One thing is clear after two weeks of climate talks: developing economies are tired of getting the short end of the stick in the globe’s decarbonisation effort. Estimates at the 27th Conference of the Parties (COP27) show that developing countries would need $5.6 trillion in the next eight years alone to have any hope in reaching the important climate goals.
But current global climate finance deals fall far short of this amount and developed nations have also failed to honour a pledge to mobilise $100 billion per year by 2020 for developing nations.
Yet the developed world institutions say they cannot decarbonise without developing markets.
“We can’t tackle climate change without emerging markets, but the financing needs are enormous,” says a spokesperson for the International Finance Corporation, the world’s largest development bank.
“Financing currently stands at less than $425 billion. Unlocking private sector financing will be key to filling that gap. Climate action is also a major business opportunity with trillions of dollars of revenue involved in mitigation and adaptation activities.”
The conference has called for developed nations to achieve the $100 billion goal urgently, going further to state that this was a “floor”, or a minimum.
Poorer nations were asking for clarity on these climate finance pledges, and for richer countries to deliver support commensurate with the gravity of climate action needed in developing countries, and to reduce the cost of borrowing.
The text of the agreement, widely expected to be signed at the close of COP27 today, acknowledges developing countries’ challenges in accessing loans for their plans to decarbonise their economies and proposes solutions for this pickle.
While it expressed concern at significant losses and damage suffered from extreme weather events, it was silent on the establishment of a dedicated loss and damage fund – a disappointing turn of events for negotiators who managed to get the issue on the agenda after hours of heated debate.
And there was no greater time to push for rich nations to establish the fund, Thandolwethu Lukuko, a coordinator at the SA Climate Action Network, told media on the sidelines of the negotiations, pointing to floods in Durban and West Africa, along with the ongoing drought in the Horn of Africa.
“If we don’t achieve it in this COP, we’re sending a message – particularly to the least developed nations, the ones that are in the continent (Africa) – … that the multilateral system that we have is unable to address the very, very urgent concerns that many countries have.”
The agreement proposed reforms to the financial system and its structures and processes – involving governments, both central and commercial banks, asset managers and pension funds, and other role players.
In other words: more borrowing, at the expense of growth, for nations which are already highly indebted.
But the agreement itself says one third of all developing countries and two thirds of low-income countries are at risk of debt distress owing to the climate emergency.
COP27 was a moderate success for countries like South Africa where the Ramaphosa administration managed to secure the first loan from the $8.5 billion pledge made at COP26. These funds are crucial to getting the ambitious JET-IP off the ground.
For now, managing to raise discussion about possible climate reparations onto the agenda is a win for the developing world.