The paradox of global climate change finance
Among the global environmental problems, climate change is the biggest challenge for humanity triggered by the increase in greenhouse gases (GHGs) and the consequent increase in the average temperature of the earth of 0.18 ° C. over the past decade. The UN is working to restore terrestrial ecosystems by 2030 with the active support and engagement of investors, businesses, governments and communities.
However, this largely depends on the commitment of countries to meet climate goals in accordance with the international agreement of the United Nations Framework Convention on Climate Change (UNFCCC). The failure to achieve the objectives of the Kyoto Protocol and the lack of consensus among the countries of the Paris Agreement show the collective failure of the international community.
The World Economic Forum’s Report on Global Risks, 2020, observes that “failure of climate action” is a threat to the economic stability of countries around the world that have witnessed unprecedented extreme weather and natural disasters intense and more frequent.
Even though economic development has made the world economy richer with $ 83 trillion, it has made the world environmentally poor due to GHG emissions and the resulting global warming, which imposes an economic and environmental cost of $ 100. billion dollars to society as a whole.
The impact of climate change is pervasive and more common around the world regarding extreme temperature events, intense droughts and floods, insect epidemics and health impacts like Covid-19, human depletion. biodiversity and ecosystem services, decrease in water resources, recurrent forest fires, decline in agricultural yields, coastal flooding, etc. The root causes of global warming and GHG emissions are undeniably rapid industrialization, urbanization, transportation and mass consumption under the economic model of capitalism which has outright undermined the earth’s ecosystem services. Climate change is global and obviously affects everyone. However, economic development benefits a few due to the unequal distribution of income or benefits.
In contrast, industries and businesses that are major contributors to climate change hardly devote to climate change mitigation efforts. The planetary emergency is manifesting itself as “the privatization of profits and the universalization of pollution” continued. In other words, the cost of climate change mitigation and adaptation is largely borne by the government and the people and benefits are owned by the business.
The main sources of global climate finance available under the UNFCCC are: replenishment of the Global Environment Facility; Special Fund for Climate Change; Least Developed Countries Fund; Bilateral and multilateral sources, etc. According to the climate policy initiatives on global climate finance, 2019, which tracked total global finance of $ 579 billion, 44% and 56% respectively, constitute public and private finance.
The main concern is that around 93% of total public and private funding is spent on mitigation activities, while adaptation activities receive less than 7%. In addition, the coverage of private finance from various sectors is limited to transport and renewable energy, while public finance covers energy efficiency, adaptation, land use and others, besides transport and renewable energies.
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The geographic distribution of global finance shows that developed countries obtain funding from private sources while developing countries depend on public funding. This clearly indicates the grave state of failure of global governance of climate finance in the world and in India in particular.
The Indian economy is facing the unprecedented effects of climate change and frequent natural disasters that cost nearly 3% of GDP. India’s 40% of poor continue to be impacted by climate change with their limited economic resilience. Poverty reduction programs continue to fail due to frequent assaults from natural disasters such as Cyclones Amphan and Yass and Covid-19 that have pushed millions of people below the poverty line and further increased income inequality.
The estimated cost of damage to West Bengal from the recent Cyclone Amphan was $ 13.2 billion. India’s agricultural sector is highly vulnerable to frequent flooding and poor monsoons which have dramatically altered cropping cycles and reduced productivity, causing loss of income to millions of farmers, laborers and fishermen.
Drinking water scarcity and heat waves are widespread in several parts of the country, making the poor very vulnerable. The loss of biodiversity, forests and habitats affects forest dependent communities. A study by the World Health Organization (1995) shows that the seasonality, distribution and prevalence of vector-borne diseases are strongly influenced by climate change.
There is a strong association between frequent weather changes and increased infections such as colds, fever, headaches, vomiting, fatigue, shortness of breath, asthma, etc. The spread of new infectious diseases involves humans and animals; scientists have observed that about 60% of all infectious diseases are zoonotic in nature and that animals infect humans due to habitat fragmentation influenced by land use and climate change.
India is committed to the Paris Agreement; The post-2020 climate targets state that the country will reduce the emission intensity of its economy by 33-35% by 2030 from 2005 levels and increase forest cover aimed at reducing CO2 levels equivalent to 2, $ 5 billion to $ 3 billion by 2030.
However, poor climate finances can limit the achievement of climate goals. India’s nationally determined contribution to meet climate goals is estimated to require Rs 11 lakh crore or $ 170 billion per year while actual dedicated climate finance was 12% or Rs 137,000 crore ( $ 21 billion) in 2018. Institutional financing policy towards climate change mitigation and adaptation remains a challenge, given the limited financial resources made available in India.
Most of the funds are aimed at achieving energy efficiency, investments in renewable energy and sustainable transport, but afforestation and adaptation receive crude treatment. The UN is committed to ‘putting ecosystem restoration on a pedestal’, but its achievement relies heavily on active support from investors in climate change finance in developing countries, particularly in countries of the world. Southeast Asia and Africa strapped for cash.
(The author is professor, Institute of Socio-Economic Change, Bengaluru)