By 2030, poor countries will need a combined total of $2.4 trillion per year to slash greenhouse gas pollution and respond to escalating extreme weather disasters, according to a new report presented Monday at the United Nations COP27 climate summit.
That amount of money (6.5% of annual world GDP) would be enough for every developing country except China to make the changes required to cap global warming at 1.5°C above preindustrial levels, say the report’s authors, but it dwarfs the level of annual funding that has so far been provided to help low-income nations mitigate and adapt to the fossil fuel-driven climate emergency.
“Humanity has a choice: cooperate or perish. It is either a climate solidarity pact—or a collective suicide pact.”
“Around half of the required financing can be reasonably expected to come from local sources, from strengthening domestic public finance and domestic capital markets, including tapping into large pools of local finance that national development banks are able to mobilize,” the report says.
But “around $1 trillion per year of external finance will be required by 2030 to meet the scale of the investment needs,” the report adds, referring to grants and loans from rich nations, multilateral development banks, and the private sector.
In a statement, report co-author Nicholas Stern said: “Rich countries should recognize that it is in their vital self-interest, as well as a matter of justice given the severe impacts caused by their high levels of current and past emissions, to invest in climate action in emerging market and developing countries.”
“Most of the growth in energy infrastructure and consumption projected to occur over the next decade will be in emerging market and developing countries,” said Stern. “If they lock in dependence on fossil fuels and emissions, the world will not be able to avoid dangerous climate change, damaging and destroying billions of lives and livelihoods in both rich and poor countries.”
The report on poor nations’ climate finance needs came the same day as a Carbon Brief analysis revealed the extent of wealthy countries’ failures to mobilize far smaller sums of money for sustainable development.
Developing countries have been promised since COP15 in 2009 that rich nations would provide at least $100 billion in climate aid each year by 2020. However, just over $83 billion was delivered in 2020—the most recent year for which data is available—and the Global North is not expected to hit its insufficient target until 2023.
The United States has been by far the biggest laggard, chipping in less than $8 billion toward the $100 billion figure in 2020. That represents just 19% of the country’s roughly $40 billion “fair share,” or what it should be paying based on its cumulative contribution to global greenhouse gas pollution.
U.S. President Joe Biden has promised to shell out $11.4 billion per year in climate aid by 2024—less than 2% of the annual Pentagon budget and still far less than Washington’s fair share—but congressional lawmakers approved just $1 billion in a $1.5 trillion spending bill passed earlier this year. To make matters worse, the U.S. government has spent 13 times more on fossil fuels than renewables in Africa since the Paris agreement was adopted in 2015, data shows.
Given that Republican victories would further hurt the chances of the U.S. providing international climate finance at a level commensurate with its culpability, COP27 participants are paying close attention to the outcome of Tuesday’s midterm elections.
Canada, Australia, and the United Kingdom also fell far short, Carbon Brief found, while countries that contributed green funding in excess of their estimated historical responsibility were more likely to provide interest-bearing loans—which must be repaid by low-income nations that have done the least to cause the life-threatening climate crisis and have fewer resources to cope with it—rather than grants.
Wealthy countries are not the only actors coming up short on the climate finance front. The World Bank, currently led by widely criticized Trump appointee David Malpass, has pumped roughly $15 billion into fossil fuel projects since 2015, directly undermining the billions of dollars it is spending on clean energy each year.
“Unlocking substantial climate finance is the key to solving today’s development challenges.”
“Given the pressure on public budgets in all countries, the role of the multilateral development banks, including the World Bank, will be critical in increasing the scale of external finance for emerging market and developing countries, and bringing down the cost of capital for investors,” Stern said.
According to the British economist: “The flow of [green development] finance from these institutions should triple from about $60 billion a year today to around $180 billion a year within the next five years. This requires a strong sense of direction and support from the country shareholders, and real leadership from the top of these institutions.”
Report co-author Vera Songwe added that “countries must have access to affordable, sustainable low-cost financing from the multilateral development banks to help crowd in investments from the private sector and philanthropy.”
“Unlocking substantial climate finance is the key to solving today’s development challenges,” said Songwe, though the executive secretary of the U.N. Economic Commission for Africa stressed that “financing alone is not enough and must be coupled with the right instruments and good policies to accelerate and scale up impact.”
Increasing the amount of funding that rich countries and development banks are allocating to address the deadly consequences of decades of unabated fossil fuel emissions—and ensuring that money comes in the form of grants instead of loans—are among the key issues at COP27, which began Sunday in Sharm El-Sheikh, Egypt.
A series of reports published in recent days have made clear that humanity is currently barreling toward climate catastrophe, necessitating more far-reaching interventions and funding to support them.
Existing climate targets and policies are so inadequate that the planet is currently projected to be 2.1 to 2.9°C hotter by 2100. The U.N. warned that there is “no credible path to 1.5°C in place” and demanded “urgent system-wide transformation” to prevent wholesale calamity.
If annual public and private investments in the Global South excluding China are increased from the current level of $500 billion to $2.4 trillion by 2030, developing countries would be better able to quickly transition to clean energy and other low-carbon technologies, says Monday’s report on green finance, which was commissioned by the governments of Egypt and the U.K. In addition to reducing planet-heating pollution, decarbonizing economies would also create jobs and help lift billions of people out of poverty.
As The Guardian reported, “The money is also needed to help poor countries adapt to the effects of the climate crisis, for instance by building more robust infrastructure and protections such as seawalls and early warning systems.”
“For the most severe impacts of climate breakdown, which countries cannot adapt to, known as loss and damage, the money would help to rescue those at risk, repair vital infrastructure, and help to heal the social fabric—services such as health and education—of countries torn apart by” devastating floods, droughts, heatwaves, wildfires, and storms that are growing in frequency and intensity, the newspaper noted.
So far, however, just a handful of countries have pledged a combined total of around $250 million to a U.N.-backed loss and damage fund even as fossil fuels are estimated to generate more than $5 trillion in unpaid damages each year.
In a Monday speech at COP27, U.N. Secretary-General António Guterres warned that “we are on a highway to climate hell with our foot still on the accelerator.”
“Humanity has a choice: cooperate or perish,” said Guterres. “It is either a climate solidarity pact—or a collective suicide pact.”