decides to include loans at market rates as finance, the overall numbers would be much higher. 

The report also mentions that defining climate finance flows is critical to ensure just transition of climate finance. It mentions that countries must agree on key definitions as soon as possible in order to build greater confidence levels. The report also points out that every other public international good finance provision under the SDGs accounts for only grants and net finance flows.

It notes that the nature and volume of finance  varies according to whether the finance was measured at the stage when it was pledged, committed or disbursed. This could determine whether it counts as private or public finance and also which country it is measured in. 

The IPCC looks at what two independent reports say on the USD 100 billion goal. While the OECD report mentioned before shows that a target of 78.9 billion USD was achieved in 2018, a report by Oxfam showed a lesser figure. This is because the Oxfam report considered only grants and grant-equivalents as climate finance flows. 

In the OECD report, however, almost 74% of the finance flows consisted of loans. Though scientists mention that the new framework under the Paris Agreement may lead to improvement wrt to transparency around climate finance flows, they note that analysis measuring the USD 100 billion goal remain rare. Even the UNFCCC’s Biennial Assessment does not exactly measure it. 

How much of this made it to the Summary for Policymakers? The issue around climate finance definition, which is expected to be one of the key fights in this year’s COP in Egypt, finds no mention in the summary. In fact, the summary mentions climate finance barely three times, with no mention of where countries stand in quantifiable terms.  

In fact, according to a report by Third World Network, when the SPM was being finalised, developed countries contested the mention of their failure to meet the USD 100 billion goal. They called it the ‘politicisation’ of the IPCC, and so the final line that was adopted was heavily watered down. This is part of the efforts by developed countries to undermine their climate finance commitments. In the Glasgow CoP held last year, recommendations by developing countries to decide on a definition for climate finance were bitterly contested by developed countries, and finally watered down in final decisions adopted. 

At a side event at the Bonn Climate talks this June, G77 and China’s coordinator on financial issues Zahir Fakir stated in Bonn that the real financial obligations of developed countries was captured in Article 4.3 of the UNFCCC which stressed on the provision of new and additional financial resources. He added that while the UN Convention refers to ‘provision’ of climate finance, the USD 100 billion has become about ‘mobilization’ and that it is important to understand the difference between the two. ‘Without provision of finance, terminologies such as ambition, tipping point and urgent climate action do not matter’ he added. 

“Climate finance definition is important because it is linked to accountability,” says Indrajit Bose, Senior Researcher, Climate Change at Third World Network. “How do you assess if this finance is actually coming through, when there is no definition of climate finance? Developed countries have not engaged in the issue because it helps their cause at the end of the day.” 

“After several years of negotiations, the Standing Committee on Finance, a technical body of the UNFCCC, is discussing the matter and the issue is expected to be contested in COP 27 in Egypt.“ says Indrajit Bose. 

“The IPCC describes itself as a policy relevant organisation and is not policy prescriptive. It’s not therefore IPCC’s role to define what is climate finance,” he added on why nothing has changed wrt definitional clarity between AR5 and AR6. 

IPCC scientists have warned that there is still some distance to go before the USD100 billion goal is achieved. Going by this, India’s USD 1 trillion demand remains a distant hope.

Mrinali is a researcher with Land Conflict Watch, an independent network of researchers studying land conflicts, climate change and natural resource governance in India. 

A majority of the models assessed in the IPCC reports are produced in the Global North, leading to the continuation of a specific development model which results in an inadequate representation of the Global South. Photo: Elsevier

Net zero targets: A shot in the dark at mitigating climate change

Countries, especially in the Global North, need to formulate plans that are more objectively fair and realistic in their execution to effectively combat the climate crisis 

More than 128 countries, 235 cities and 702 publicly listed companies in the Forbes Global 2000 have already declared some form of net-zero commitments, a 2022 report by Net Zero Tracker noted. These declarations are a part of the efforts to control the negative impacts of climate change, or what is more commonly known as ‘climate change mitigation’ measures.

In June 2022, India emphasised at the Bonn climate conference that future climate mitigation efforts should respect the climate targets committed under Nationally Determined Contributions (NDCs), following the 2015 Paris Agreement, reported the Third World Network’s climate update. 

The importance of India’s stand at Bonn needs to be understood in light of the race to ‘net zero’ that the world seems to have embarked upon, as part of their climate action plans.

