Across the globe, the impact of climate change is being felt with increasing severity. As we enter a new round of discussions at this year’s Conference of the Parties (COP), the importance of providing finance to those on the front line of climate change will be high on the agenda. Dr Robert Charnock, Director of the RSK-funded Metis Institute on Climate Strategy, lays out the pivotal role finance will play in efforts to respond to the climate crisis and drive a just transition to net zero.
At COP27 in Sharm El Sheikh, Egypt, climate finance will be a top priority. As the climate crisis accelerates, a key question is how the international community will support the most vulnerable regions and communities with the resources needed to adapt to its impacts. The urgency, which is expected to be a focus at this year’s COP discussions, is amplified by the fact that severe impacts are falling on emerging economies and communities that are already stretched for resources. It is now imperative that the communities most vulnerable to the impacts of climate change are given access to the funding they need to take urgent steps to adapt.
This is not the first-time climate finance has been the focal point of global debates. Nearly 13 years ago, at Copenhagen’s COP15, developed countries committed to delivering US$100 billion in financing support by 2020 to the nations most vulnerable to climate change. However, estimates show that only US$83.3 billion of this target was successfully delivered and, worryingly, some critics believe this is an overestimation.
Against this backdrop, the conversation is shifting. Not only is there a need to ensure finance is delivered – and to the places that need it most – but there is also increasing recognition that funding must emphasise adaption, not mitigation measures. Much of the financing delivered in recent years has gone to middle-income countries and has focused on one element of global response: mitigation projects for carbon reduction. Efforts to mitigate now will have an impact in the far longer term, but adaptation needs to take priority in the near term to limit the impact of locked-in change.
Are we now heading in the right direction?
Analysis by the Organisation for Economic Co-operation and Development (OECD) shows that, between 2019 and 2020, adaptation finance increased from US$20.3 billion to US$28.6 billion – an encouraging trend. The distribution of that finance is becoming a key agenda point, and the Egyptian presidency of COP27 will further shine the spotlight on the need for equitable distribution, and especially so when much of the available support goes to middle-income counties, with some observers noting that emerging economies are often unable to meet the technical requirements of accessing funding.
The loss and damage debate
The ‘loss and damage’ associated with climate impacts and how nations can adapt to the worsening climate-related disaster has been a key debate since the Paris talks in 2015. This year, it is again set to be a critical talking point, driven by emerging economies whose voices will be amplified by the Egyptian presidency. Since the turn of the century, the world has seen US$2.9 trillion of losses, in real terms, arising from the impacts of climate change, and these same countries are disproportionately affected. Over the coming decades, nations on the front line will continue to experience greater losses, even if rapid levels of decarbonisation are achieved. In Sharm El Sheikh, any climate agreement that can be considered ‘just’ needs to also include mechanisms to address these significant losses and damage.
However, there are challenges to making progress on financing for loss and damage, most notably because there is currently no clear definition of these terms. Consequently, it is a challenge to assess contributions allocated in this area through funds such as the Global Risk Financing Facility and the Global Facility for Disaster Reduction and Recovery. Access, as previously explored, is also a considerable issue. A World Bank Group report found that, in response to the 2011 landslide in Nepal, 90% of wealthy individuals sought government assistance, whereas just 6% of the poor accessed support. This imbalance is critical in the context of the loss and damage debate: it is not only the total financing that is important, but also ensuring equitable and just access.
So, what can we expect from COP27?
Conversations at this year’s event are likely to shift towards action, with COP27 being dubbed ‘the implementation COP’, and gaining clarity on the mechanisms of financial support that are needed to get things done. It is vital that we see COP26 commitments turning into actions and the development of clear implementation strategies for plans agreed at COP27. This may well include:
- establishing a shared understanding of the areas where action and funding for adapting to climate impacts are most needed
- making loss and damage a focal point, albeit a potentially tense one, in the discussions so progress can be sought on defining and establishing financing mechanisms to address this issue
- needing to see updated and more ambitious nationally determined contributions from governments, which may fall short of what is hoped for due to external global pressures such as the COVID 19 pandemic and the Russo–Ukrainian war
- likely seeing a stronger private-sector voice that moves past the ‘technological fix’ to refocus on nature-based solutions that offer simultaneous carbon mitigation and climate adaptation measures.
Although we cannot predict the outcome of the conference, we do know that, if this is to go down in history as ‘the implementation COP’, it will need to deliver key commitments on equitable and just climate finance. The communities at the forefront of the climate crisis deserve and need the spotlight as the world looks to act on adaptation. With the presidency in Egypt, it is hoped that these voices will be amplified yet further.