NEWS HIGHLIGHTS
Theme : Bilateral, regional and global grouping and agreements involving India or affecting India’s interests, Important international institutions etc
Paper : GS - 2
- It refers to local, national, or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change.
- The UNFCCC, Kyoto Protocol, and the Paris Agreement call for financial assistance from Parties with more financial resources (Developed Countries) to those that are less endowed and more vulnerable (Developing Countries).
TABLE OF CONTENT
- Context
- Climate Financing
- Developed Countries on Financing
- Unachieved Goal
- Issues for Low-Income Countries
- Road Ahead
Context : The UNFCCC Standing Committee on Finance (SCF) released a report before COP27, on the progress made by developed countries towards achieving the goal of mobilizing $100 billion per year.
Climate Finance:
- It refers to local, national, or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change.
- The UNFCCC, Kyoto Protocol, and the Paris Agreement call for financial assistance from Parties with more financial resources (Developed Countries) to those that are less endowed and more vulnerable (Developing Countries).
Developed Countries on Financing :
- Climate Financing: commitment to reaching the target of $100 billion in climate finance a year for developing countries is close to being met.
- Private finance: Mobilization of private finance as the critical component of climate finance
What are Unachieved goals?
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UNFCCC Standing Committee on Finance (SCF) report:
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The $100 billion goal has not been achieved in 2020.
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Efforts to mobilize private finance by the developed countries have met with failure.
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OECD report: Developed countries have only mobilized:
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$3(eighty three point three)billion in climate finance in 2020
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$3(sixty eight point three)billion in public finance
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$1(thirteen point one)billion in private finance
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$9(one point nine)billion in export credit.
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Criticism of report: Lack of transparency of information on mobilized private finance.
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Oxfam report: Its values are much lower(OECD-claimed climate assistance of $83.3(eighty three point three)billion is only around $21–$24.5(twenty four point five)billion).
Issues for Low-Income Countries :
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Climate finance remains skewed towards mitigation: flows towards bankable projects with clear revenue streams.
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Unlikely to offer commercially profitable opportunities for private financiers: Vulnerable, debt-ridden and low-income countries with poor credit ratings needing adaptation finance the most, find it challenging to access private finance.
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Unable to meet goals: Developed countries pushed the target year for achieving climate Financing to 2025 from 2020.
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At COP26 (Glasgow), developed countries came up with a Climate Finance Delivery Plan (CFDP): claiming this time that the goal would be met in 2023.
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Private finance: The mobilized private finance had fallen short by 6% compared to the scenario estimate.
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Climate Finance Delivery Plan (CFDP) progress report: Mobilizing private climate finance has proven to be challenging, and particularly limited for adaptation.
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De-risking and creating enabling environments by developed countries: They have not yielded results at the scale required to tap into the significant potential for investments by the private sector.
Road Ahead :
- Further growth: Both public and private finance segments would need to grow a further 21%-22% to meet the 2023 low-end estimate of $101 billion.
- The SCF report: Mobilization of private finance as a means of achieving the $100 billion goal, should not come at the expense of, or involve a trade-off in addressing the needs of developing countries.
FAQs :
1. What is Climate Finance ?
Answer : It refers to local, national, or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change.
2. What does India expect from Rich countries ?
Answer : India expects action from rich countries in terms of climate finance, technology transfer and strengthening the capacity of poor and developing countries to combat climate change.