Climate finance to developing nations

(General Studies III – Environment Section -Conservation, Environmental Pollution and Degradation, Environmental Impact Assessment.)

• The 29th Conference of the Parties (COP29) of the UNFCCC, set to be held in Baku, Azerbaijan, will focus heavily on climate finance.
• As developing nations bear the brunt of climate change, securing adequate funding to combat its impacts will be a key discussion point at this year’s conference.

Why Are Developing Nations Vulnerable?

1. Geographic and Economic Exposure: Developing nations, particularly those in the Global South, are highly vulnerable due to their reliance on agriculture and natural resources. Many of these countries are prone to extreme weather events like floods, droughts, and rising sea levels, which severely impact their economies.
2. Low Contributions but High Impact: While these nations contribute very little to global greenhouse gas emissions, they suffer disproportionately from climate change. For example, developed countries are responsible for 57% of cumulative emissions since 1850, but developing nations, especially small island states and least developed countries, bear the brunt of the environmental and economic fallout.
3. Limited Resources for Adaptation: With limited financial and technological resources, developing countries struggle to both mitigate emissions and adapt to the changing climate. High costs of clean energy infrastructure further compound their challenges. For instance, the cost of capital for renewable energy is almost double in developing countries compared to developed ones.

Limitations to Climate Finance –

1. Inadequate Financial Disbursements: While there are global commitments like the $100 billion annual target agreed in 2009, actual disbursals fall short. Much of the committed finance has not been provided, or comes as loans, increasing debt burdens rather than relieving financial pressures.
2. High Cost of Capital: Developing countries face higher capital costs for renewable energy projects. For example, the cost of solar power generation is twice as expensive in developing nations compared to developed countries, hindering their ability to transition to cleaner energy sources.
3. Limited Access to Technology and Knowledge:Many developing nations lack access to the latest climate-friendly technologies and technical expertise required to implement effective mitigation and adaptation strategies. This knowledge gap further exacerbates their vulnerability to climate impacts.

What Can Be Done?

1. Prioritize Grants Over Loans: To ease financial burdens, climate finance should shift towards direct grants rather than loans, especially for adaptation measures that do not generate immediate economic returns.
2. Improve Data Accessibility and Transparency: Public climate finance data should be made more accessible and transparent to allow for better tracking and accountability of financial flows, especially in high-risk areas.
3. Establish Long-term Financial Mechanisms: COP29 must address the need for a new New Collective Quantified Goal (NCQG) to secure long-term financing. A proposed target of $1 trillion annually for developing countries by 2030 has been recommended, focusing on new and additional sources of finance, including public-private partnerships.
4. Technology Transfer and Capacity Building: Developed nations should facilitate technology transfer and capacity building initiatives to empower developing nations to implement sustainable projects and strengthen local resilience against climate risks.

COP29 presents a pivotal opportunity for global leaders to address the critical gaps in climate finance and secure a future where developing nations can effectively combat and adapt to climate change. Ensuring sufficient, timely, and accessible funding, along with technology support, will be essential for achieving sustainable development goals and a just energy transition.