Climate meet in France: It signals small steps towards improving climate financing architecture

Source: The post is based on the article “Climate meet in France: It signals small steps towards improving climate financing architecture” published in The Indian Express on 26^th June 2023.

Syllabus: GS 3 – Environment – Climate Change

Relevance: challenges in climate financing

News: Recently, a summit for a ‘Global Financial Pact on Climate Change’ was held in Paris.

What are the excerpts of the Summit?

Most delegates attending the summit arrived at a consensus that multilateral institutions should find ways to unlock new climate investments. Also, debt arrangements should include disaster clauses.

For instance, the disaster clause may include a two-year pause on repayments after an extreme weather event.

However, representatives of the developing countries still feel th at any changes in the funding ecosystem will be gradual.

French President Emmanuel Macron expressed a possibility that rich nations will meet their pledge for a $100 billion annual fund for climate change initiatives in the Global South, by the end of this year.

This fund was originally meant to be received by the developing countries by 2020. However, the failure to do so represents the failure of the global climate financing system and a sense of mistrust in climate negotiations.

What are the challenges present in climate financing?

The current commitment of $100 billion represents a fraction of the amount required by the Global South to develop resilience against climate change.

A report presented at COP27 last year. It estimated that, excluding China, developing and emerging economies will require $2 trillion annually by 2030 to support energy transition, adaptation, sustainable agriculture, and address global warming-related loss and damage.

What measures have been taken to support developing countries?

The IMF announced Special Drawing Rights (SDR) of $ 100 billion to Global South. France, Japan, and the UK also made SDR-related pledges.

The World Bank also said it will pause loan repayments for countries struggling with climate disasters.

What more can be done?

Instead of the support from the developed nation, loans currently constitute the primary source of funds for climate financing. Therefore, financing support from developed countries must be fulfilled as soon as possible.

The demand of vulnerable countries at the summit in Paris for their need for grants and technology transfers should also be considered.