In the Conference of Parties-24 (COP), which took place in Katowice, Poland, in 2018, representatives of Action Aid, an advocacy group, walked around wearing a badge that said ‘WTF’. Underneath the bold lettering was the legend, “where’s the finance”.
Four years later, finance will be a dominating theme in the COP27, currently underway at Sharm el-Sheikh, Egypt.
A compilation of various countries’ asks done by Carbon Brief, a UK-based website that tracks climate change, shows that India’s focus will be predominantly on finance. Article 2.1c of the Paris Agreement alludes to “finance flows”; India will also want “finance flows” properly defined, notes Carbon Brief.
Financing pledge
Among its major demands will be the delivery of the Paris Agreement’s $100 billion a year financing pledge, which was supposed to run from 2020 to 2025 before increasing thereafter.
The promise is nowhere near being met. The World Bank Group has said that $83 billion has been delivered over the past five years - reaching the highest level in a single year in 2020 at $21.4 billion - and the remaining goal by 2023.
A report of BloombergNEF(BNEF) states that India will require $223 billion investment in order to meet its goal of wind and solar capacity installations by 2030 in its updated NDC, India has committed to 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. This will necessitate the need to attract private finance.
Capital flows
R R Rashmi, Distinguished Fellow, TERI India and a former India’s negotiator at climate talks, observed at a recent webinar organized by Climate Trends, a Delhi-based capacity-building firm, that the capital flows to the Green Climate Fund (GCF) have been very little. The total capitalization of GCF is $10-12 billion and out of that only $3-4 billion has come from international sources. Only six projects are being implemented in India with GCF funding and those too are very small in size.
About 95-96 per cent of the $100 billion in finance has gone to other developing countries. Therefore, $100 billion is not so important for India but it is important for other developing countries and gives an important signal. It’s an unresolved issue that is still pending.
Speaking at the webinar, Dhruba Purkayastha, Executive Director, Climate Policy Initiative, rued that most of the green investments are happening in G7 and OECD (rich) countries—which is not smart, because “the cost of mitigation of one unit of CO2 in non-G7 countries is half of that in G7 countries.”
So, where is it efficient for the capital to go, Purkayastha asked.
Dipak Dasgupta, Distinguished Fellow, TERI, is more optimistic. He believes that capital flows into emerging countries is doable. “Global finance is a massive engine with around $225 trillion in credit. The question is how do you move and force the banks and institutional lenders to start to reallocate funds towards the direction that it needs to go.”
Still, finance is a very sticky issue in climate negotiations. Developing countries are banging their fists on the desk asking for more money for the ‘Just Energy Transition Partnership’, an initiative that seeks to make energy transition from fossil fuels to renewables ‘just’ and humane. If coal mines are shut, what will all the workers do for a living? The initiative is meant to address such issues. However, developed countries do not easily open their purses. A long and hard negotiation lies ahead.