Who Should Finance the Fight Against Climate Change? A Debate That Year After Year Finds No Answer

People walking
La Nacion
Dubai, United Arab Emirates
Who Should Finance the Fight Against Climate Change? A Debate That Year After Year Finds No Answer

Financing climate action is perhaps one of the greatest challenges today, but during the negotiations at this climate conference (COP28) it is also one of the issues that is making the least progress. Especially when the discussion revolves around who has to give that money, how it is going to be obtained, who can receive it and what it is going to be used for, the dialogue between the parties or countries becomes acrimonious.

Both Argentina and most of the developing countries have put financing as one of the main banners of struggle. And they require it for everything: investing in the energy transition, developing ways to cope with heat waves, rebuilding houses collapsed by floods... All climate action needs money.

And it's not a new discussion. You only have to go back 14 years to remember that it was at COP15, in Copenhagen, that developed countries – under pressure from others – determined for the first time that money would be given to finance climate action. But it wouldn't be for just any country, nor would it be just any country that would provide it.

Since that time, prior to the famous Paris Agreement, it was widely believed that the most industrialized countries would be primarily responsible for financing the action of all developing countries. And that conclusion didn't come as a matter of philanthropy. It was all about numbers and science.

And what was known – and is known – is that nations like the United States, Britain, and all the countries of the European Union are historically responsible for the main cause of the climate crisis: greenhouse gas emissions. In other words, it's not just what's polluted now, but what's been polluted over the last 150 years.

Under this logic, countries in Latin America and the Caribbean, as well as in Africa, the Pacific Islands, and even China or India, would be the recipients of special financing that, starting in 2010, would be granted and distributed for two particular areas: greenhouse gas mitigation and adaptation to climate change. It was the first time that the promise to create a fund of 100,000 million dollars a year until 2020 was heard... although from the first moment of execution only a part of the money arrived.

The first year he collected a little more than half, the second there was a slight ascent, but they never reached the finish line. Such was the lack of commitment that even after the Paris Agreement was signed in 2015, it was agreed to renew the goals from 2020 to 2025. Despite the fact that there was a little more collection, the trend continues. There is not enough money.

The Funding Gap

To understand the discussion on financing, it is necessary to start from the fact that among the 198 Parties negotiating at COP28 there are gaps. Some countries emit more than others, they also make more money than others, and they are better prepared to deal with the climate crisis.

a flood damaged cars
View of the damage caused after the passage of Hurricane Otis in Acapulco, Guerrero state, Mexico on October 25, 2023 / Credit: Francisco Robles, AFP.

According to the OECD, by 2025 developing countries will need one trillion dollars annually to finance their climate action and meet the 2030 goals of the Paris Agreement. And even if that number is reached, the distribution should be equitable, which is not the case either. Worst of all, as time goes on, the costs are rising.

According to the same organization, climate finance, including private donations, multilateral and bilateral public funds, private and carbon export services, mainly benefits middle-income  countries (70%), then low-income countries (9%) and finally high-income countries (3%). There is also a difference in what kind of climate action is implemented. Greenhouse gas mitigation takes 60% globally, 27% adaptation, and 13% that can include both at the same time.

This means  that the poorest countries, which are also the most vulnerable to the effects of climate change, are among those that receive the least funding. And even if they received money, they would have a minuscule portion to adapt, something that should be a priority in Latin America and the Caribbean. "But in the region, the distribution is even more uneven. About 10% goes to adaptation and 80-85% to mitigation," says Sandra Guzmán, general coordinator of the Financing Group for Latin America and the Caribbean.

But it's not just that gap that exists in our region when it comes to financing for climate action. According to the latest report by this group led by Guzmán, it is the countries with the highest GDP in the region – Brazil, Mexico, Argentina and Colombia – that receive the most multilateral financing and most of the funds are actually loans granted especially by the Inter-American Development Bank (IDB), the Green Climate Fund (GCF), the International Monetary Fund (IMF), the European Union (EU), the European Commission (NG  The Climate Investment Fund (FIC), the Global Environment Facility (GEF).