A country or company can attain ‘net-zero’ emissions by removing the same amount of greenhouse gas (GHGs) emissions that it has produced. Simply put—the net difference between emissions removed and produced should be zero to claim ‘net-zero’ status. When applied to CO2 or greenhouse gas emissions, this becomes ‘net-zero CO2’ or ‘net-zero GHG’ emissions.

According to the sixth assessment report (AR6) of the United Nations’ Intergovernmental Panel on Climate Change (IPCC), attaining net-zero CO2 emissions can play a crucial role in restricting the rise in global average temperature to below 2°C.

The AR6 points out this could be achieved by using different methods of ‘carbon dioxide removal’ (CDR). This, however, is easier said than done. Although across the world different projects for CDR are being explored, as of now  the most feasible method for removing carbon dioxide at scale appears to be through afforestation. 

Given that a major share of afforestation potential lies in tropical regions, which is where most developing countries (sub-Saharan Africa and Asia) are located, the burden of implementing CDR is likely to fall on them. This is because the idea of ‘net zero’ would work only if it is implemented within a limited time frame, say 2050. And, waiting for CDR technologies to evolve before adapting measures for removing emissions would be a gamble—with the collective global future at stake.

Roots of net zero

The science of net zero was first mentioned in a 2018 report of the IPCC. This was followed by the sixth annual assessment (AR6) reports of IPCC in 2021, which details it further. The report of Working Group 3 (WG3) in AR6 focuses particularly on ways for attaining net zero.

The WG3 assessed more than 1,200 models, out of which five broad situations for mitigation action were assessed further. Each situation reflects the impact of factors like global population, economic growth, energy consumption, use of renewables, and CDRs, on environment and society.

With a huge number of variables involved, these models make certain assumptions to arrive at conclusions. The findings, therefore, should be viewed within the context of those assumptions. This is a fact that even the IPCC reports mention. But since it is not included in the summary for policymakers (SPM), it receives little public attention.

A recent study published in The Lancet Planetary Health points to a crucial limitation of the models assessed in AR6. The models maintain existing global inequalities in energy consumption till the 21st century while calculating projections for the year by which net zero emissions should be achieved by different regions. 

For instance, countries in Africa and the Middle East are allocated 30 gigajoules of energy per capita per year. While OECD countries and Europe are allocated three times that amount, at 100 gigajoules per capita per year till the end of the century. 

“This happens because these models draw future energy growth projections on the basis of current usage levels,” explains Tejal Kanitkar, a specialist in energy and climate change policy, and associate professor at the National Institute of Advanced Studies, Bengaluru. “Due to which countries in Asia and Sub-Saharan Africa, which are using low levels of energy now, are expected to continue with the same levels of energy use well into the century. While countries in the Global North are allowed to continue their high levels of energy use.” 

In short, the models are not only flawed, but could also be seen as problematic. 

A key assumption in the above example is that developed countries can continue to have high levels of emission now and remove emissions from the atmosphere using technological innovations like CDR at a later point of time to attain ‘net zero’. 

The problem with this is that they need to begin removing their emissions now as they have already consumed their share of the global carbon budget, or the total amount of carbon dioxide emissions that the globe can withstand to keep temperature rise below 2°C. A 2021 study in the Economic and Political Weekly arrived at a similar conclusion. 

However, global policy discussions tend to pay very little attention to the assumptions and flaws of those models. Neither do they consider the fact that 49% of the mitigation scenarios assessed in AR6 come from a single study. A majority of the models assessed in the IPCC reports are produced in the Global North, with assumptions that are suitable to the developed world, leading to the continuation of a specific development model. While the realities of the Global South find inadequate representation in those models.     

The illusion of CDR technologies

The AR6 reports mention that net zero emissions can be achieved by 2050 by adopting certain supply and demand strategies. On the supply side, it includes shifting to non-fossil fuel-based energy sources, while on the demand strategy it requires an increased use of CDR to reduce CO2 emissions.

If implemented well, these strategies might make it possible to achieve net zero emissions by 2050.

But the big assumption here is that technology to implement CDR on a large scale is available right now. This is not the case.

“On paper, multiple methods of CDR are available, many of which could be implemented on scale if resources and political priorities were in place. In practice, however, afforestation is perhaps the CDR option that is closest to actually being scaled, because we already have a very substantial forestry industry around the world. But it’s also the technology that most clearly comes with significant challenges if scaled,” explains Wim Carton, a specialist in negative emissions, and a senior lecturer at the Sustainability Centre, Lund University in Sweden. 

