World leaders, delegates from the nation countries recently gathered in the 26th Conference of the Parties (COP26) hosted in partnership between the UK and Italy in November 2021 in Glasgow to agree on a path forward for tackling global warming. Parties debated over the issues on net zero-emission, Loss and Damage, Mitigation and Adaptation, Finance, Transparency to develop a common understanding.
The COP26 adopted the Glasgow Climate Pact which reflects a subtle balance between the interests and aspirations of parties around some urgent issues. COP26 saw success where the Parties could agree on increasing the pace of implementing the Paris Agreement. However, there are disappointments over the issues regarding loss and damage or not securing the $100 billion pledge or failure to meet the 1.5°C targets.
As we all know, if finance is not agreed upon, nothing is agreed upon. The discussion on finance falls under Article 9 of the Paris Agreement. Finance was extensively discussed throughout UNFCCC Glasgow COP26 as the scale and speed of changes that are required to limit the global goal on temperature rise would require finance in all forms – be it climate finance, adaptation finance, public or private finance. Hence, the major issues around climate finance focus on closing the gap of annually providing $100 billion and setting up the post-2025 climate finance target.
Discussion around long-term finance, technology and capacity building for mitigation and adaptation
There have been a lot of discussions around long-term finance. This COP26 was critical about the failure to mobilize $100 billion per year. However, the Glasgow Climate Pact emphasizes the need to mobilize climate finance from all sources to reach the level needed to achieve the goals of the Paris Agreement, including significantly increasing support for developing country Parties, beyond $100 billion per year. OECD 2020 Report claims $78.9 billion delivered as CF in 2018 of which 21% is adaptation finance and the remaining is for mitigation.
The final pact notes with “deep regret” the failure to meet the target on time (by 2020) and commits nations to deliver on their promises in the context of mitigation actions and transparency on implementation every year through to 2025. Thus, the duty to fulfil the pledge of providing $100 billion annually from developed countries to developing countries was reaffirmed. Consensus was reached on the need to continue increasing support to the developing countries. In addition, the process to define the new global goal on finance was launched. There is also a discussion around the importance of transparency in the implementation of finance pledges through the Biennial Report.
Highlights around Adaptation Finance
The overarching decision concerns on the insufficient flow of adaptation finances towards the developing countries to urgently and significantly scale up their provision of climate finance, technology transfer and capacity-building for adaptation so as to respond to the needs of developing country parties as part of a global effort, including for the formulation and implementation of national adaptation plans and adaptation communications. Therefore, the Pact recognizes the importance of the adequacy and predictability of adaptation finance, including the value of the Adaptation Fund in delivering dedicated support for adaptation – a pledge from developed countries to “at least double” adaptation finance between 2019 and 2025 in the context of achieving a balance between adaptation and mitigation actions. Announcement has been made on the financial pledges amounting $356 million to Adaptation Fund, where $116 million will be from EU and multi-year commitments from Norway and Ireland. In addition, 12 donor countries including Germany, US, Belgium etc have pledged $413 million new funding for the least developed country fund (LDCF) outside the UNFCCC and $450 million mobilized for initiatives and programs enhancing Locally Led Adaptation.
Side deals having finance notions
COP26 was about many new initiatives, breakthroughs and pledges as about 90% of the world’s economy is now committed to net-zero targets. While the climate activists are not happy with the text “phase down of coal power”, 23 nations have agreed to phase out coal power in the 2030s. There was also discussion around the financial allocation for net-zero emission and methane pledge.
The Leaders’ declaration representing 110 nations talked about the “Halt and reverse” deforestation and land degradation by 2030. 141 countries have so far pledged to increase finance for sustainable agriculture, forest management and forest conservation and restoration.
Multilateral Development Banks’ joint statement regarding Nature, People, Planet highlighted the need for aligning their portfolios with the Paris Agreement goals and as well as nature. There was no agreement towards providing dedicated finance towards loss and damage, and thus, no agreement on the establishment of a finance facility for L&D for which the LDCs and SIDs were not happy. However, outside the UNFCCC, Scotland offered 1.5m for L&D which was encouraged by many.
My viewpoints on finance at COP26 and takeaways
However, many were disappointed that this COP once again failed to provide vulnerable nations with the money to rebuild and respond to the unavoidable impacts of climate change. A recent assessment by the UNFCCC’s Standing Committee on Finance concluded that developing countries would require nearly $6tn up to 2030, including domestic funds, to support just half of the actions in their NDCs.
There are countries who have shared their concerns that the developed countries may fail to deliver the $100 billion from 2025 as the Green Climate Fund (GCF). The inclusion of private sectors also raises the question around the fact that will become an interest-free modality. Because it was necessary for the least developed countries (LDC) and Small Island Developing States (SIDS) to get it in the form of grants, thus the predictability gets reduced as the discussions did not happen at an extensive level on balance between loans and grants. There is also a concern around the imbalanced fund allocation between the mitigation and adaptation activities. As the commitment from the developed country parties to urgently provide the resources to the climate-vulnerable has failed, there is less hope on the fact that it will be delivered from the next committed time frame.
In addition, another discomfort was around the no specific guideline on the eligibility and accessibility of the highly indebted poor countries to the concessional forms of climate finance. Developing nations, LDCs and SIDs have pushed a lot for finance beyond adaptation terming as the L&D, but less significant progress has been made around that.
However, without phasing out the coal and limiting the global temperature rise, all of the efforts, discussion and on the ground actions would not make any impact. Hence, more investment and transparency issues are required when it comes to mitigation and adapting using nature-based, community-based or low-carbon strategies and approaches. To achieve our climate goals, every company, every financial firm, every bank, insurer and investor will need to change. Hence, there is a need to keep up the momentum so that bigger and greater can be achieved from the COP27.
Originally this article was published on January 23, 2022 at Dhaka Tribune.
Tasfia Tasnim coordinates the Nature-based Solutions Program at the International Centre for Climate Change and Development (ICCCAD). Her area of work involves the interlinkages among nature, adaptation, resilience and finance issues.