Increased action on climate finance, adaptation, and loss and damage is critical for supporting climate-vulnerable developing countries, strengthening trust and raising ambition on mitigation.
The year 2020 was one of the warmest on record. As COVID-19 ravaged the world, extreme weather events continued to cause severe devastation. In Bangladesh, torrential rains submerged a quarter of the country, resulting in hundreds of deaths, mass displacement and damage to more than a million homes. Record-breaking floods in Sudan and Uganda also displaced hundreds of thousands, while super cyclone Amphan raged across South Asia. Extreme weather events were also a defining feature of the summer of 2021. An unprecedented heatwave may have killed almost 500 people in British Columbia, as well as a billion marine animals along the Canadian coastline. In the Chinese province of Henan people drowned in the subway after a year’s worth of rain fell in just three days. Germany and Belgium also experienced death and destruction as a result of severe flooding, while villages in Greece burned.
Limiting global warming to 1.5°C is key to avoiding the most catastrophic events, but substantial measures must also be undertaken to adapt to climate change impacts and build resilience.
The impacts of climate change are striking even harder than many anticipated, and as temperatures continue to rise extreme weather events are increasing in both frequency and intensity. Limiting global warming to 1.5°C is key to avoiding the most catastrophic events, but substantial measures must also be undertaken to adapt to climate change impacts and build resilience. As the summer of 2021 shows, no country is spared. It is, however, those who have emitted the least that are most at risk, and in many countries that are disproportionately affected by climate change – such as the least developed countries (LDCs) – financial constraints impede their ability to invest in adaptation, build resilience and deal with loss and damage. COVID-19 has aggravated this challenge: while industrialized countries have implemented unprecedented stimulus measures to support their economies – and vaccinated large parts of their populations – many developing countries remain in the midst of a health and economic catastrophe.
Scaled up action on climate finance, adaptation and loss and damage are – in addition to increased ambition on mitigation – key priorities for climate-vulnerable nations ahead of COP26. Raised ambition and concrete delivery in these areas are critical for supporting those at the frontline of climate change, key to building trust, and could encourage some parties to raise the ambition of their NDC pledges. The implementation of many NDCs is, in addition, at least partly conditional upon receiving increased levels of finance, as well as other types of support.
Honouring the $100 billion goal
In 2009, developed countries committed to mobilizing $100 billion per year by 2020 for climate mitigation and adaptation in developing countries. This pledge was subsequently formalized in the Cancun Agreements in 2010 and reaffirmed in the Paris Agreement in 2015. The resources provided were to be ‘new and additional’ and come from a variety of public and private sources. The $100 billion goal is a core element of the bargain underpinning the Paris Agreement. While achieving the mitigation and adaptation goals of the agreement will require trillions of dollars in investment – of which most will need to come from the private sector – the delivery of the $100 billion is critical to building trust between developed and developing countries, and is important for raising ambition on mitigation.
The OECD estimates that $79.6 billion was mobilized in 2019, which is the most recent year for which official figures are available. In 2018, the figure was $78.9 billion, and in 2017 it was $71.2 billion. Though the verified figures for 2020 will not be available until 2022, it is clear the target was missed. Developed countries have, moreover, not yet been able to show that the pledge will be honoured in 2021, nor demonstrate conclusively how it will be met in the 2022–24 period.
How the goal is achieved matters. Only around one-fifth of bilateral climate finance is allocated to the LDCs, and locally led projects receive low priority. There are also concerns related to overreporting and lack of additionality. Oxfam estimates, for instance, that 80 per cent of public climate finance provided over the 2017–18 period took the form of loans or other non-grant instruments, and that the actual grant equivalent only accounted for around half of the total amount of finance reported. Furthermore, the Center for Global Development has found that almost half of the climate finance reported between 2009 and 2019 cannot be considered ‘new and additional’. There is, finally, an urgent need to close the adaptation finance gap (see next section), and facilitate access to finance.
It is widely recognized that honouring the $100 billion goal is a prerequisite for success at COP26. The hitherto failure of developed countries to provide clarity on the issue is creating mistrust between countries, with the director of the International Centre for Climate Change and Development (who is also an adviser to the climate-vulnerable countries) conveying that, ‘if the money is not delivered before November, then there is little point in climate-vulnerable nations showing up in Glasgow to do business with governments that break their promises’. The chair of the LDC Group has also made it clear that, ‘[t]here will be no COP26 deal without a finance deal’.
It is widely recognized that honouring the $100 billion goal is a prerequisite for success at COP26.
The G7 countries play a critical role in mobilizing the $100 billion, and there was a hope that G7 leaders would increase their bilateral commitments substantially – and provide clarity on the $100 billion – when they convened in Cornwall in June 2021. Some new pledges were made. Canada, for instance, committed to doubling its climate finance through to 2025 (to CAD $5.3 billion), and Germany pledged to increase its annual commitments from €4 billion to €6 billion by 2025 at the latest. The G7 members collectively also committed to ‘each increase and improve’ their public climate finance contributions, and announced they would develop a new international initiative – ‘Build Back Better for the World’ – the details of which have yet to be fleshed out. However, many developing country officials – and many observers worldwide – expressed disappointment with the summit outcome, with the climate minister of Pakistan describing the G7 commitments as ‘peanuts’.
