Finance for climate action
The report titled ‘Finance for Climate Action: Scaling Up Investment for Climate and Development’ has been released recently.
This report has been prepared by an independent high level expert group on climate finance.
This group was formed in the year 2021 by COP-26 Presidency, COP-27 Presidency and United Nations Climate Change High Level Champions.
Climate finance refers to financing at the local, national or international level. It is also sourced from alternative sources of finance apart from the public and private sectors.
This finance is mobilized for use in mitigation and adaptation actions.
State of climate finance
- 90% of the total climate finance is being used for mitigation activities.
- Much of the climate finance was raised in the form of debt. Of this, only 16% was low cost (low interest rate).
- Most of the finance raised remains within the country of its origin. This means that most of the money is used for climate finance in the country from where it is raised.
- Emerging markets and developing economies, excluding China, will require $2 trillion per year by 2030.
Framework for Climate Finance
- Climate financing from multilateral development banks and development finance instrument systems should be tripled ($180 billion) within five years.
- Its pool should be expanded by issuing special drawing rights regularly. It should be used to enhance flexibility and sustainability.
- Carbon markets can provide immediate finance for activities that remove carbon from the atmosphere through technologies such as direct air carbon capture and storage, in addition to nature-based solutions.
- The use of carbon credits to replace investments in companies’ own emissions reductions must be stopped.
The main funds of climate finance are as follows:
Green Climate Fund: It is an international financial institution established in the year 2011 under UNFCCC.
The formation of the Green Climate Fund was proposed at the United Nations Climate Change Conference held in Copenhagen in 2009, which was accepted in the conference held in Durban in 2011.
This fund provides assistance to developing countries to deal with the challenges of climate change.
Special Climate Change Fund: This fund was formed in the year 2001 under UNFCCC. It was formed to finance projects related to adaptation, technology transfer, capacity building, energy, transport, industry, agriculture, forestry and waste management and economic diversification.
It provides grants for economic diversification and climate change relief in countries heavily dependent on income from fossil fuels.
Source – The Hindu
