Baku, Azerbaijan – Just as a simple lever can move heavy objects, rich nations hope that another type of lever—the financial one—will help them get the money that poorer nations need to cope with the crisis. climate change.
The idea involves a complex package of grants, loans and private investments, and is becoming the main currency in the annual climate talks of the United Nations Organization (UN)known as COP29.
But poor nations fear receiving the short end of the stick: too little money and too much debt.
Half a world away, in Brazil, the leaders of the 20 most powerful economies issued a statement that, among other things, supported strong financial aid for poor nations and the use of leveraged financial mechanisms. This was celebrated by climate analysts and advocates. Yet at the same time, G20 leaders notably avoided repeating the call for a global transition away from fossil fuels, a key victory in last year’s climate talks.
Money is the key issue in Baku, where negotiators are working on a new sum to help developing nations transition to clean energy, adapt to climate change and respond to climate disasters. It will replace the current goal of $100 billion annually, established in 2009.
Climate money could take the form of loans, grants or private investments
Experts estimate the need is closer to $1 trillion, while developing nations have said they will need $1.3 trillion in climate finance. But negotiators talk about different types of money, as well as amounts.
So far, rich nations have not offered exactly a figure for the bulk of the money they could provide. But the European Union is expected to eventually do so, probably in the range of $200,000 to $300 billion a year, Linda Kalcher, executive director of the Strategic Perspectives think tank, said Tuesday. It could even be up to four times the original $100 billion amount, said Luca Bergamaschi, co-founding director of the Italian think tank ECCO.
There is a big difference between $200 billion and $13 trillion. But that can be overcome with “the power of leverage,” Persaud and others said.
When a country gives $1 to a multilateral development bank like his, it could be used with loans and private investments to get up to $16 in dirty energy transition spending, Persaud said. When it comes to items to adapt to climate change, the return is a little lower, about $6 for every dollar, he said.
But when it comes to compensating poor nations already damaged by climate change, such as Caribbean nations devastated by repeated hurricanes, the lever doesn’t work because there is no investment or loans. That’s where direct grants could help, Persaud said.
Whatever the form of funding, Ireland’s environment minister, Eamon Ryan, said it would be “unforgivable” for developed countries to walk away from the negotiations without making a firm commitment to developing countries.
“We have to reach an agreement here,” he said. “We have to provide the financing, especially for developing countries, and give confidence that they will not be excluded, that they will be center stage.”
For developing nations, the idea of loans brings with it the fear of debt
If climate finance comes primarily in the form of loans, except for damage compensation, it means more debt for nations already drowning in it, said Michai Robertson, climate finance negotiator for the Alliance of Small Island States. And sometimes the money leveraged or mobilized doesn’t show up as promised, he said.
“These are all just fancy ways of saying more debt,” Robertson said. “Are we here to address the climate crisis, which especially the small developing states, the least developed countries, have basically done nothing to contribute to? The new objective cannot be a recipe for unsustainable debt.”
His organization argues that most of the $1.3 trillion it seeks should come in the form of grants and long-term, very low-interest loans that are easier to repay. Only about $400 billion should go into leveraged loans, Robertson said.
The lending lever “will be a critical part of the solution,” Andersen said. But so should subsidies and debt relief, he added.
Bolivia’s foreign policy director and president of the Developing Countries Group negotiating bloc, Diego Balanza, criticized developed countries in a speech on Tuesday, saying they have “failed miserably to provide the committed support to developing countries.” ”.
“A significant portion of the loans have adverse implications for the macroeconomic stability of developing countries,” Balanza said.
Rohey John, Gambia’s environment minister, said the lack of financial commitment from rich nations suggests “that they are not interested in the development of the rest of humanity.”
“Every day we wake up to a crisis that could wipe out an entire community or even an entire country, for a crime we never committed,” he said.
Praise and concerns about the G20 declaration
The G20’s mention of the need for strong climate finance and especially the replenishment of the International Development Association is a boost for negotiators in Baku, ECCO’s Bergamaschi said.
“G20 leaders have sent a clear message to their COP29 negotiators: do not leave Baku without a successful new financial target,” said United Nations climate secretary Simon Stiell. “This is an essential signal, in a world plagued by debt crises and growing climate impacts that are ruining lives, hitting supply chains and stoking inflation across economies.”
But the G20 did not say how much funding would be for the new target, said Shepard Zvigadza of the South African Climate Action Network. “This is a shame,” he said.
Analysts and activists also said they were concerned that the G20 statement did not repeat the call for a transition away from fossil fuels, a hard-won concession in last year’s climate talks.
Alden Meyer, a veteran climate talks analyst at European think tank E3G, said the nuance in the G20 statement on the fossil fuel transition is due to pressure from Russia and Saudi Arabia. He added that it is “just another example of the Saudi wrecking ball strategy” in climate meetings.