There is, for instance,  “a clear risk that most of the burden for afforestation would fall on the tropics, and therefore the Global South. That has historically been the pattern and it is also the assumption that is made in many [IPCC] models, both for biophysical and for economic reasons. Clearly this would lead to significant climate justice concerns—it could mean that industrialised countries outsource much of the responsibility for removals to the developing world,” adds Carton. 

A large-scale afforestation programme, if implemented, would involve planting trees on lands that have historically not been forests, resulting in a massive land use change. Furthermore, afforestation offers no guarantee that carbon will remain stored in perpetuity, especially as incidences of forest fires (and landslides) continue to increase in a warming planet.

This will have implications for food security, which again will have a greater impact on developing countries, as many of them still struggle to deliver sufficient food security. It will also impact water availability and global rainfall patterns. According to a 2022 study in Nature Geoscience, planting trees on a large scale has the potential to reduce water availability in the regions they are planted in and disrupt global rainfall patterns. Another method of CDR is carbon capture and storage (CCS), which, as the name suggests, involves capturing carbon and storing it such that it is removed from the atmosphere. However, CCS, too, does not look like a promising option. A 2022 study by the Institute for Energy Economics and Financial Analysis  examined 55% of the world’s existing CCS programmes, and found “failed / underperforming projects considerably outnumbered successful experiences.” 

No equity in net zero targets

The gaping question of who will bear the cost of technological innovations for implementing CDR, too, remains unanswered.

The AR6 models consider only the cheapest ways of implementing CDR, but do not address the matter of who will pay for those technologies. Developed countries, too, have avoided making any commitments. Neither are they likely to face any pressure for taking the lead on afforestation, as their geographic locations do not make them a suitable candidate for undertaking large-scale tree plantations.

The issue is compounded by the fact that most emissions pathways modelling efforts originate in the developed world and pay little heed to incorporating parameters that would ensure equity. “The fact that most models originate in the Global North should not be a reason for there to be a lack of equity. After all, are equity and justice not universal concepts? These are also concepts that are central to the UNFCCC which the developed countries have accepted. But the exigency of their operationalisation is clearly not felt by academics in developed countries who work on these models. Equity is absent across the scenarios. Not only is there no historical responsibility in these scenarios, but inequalities are projected to continue far into the future. These are least cost models, i.e. they minimise global abatement costs, but pay no attention to the developmental needs of the poorest regions of the world,” explains Kanitkar.

The race to net zero by 2050 for all countries, without considering the full implications of CDR, could help developed countries evade their fair share of climate action. This is a concern that Bolivia, while speaking for the Like Minded Developing countries, raised in the Bonn climate meet as it felt the uniform imposition of net-zero targets lets developed countries get away with taking too little action.

While the ongoing conversation on achieving net-zero emission targets is an important one, the commitments will remain mere shots in the dark, unless there is an objectively fair and realistic plan for execution. 

Radhika Chatterjee is a researcher with Land Conflict Watch, an independent network  of researchers studying land conflicts, climate change and natural resource governance in India

The NDC updates, according to the synthesis report, now chart a path to increase emission reductions by about 3.8% in 2025 and 9.5% in 2030 as compared to the original NDC submissions.

UN’s NDC synthesis report charts marginal improvement in countries’ climate ambition ahead of COP27

Current NDC’s would see global emissions peak before 2030, but still fall short of emission reductions needed to achieve Paris Agreement warming limits

This week, the United Nations Framework Convention on Climate Change (UNFCCC) released their annual report that analysed the updated Nationally Determined Contributions (NDCs) ahead of COP27. The verdict: Things are moving ahead, but not quick enough to limit warming to 1.5°C. For starters, since COP26 last year, only 24 countries have submitted updated NDCs, many of which were not much stronger than the previous ones.

“The fact that only 24 new or updated climate plans were submitted since COP 26 is disappointing. Government decisions and actions must reflect the level of urgency, the gravity of the threats we are facing, and the shortness of the time we have remaining to avoid the devastating consequences of runaway climate change,” said Simon Stiell, executive secretary of UN Climate Change.

The NDC Synthesis Report analysed 166 latest NDC submissions, representing 193 nation members of the Paris Agreement. The NDCs represent 94.9%  of the total global emissions in 2019 (excluding emissions from land use, land-use change and forestry). Most (90%) of the submissions provide quantified mitigation targets while the remaining parties have included strategies, policies and plans without quantifiable information.

