Published on: October 21, 2024
CLIMATE FINANCE TO DEVELOPING NATIONS
CLIMATE FINANCE TO DEVELOPING NATIONS
INTRODUCTION
- The 29th Conference of the Parties (COP29) of the UNFCC will be held in Baku, Azerbaijan, from November 11 to 22.
- This conference is expected to focus significantly on climate finance issues.
VULNERABILITY OF DEVELOPING COUNTRIES
- Economic Dependence: Developing countries are particularly vulnerable to climate change due to their reliance on agriculture, which is sensitive to climate impacts.
- Cumulative Emissions:
- Developed countries account for 57% of cumulative global emissions since 1850.
- Developing countries have contributed relatively little to emissions but face pressing developmental needs.
- Commitments from Developed Nations:
- The 2009 Copenhagen Accord committed developed countries to provide $100 billion annually in climate finance to developing nations by 2020, extended to 2025.
- A new target for post-2025 is on the agenda at COP29.
DEFINITION OF CLIMATE FINANCE
- UNFCCC Definition:
- Climate finance encompasses financing from public, private, and alternative sources to support climate mitigation and adaptation actions.
- It includes sources (public or private) and end-uses (mitigation or adaptation).
- OECD Reports:
- These reports analyze climate finance flows, covering international public finance, commercial and concessional loans, grants, and equity.
- Loans constitute the largest share (69.4% in 2022), followed by grants (28%).
CRITIQUE OF OECD REPORTS
- Shortcomings Identified:
- Reports should reflect actual disbursements, not just commitments.
- Funds should be new and additional, not a reclassification of existing aid.
- Only grants or grant-equivalents should be counted, excluding commercial finance.
NEED FOR CLIMATE FINANCE
- Access to Electricity:
- In 2021, 675 million people in the developing world lacked access to electricity.
- Developing countries need to increase electricity consumption and universalize access.
- Financial Limitations:
- Developing nations have smaller financial systems and higher capital costs.
- The cost of solar photovoltaic technologies is approximately double in developing countries compared to developed ones.
INDIA’S CLIMATE FINANCE REQUIREMENTS
- Short-term Targets (by 2030):
- 500 GW from non-fossil fuel sources.
- 5 million metric tonnes per annum of green hydrogen (GH2) production capacity.
- Significant investments estimated:
- ₹16.8 lakh crore for 450 GW of renewable energy.
- ₹8 lakh crore for GH2 targets.
- ₹16 lakh crore for Electric Vehicle (EV) purchases.
- Long-term Needs:
- ₹850 lakh crore required between 2020 and 2070 to achieve net-zero emissions.
NEW COLLECTIVE QUANTIFIED GOAL (NCQG)
- Objectives:
- Establish a new annual climate finance mobilisation target.
- Should include actual disbursals, new and additional funding, and a mix of public and private capital.
- Exclude organically flowing private finance to developing countries.
- Estimated Requirements:
- An independent expert group has determined that developing countries (excluding China) will need around $1 trillion in external finance by 2030.
CONCLUSION
- The upcoming COP29 will be critical in addressing climate finance challenges for developing countries.
- There is an urgent need to establish clear, actionable targets for climate finance to meet the growing demands of these vulnerable nations.