The Future of Climate Finance: From Insufficient Targets to Systemic Transformation
Shanghai, China by Maggie Yang. Photo via Unsplash.
With the world again reeling from a new COVID-19 variant, the economic outlook for 2022 is defined by uncertainty and inequality. Advanced economies, where vaccines are widely available, are beginning to recover, but concerns over rising inflation are prodding central banks to consider increasing interest rates.Developing countries, meanwhile, face bleak prospects: low vaccine access coupled with tight fiscal situations, including possible capital outflows and increasingly unsustainable debt levels linked to rising global interest rates. Amid these immediate crises, how can the world mobilize for the long-term crisis of climate change and its disproportionate impacts on developing countries?
The 2021 United Nations Climate Change Conference, known as COP26, was not the transformative summit the moment called for. Significant milestones, such as the mention of coal- and climate-induced loss and damage in the final text, were tempered by resistance to include equity in climate talks. This is particularly evident in the lack of commitment and detail on financing, especially in addressing how low-income countries (LICs) will pay for the mounting bill of mitigation and adaptation. Developing countries also sought to establish a financing mechanism to address loss and damage (the category of climate impacts that communities cannot necessarily adapt to), which did not materialize.
The new round of climate pledges brings the world incrementally closer to the Paris Agreement goals, but without the necessary resources to support climate action, implementation challenges will persist, more ambitious climate action will remain off the table and the majority of the world will be consigned to continuous crisis for a catastrophe they did not create. Focusing only on the $100 billion climate finance target is no longer sufficient. To achieve progress on climate finance, it is time to meet the real financing need and retrofit global economic governance for a zero-carbon future.
A new article from
Rishikesh Ram Bhandary and
Katie Gallogly-Swan in the
Progressive Review outlines four routes to unlock resources at the scale required in 2022 and move from arbitrary targets to concrete change. These routes include (1) meeting climate finance commitments, (2) tackling the sovereign debt crisis, (3) greening the International Monetary Fund and (4) regulating private finance to redirect high-emitting investments.
The authors argue it is time to firmly anchor climate finance discussions in the broader economic context. Different pieces of the development landscape have to come together to deliver the kind of systemic shift that tackling the climate crisis requires, and such a change is necessary to ensure both pandemic recovery and climate action are achieved, and a more resilient economic order is built for the future.
