Need for climate finance is especially critical for developing countries

Source: The post need for climate finance is especially critical for developing countries has been created, based on the article “On climate finance to developing nations” published in “The Hindu” on 21st October 2024

UPSC Syllabus Topic: GS Paper 3 – Environment — Conservation.

Context: The article discusses the need for climate finance, especially for developing countries. It highlights the challenges they face due to climate change and their need for external financial help. A new global target for climate finance will be set at COP29.

For detailed information on Climate Finance read this article here

What Are the Key Issues at COP29?

COP29, held in Baku, Azerbaijan, is focused on climate finance. This means leaders will discuss money related to climate change, particularly helping developing countries that are vulnerable but have less money to cope with climate effects.

What Is Climate Finance?

1. Climate finance refers to funding aimed at supporting climate action, such as mitigation and adaptation projects.
2. It can come from public or private sources and be used domestically or internationally.
3. The Organisation for Economic Co-operation and Development (OECD) tracks climate finance from developed to developing countries.
4. In 2022, loans made up 69.4% of international public climate finance, with grants accounting for 28%.
5. Critics argue climate finance should be based on actual disbursals, not just commitments, and focus on new and additional funding, not reclassified aid.

Why Are Developing States More at Risk?

1. Geographical Location: Developing countries are often located in areas prone to extreme weather events, such as floods and droughts, making them highly vulnerable to climate change effects.
2. Economic Dependency: Developing countries’ economies heavily rely on sectors like agriculture, which are highly sensitive to climate changes. Agriculture is directly impacted by shifting weather patterns.
3. Financial Constraints: Developing countries face higher costs of capital for climate technologies. According to the IEA, the cost of capital for solar photovoltaic and storage technologies is about twice as high in developing economies than in developed ones.
4. Other Factors: Competing developmental needs, such as providing electricity to 675 million people who lacked access in 2021 (IEA), limit their ability to invest in climate action.

How Much Does India Need for Its Climate Goals?

1. India has ambitious climate targets for 2030, including installing 500 GW of capacity from non-fossil fuels, producing five million metric tonnes of green hydrogen, and expanding electric vehicle use.
2. To meet these goals, India needs an estimated ₹40.8 lakh crore by 2030.
3. For renewable energy (450 GW by 2030), an additional ₹16.8 lakh crore is required.
4. The National Green Hydrogen Mission needs ₹8 lakh crore in investments.
5. Consumers must spend about ₹16 lakh crore to adopt electric vehicles.
6. Long-term, India needs ₹850 lakh crore from 2020 to 2070 to achieve net-zero emissions.

What Is the New Collective Quantified Goal (NCQG)?

1. The NCQG aims to establish a new annual climate finance target for developing countries.
2. It must focus on actual disbursals, not just commitments or promises of funding.
3. It should be new and additional, not reclassified from existing aid programs.
4. Public capital should include direct grants, mobilizing private finance through public funds.
5. Organically flowing private finance should not count.
6. An expert group estimates developing countries, excluding China, will need $1 trillion annually by 2030 to meet climate goals.
7. This target is crucial for balancing development and climate action in vulnerable nations.

Question for practice:

Examine the challenges developing countries face in accessing climate finance and how the New Collective Quantified Goal (NCQG) aims to address these challenges.