Several announcements on climate finance were also made during the 76th Session of the UNGA in September 2021. Most importantly, President Joe Biden pledged to double US climate finance (again) from the previously committed $5.7 billion to $11.4 billion per year by 2024. Actual delivery is, however, contingent on congressional approval. The EU – which already contributes around $25 billion in climate finance per year – also stepped up, announcing an additional €4 billion until 2027, while Italian Prime Minister Mario Draghi conveyed that Italy would shortly be announcing a new climate finance commitment. Though the US pledge in particular has been described as a critical step forward that ‘puts the $100 billion within reach’, more will need to be done.
The multilateral development banks (MDBs) play key roles in mobilizing the annual $100 billion. At the G20 Finance and Central Bank Governors Meeting on 9–10 July, participants agreed to launch an independent review of the capital adequacy frameworks of these institutions, which is to be concluded by the Annual Meetings of the IMF and World Bank Group in 2022. Changes in the MDBs’ capital adequacy frameworks could, along with other efforts to optimize their balance sheets and align their portfolios with the goals of the Paris Agreement, enable these organizations to play a larger role in funding the green transition and building resilience in developing countries, including by leveraging much-needed private-sector finance. Ambitious capital increases in the MDBs and multilateral climate funds over the next few years would also help increase the financial firepower of these organizations.
To build trust and provide further clarity on the delivery of the $100 billion, the COP26 president-designate, Alok Sharma, announced in early July 2021 that developed countries would publish a ‘clear plan’ for how the funds will be mobilized in the period up to 2025. The production of such a roadmap has been called for by climate-vulnerable developing countries, which are demanding $500 billion over five years, as well as the UN secretary-general. At the UK-convened COP26 ministerial in late July, Germany and Canada were tasked with leading the work on developing the plan. The publication date of the roadmap is yet to be announced.
The $100 billion finance goal will play an important role ahead of – and at – COP26, potentially impacting the negotiations in a range of areas, the ambition of developing country mitigation pledges, and trust between partners. The current goal covers the 2020–24 period, but at COP26 the deliberations on a new, post-2025, climate finance goal are due to be initiated. The signatories of the Paris Agreement have agreed that the new goal shall be quantifiable, that the $100 billion shall serve as a floor, and that the needs and priorities of developing countries shall be taken into account. At the UK-convened ministerial in July, participants expressed their support for formulating a plan for the negotiations.
Scaling up adaptation
Strengthening the ability to adapt to climate change impacts and build resilience are key priorities for climate-vulnerable developing countries. Often the discussions on adaptation are closely tied to those around finance. In 2017–18, around $30 billion per year was invested in adaptation. Though this represents an increase of 36 per cent compared to 2015–16, the adaptation finance gap remains large and by 2030 adaptation financing needs in developing countries alone could reach up to $300 billion per year. The Paris Agreement states that, ‘[t]he provision of scaled-up financial resources should aim to achieve a balance between adaptation and mitigation’, and attaining a 50:50 split has long been an important priority for climate-vulnerable developing countries. Despite this, the OECD estimates that mitigation finance still accounted for around two-thirds of the finance contributing to efforts towards the $100 billion goal in 2019. Ahead of COP26, climate-vulnerable nations are calling on developed countries in the $100 billion delivery plan to clarify how the 50:50 adaptation–mitigation balance will be achieved. They are also demanding that at least 5 per cent of proceeds generated by carbon trading under Article 6 of the Paris Agreement be allocated to adaptation efforts.
Article 7 of the Paris Agreement established the ‘global goal on adaptation’ with the aim of driving collective action on adaptation, but does not specify how it should be operationalized. Since COP21, there have been discussions around how to further define the goal, but progress has been slow. At the UK-convened July Ministerial on COP26, participants expressed their support for the development of a roadmap or work programme for assessing progress on the global goal on adaptation, and the incoming COP president conveyed they would explore the proposal.
Political space and support for loss and damage
Loss and damage (i.e. economic and non-economic harms caused by climate change impacts that cannot be avoided through adaptation and mitigation) is a core priority of many developing countries ahead of COP26. At COP25 in Madrid, parties agreed to establish the ‘Santiago Network’ on loss and damage, which aims to catalyse technical assistance for addressing loss and damage to governments and organizations in developing countries. Since the Madrid summit, a website for the Santiago Network has been set up, but climate vulnerable nations have been adamant that an online presence alone will not suffice. The COP25 and COP26 presidencies are conducting consultations on how to further operationalize the Santiago Network, and making substantial progress in these discussions ahead of COP26 would be an important loss and damage deliverable.
Developing countries are, however, calling for action on loss and damage in the run-up to and during COP26 that goes beyond the operationalization of the Santiago Network. Key requests include establishing loss and damage as a stand-alone agenda item under the subsidiary bodies; clarifying the governance of the Warsaw International Mechanism for Loss and Damage (WIM); appointing a loss and damage special envoy; and enhancing the provision of loss and damage finance (as separate from and additional to mitigation and adaptation finance). Some nations are also calling for the establishment of a dedicated loss and damage funding stream.