Guzmán explains that this is mainly because the problem is not only the amount of money raised, but access to it. "Funds like these ask for requirements that Latin American countries often cannot meet. How to have a specific office that is dedicated to preparing the necessary documentation for the procedures. It's a huge amount of paperwork and bureaucracy. And this gets even worse if we're talking about adaptation. So you have very small countries with conflicts or with a smaller team in the government and the possibility of receiving funding goes down," Guzmán adds.

This is where  options such as those proposed by governments such as Argentina, Barbadian or Colombia, such as carbon markets, the exchange or cancellation of debt for nature or climate action, green taxes and restructuring of multilateral organizations, are beginning to emerge. However, everything is still in the preliminary stages or has not even been fully discussed. There are very few concrete examples to determine that any of these strategies could substantially alleviate the Latin American territory. In the first week, financing was one of the points that were stopped in the parties' discussions. Although one of them seems to be heard more loudly in the halls of COP28.

A radical change in financing mechanisms

Of all the options available, the restructuring of multilateral organizations is one of the most important to put on the agenda. This plan not only seeks to direct more money than it currently does, but also aims to do so in the most effective way possible: more speed when granting it, lower interest rates and, above all, developing mechanisms based on necessity.

An initiative spearheaded by Mia Mottley, the prime minister of Barbados and finance expert Avinash Persuad, seems to be the one pulling the most. The name of this program is the "Bridgetown Initiative."

"This initiative was created to pressure multilateral financing agencies to put the climate crisis as a cross-cutting issue for all their loans, and to consider the true conditions of the countries that need them," Persuad said at a press conference. They seek a complete restructuring of these institutions in favor of the global south, and the current crisis. But this is not something that has only been thought about since this initiative.

A woman walking
Mia Mottley, Prime Minister of Barbados at a talk on climate finance in Dubai / Credit: Matías Avramow.

Since the pandemic, multilateral organizations have held biannual meetings — one in April and one in October — to discuss a new way of functioning. They call it "pathway reform." That is where the Bridgetown Initiative aims to have an impact, to put the climate crisis as a cross-cutting axis, and now, not only to adapt and reduce emissions, but also to remedy the losses and damages that have already hit society and the economy.

A New Fund: Loss and Damage

"Two years ago my country was hit by two storms, 46 lightning strikes in 90 minutes. Two weeks later we were hit by a hurricane," the prime minister of Barbados described a few days ago in a presentation during COP28. The islands of the Caribbean are extremely vulnerable. There are sites that intersperse extreme droughts and tropical storms annually, causing irreparable damage: crop or livestock losses. And it's not just an economic issue: houses, clothes, photographs, documents, everything can be lost after events as extreme as we see them today.

But until this year, among all the financing mechanisms, none had been effective in alleviating these losses. Existing funding does not respond to the speed and effectiveness required by a situation as urgent as the day after a storm like the one Mottley described. "We need new social contracts, new ways to implement funds, and more money. Investing one dollar in this means saving seven dollars in damages," she adds.

For this reason, since last year, COP27 has proposed and developed a loss and damage fund that on the first day of this year's conference, in Dubai, was approved and began to be funded. "Collectively, we made history. We achieved consensus to respond to the effects of climate change that will protect lives and livelihoods. Especially of the most vulnerable," said the COP28 president after delivering the big news, one that took absolute prominence.

Today, this fund accumulates $655.9 million, which, although insufficient, has been a remarkable achievement during this conference. Today, during the plenary, the progress that has been made in this area was celebrated, both in terms of financing and in the full implementation of the Santiago network, which will provide technical assistance in loss and damage to developing countries.


This story was produced as part of the 2023 Climate Change Media Partnership, a journalism fellowship organized by Internews' Earth Journalism Network and the Stanley Center for Peace and Security. It was first published in Spanish by La Nación on December 6, 2023 and has been translated to English and lightly edited for length and clarity.

Banner image: People walking / Credit: AP/Peter Dejong.

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