What the NDCs will achieve

According to the synthesis report, the submitted NDCs thus far will lead to global GHG emissions peaking sometime between 2025 and 2030. Current NDCs chart a path that would see total global GHG emissions (without LULUCF) in 2025 at around 53.4 (51.8–55.0) Gt CO2 eq.—53.7% higher than emission levels in 1990, 12.6% higher than levels in 2010 and 1.6% higher than the 52.6 GTCO2 eq emitted in 2019. Thereafter, emission levels are set to fall to around 52.4 (49.1–55.7) GtCO2eq in 2030, marginally lower than levels in 2019.

“The projected total global GHG emission level taking into account full implementation of all latest NDCs (including all conditional elements) implies an even stronger possibility of global emissions peaking before 2030 than estimated in the previous version of this report…However, in order to achieve that peaking, the conditional elements of the NDCs need to be implemented, which depends mostly on access to enhanced financial resources, technology transfer and technical cooperation, and capacity-building support; availability of market-based mechanisms; and absorptive capacity of forests and other ecosystems,” the report stated.

The NDC updates, according to the synthesis report, now chart a path to increase emission reductions by about 3.8% in 2025 and 9.5% in 2030 as compared to the original NDC submissions.

“The downward trend in emissions expected by 2030 shows that nations have made some progress this year,” said Stiell. “But the science is clear and so are our climate goals under the Paris Agreement. We are still nowhere near the scale and pace of emission reductions required to put us on track toward a 1.5 degrees Celsius world. To keep this goal alive, national governments need to strengthen their climate action plans now and implement them in the next eight years.”

Even with the updates, however, the projected reductions in emissions from the current targets fall well short of the prescriptions in the latest IPCC AR6 WG3 report on mitigation.

According to the IPCC’s assessment, to achieve scenarios that limit warming to 1.5°C (with at least 50% likelihood by 2100) with no or limited overshoot, GHG emissions must be reduced by 43% (between 34-60%) by 2030 relative to the 2019 emission level. For scenarios of keeping warming below 2°C (with a probability of at least 67% by 2100), emissions in 2030 would have to be 27% (between 13-45%) lower than in 2019.

Compared to these prescribed reductions, full implementation of all latest NDCs (including all conditional elements) is estimated to lead to a 3.6% (between 0.7–6.6%) emission reduction by 2030 relative to the 2019 level. Implementation of NDCs, excluding conditional elements, on the other hand, would lead to an increase in emissions by 3.1% (0.2-6%) in 2030 compared to 2019 levels.

In terms of the carbon budget, the IPCC estimates that limiting warming to 1.5°C would leave a cumulative budget of 500 GtCO2eq. The NDC synthesis report shows that current plans would see 86% of this budget exhausted by the end of the decade. The remaining 70 GtCO2eq, is equivalent to less than two years of the latest projected total global emissions by 2030. The carbon budget consistent with a likely chance of keeping warming below 2°C is estimated to be 1,150 GtCO2 eq from 2020. Thirty-seven percent of this would likely be used up by 2030 as per the current NDCs. The best estimates of the resultant warming from the current set of planned policies and targets by 2100 is between 2.1-2.9°C.

Also, as per the updated NDCs, most emission reductions are likely to take place between 2030 and 2050, but not before. Longer term targets (which are also subject to greater uncertainties) indicate that total GHG emission levels could be 64% (between 59–69%) lower in 2050 than in 2019. Mid-century annual per capita emissions would be 2.4 (between 2.1–2.7) tCO2eq. To limit warming under 2 °C (with a probability of over 67%), annual per capita emissions are required to be 2.2 (between 1.4–2.9) tCO2eq. 

This close comparison signals that estimated long-term per capita emissions inscribed in NDCs are close to being consistent with 2°C warming scenarios. The comparison is not so favourable for limiting warming to 1.5°C (with a probability of at least 50%) and achieving net-zero emissions this century; annual per capita emissions by 2050 need to be two to three times lower at 0.9 (between 0.0–1.6) tCO2eq. 

“COP27 will be the world’s watershed moment on climate action,” said Sameh Shoukry, Egyptian Minister of Foreign Affairs and COP27 President-Designate. “The synthesis report is a testimony to the fact that we are off-track on achieving the Paris Climate Goal and keeping the 1.5 degrees within reach. This is a sobering moment, and we are in a race against time. Several of those who are expected to do more, are far from doing enough, and the consequences of this is affecting lives and livelihoods across the globe. I am conscious that it is and should be a continuum of action until 2030 then 2050, however, these alarming findings merit a transformative response at COP27.”