A Burning Issue of Climate Finance
The finance minister has cautioned advanced countries for failing to meet their financing commitments to help emerging economies deal with climate change.
Meaning of Climate Financing:
- The term has been used in a narrow sense to refer to the transfer of public resources from developing countries and, in broadest sense; it refers to all financial flows related to mitigations and adaptation related to climate change.
- The UNFCCC, Kyoto Protocol and the Paris Agreement call for financial support from countries that have fewer financial instruments and are more vulnerable.
- Climate finance refers to local, national or international financing – which is derived from sources of public, private and alternative financing.
- It works on the principle of “Common but Differentiated Responsibilities and related capabilities”.
- It is related to cooperation in mitigation and adaptation works related to climate change.
What is the available climate financing mechanism?
- Global Environment Facility (GEF)
- Green Climate Fund (GCF)
- Special Climate Change Fund (SCCF)
- Adaptation Fund (AF)
- Climate Investment Fund by World Bank
- Clean Technology Fund (CTF)
Commitment to developed economies:
- Through the Cancun Agreements in 2010, developed countries have targeted to raise USD 100 billion jointly per year, by 2020, to meet the needs of developing countries. The Green Climate Fund (GCF) was established in the Cancun Agreement and in 2011, it was designated as the operating entity of the financial system.
- Under the Paris Agreement in 2015, developed countries ratified this goal and agreed that, a new collective target would be set through USD 100 billion per year before 2025. The Paris Agreement reaffirms the obligations of developed countries, while also encouraging voluntary contributions by other parties for the first time.
Issues related to Climate Financing:
- Lack of clarity: There remains a lack of clarity on how this climate finance should be defined and accounted for, as serious concerns have been raised by developed country parties over self-information.
- Prejudice towards mitigation: Most climate funds have been channeled into mitigation rather than adaptation (mitigation refers to the way new solutions are designed and things to be done, while adaptation refers to the management of current issues).
- Need for a robust accounting framework: Underlining the need for a robust accounting framework for transparent reporting of climate finance, the methods for accounting financial resources may not be at the discretion of a particular country.
- Indeterminate End-Use: It is difficult to ensure that money will be spent on climate priorities.
- In addition, efforts will require large-scale investment, but historically emitting industrialized countries have failed to make good their commitments to provide funding under the Paris Agreement.
- The budget is unlikely to lead to new climate change-focused debt, due to cost uncertainties, as well as difficulty including a tight fiscal environment.
Source – The Hindu