The trust deficit facing COP28
Mbongeni Mguni | Tuesday November 21, 2023 16:46
As in previous meetings of the United Nations Climate Change Conference, known as the Conference of the Parties or COP, the upcoming gathering in Dubai is expected to be dominated by discussions around financing. At COP28 in Dubai, developing countries will press their developed counterparts to make good on long-standing pledges to finance climate change adaptation and mitigation.
Due to a cruel twist of fate, poorer countries, particularly in Africa, are bearing the brunt of the mounting climate change disaster, despite contributing the least over the decades to the factors that are causing the phenomenon.
Besides commitments on restraining the rise in global warming going forward, the richer nations whose development has led the planet to the crisis and keeps it on the brink even today, pledged in 2009 to make $100 billion annually available to developing countries to tackle the climate crisis. The funding is designed to help Africa adapt to and mitigate climate change.
Adaptation measures are based on lessening vulnerability to the effects of climate change and increasing countries’ resilience, such as smart agriculture initiatives. Mitigation involves introducing measures or actions to reduce and curb the greenhouse gas emissions that are pushing the world to the point of no return in terms of climate change.
Africa’s challenge is largely focussed on adaptation or coping with the crisis, as the continent’s under-development means it contributes less than five percent of global emissions and thus will likely meet its global commitments. Adaptation, climate specialists say, is where Africa most urgently needs help, as the frequency of droughts, floods, associated diseases, impact on food security and incomes, grows greater.
However, in both in terms of global warming and the annual funding commitments, the industrialised world has continuously set itself targets and subsequently fallen short of these at each of the COPs. Developing countries have also said even the funding that is said to have been made available is over-exaggerated, misdirected or is dominated by market rate loans.
On Thursday, the Organisation for Economic Co-operation and Development (OECD) published a report indicating that developed nations have been gradually closing the gap in their annual targets, since at least 2016. The report this week is the result of a request by members of the OECD, an economic grouping of mostly highly developed countries, who requested regular updates of their climate obligations.
According to the OECD’s data, in 2021, climate finance provided and mobilised from the developed world reached a high of $89.6 billion.
The OECD says 60% of the funding in 2021 was on mitigation, while nearly half of the $89.6 billion was in the form of loans, with lower amounts for grants and equity investments. The report did not detail average cost of the loans being provided or whether they were offered at concessional or market rates.
OECD researchers did note, however, that the funding could be better directed.
“There is a pressing need for international providers to significantly scale up their efforts in two essential areas: adaptation finance and the mobilisation of private finance,” OECD researchers said.
“Adaptation finance is key to building resilience, allowing developing countries to address and alleviate the effects of climate change, and guiding them towards sustainable socio-economic growth.”
The OECD researchers say such financing can support developing countries in establishing climate-resilient infrastructure and practices, incorporating climate risk considerations into economic planning, and developing local disaster response strategies.
At the last global climate conference held in Egypt, activists found that although the meeting was dubbed “Africa’s COP,” the issue of funding was again a headache.
United Nations Climate Change High-Level Champion's special advisor, Bogolo Kenewendo, previously reported that at the Egypt climate change summit, activists ramped up their demands for tangible, appropriate funding and the fulfilment of financing pledges.
“There is actually a badge that has been going around written WTF, which means ‘Where is the Finance,’” she told a social media dialogue.
“Instead of pledges, we are asking for signatures to be put down for the money.”
This week, Kenewendo and two other high profile climate professionals, Mahmoud Mohieldin and Reuben Wambui, tabled a proposal which the COP28 could take note of. Mohieldin is a UN Climate Change High-Level Champion while Wambui is a climate risk and finance specialist and founder of the Net-Zero Africa Initiative.
The three climate specialists noted that an analysis of financing barriers reveal that the global climate finance system is inefficient, insufficient, and unfair. Strained national budgets and unsustainable debt levels are intertwined with unsupportive policy frameworks, inconsistent regulation, and insufficient private sector engagement.
“Additionally, heightened perceptions of investment risk in Africa, perceived and real foreign currency risks, the complexity of existing international climate finance mechanisms, and data limitations collectively curtail climate-aligned investments,” the three said in a research note.
The three have proposed interventions to unlock financing for climate transition in Africa, which include debt relief and suspension for low-and middle-income countries, including innovative debt swaps and Climate Resilient Debt Clauses. This could include debt-for-nature swaps allowing affected nations to repay their debts by investing in nature regeneration and climate action.
Kenewendo and her fellow specialists are also proposing that climate change financiers extend below market rate or concessional funding. They argue that multilateral development banks such as the World Bank, should provide low and lower middle income countries with one percent interest rate, a 10-year grace period and 20-year repayment periods for financing projects that boost resilience to climate change.
“These concessional terms need to be supported by the climate finance contributions of higher-income economies,” the trio’s paper reads.
Other proposals include using credit enhancement and credit guarantee schemes to incentivise private sector participation and establishing a fund that helps private investors mitigate foreign exchange risks in Africa.
Kenewendo, Mohieldin and Wambui are also proposing the creation of a “turbocharger facility” for projects and entrepreneurs running project preparation programmes on the continent. This type of facility, they say, is particularly important for projects that can regenerate nature and help communities adapt to climate change impacts.
The three specialists said overcoming the financial barriers inherent in Africa’s climate transition requires a comprehensive strategy that effectively addresses the different challenges.
“The goal is to finance a just and equitable climate transition that spans across all of Africa — not just in a handful of countries deemed “investable,” the paper reads.
It remains to be seen whether the proposals will find traction at COP28 or to what extent Africa will be able to garner tangible support to cope with the deepening crisis of climate change.