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Finance holds climate key but poor countries fear missing out

<span>Photograph: Reuters</span>
Photograph: Reuters

Finance holds the key to tackling the climate crisis, the UK’s business secretary and the Bank of England governor have declared to warm applause from City grandees and international investors. But developing countries have been left wondering whether they will receive the funds they need to avoid disaster.

The business secretary, Alok Sharma, who will lead this year’s UN climate talks, Cop26, in Glasgow, set out plans to generate the finance needed for a low-carbon global economy. The UK will provide £11.6bn over the period from 2021 to 2025 to help poor countries cut carbon and cope with the impacts of climate breakdown and will invite other developed nations to pledge similar amounts.

The principle that rich countries must provide sufficient funding to help poor countries cut their greenhouse gas emissions and adapt to the ravages of climate breakdown has underpinned the UN climate talks for more than a decade. At the Copenhagen talks in 2009, rich countries agreed that the flows of money to the poor world must reach at least $100bn by 2020. That pledge was reiterated in the Paris agreement of 2015.

But poor countries are concerned that the funding is not being provided and that the sums agreed more than 10 years ago are insufficient. Sharma quoted estimates from the OECD that $7tn a year would be needed up to 2030 to meet the emissions-cutting goals of the Paris agreement and UN development goals to alleviate poverty.

So far there is little in the way of a roadmap to show how funding can be expanded to reach those levels. Mohamed Adow, the director of Power Shift Africa, a thinktank, said: “These warm words are said by every incoming Cop president and yet the promised finance to poorer countries has not materialised. Richer countries combined are shirking their responsibility to deliver the paltry $100bn of climate funding they promised the poor countries 11 years ago and yet the UK alone has just given the go-ahead to the HS2 train line, which could cost £106bn.

“This climate finance is vital not only to build adaptation and help poor countries decarbonise their economies, it’s also essential for building trust in the negotiations, which will be vital if the UK are going to oversee a successful summit.”

For almost three decades, world governments have met every year to forge a global response to the climate emergency. Under the 1992 United Nations Framework Convention on Climate Change, every country on earth is treaty-bound to “avoid dangerous climate change”, and find ways to reduce greenhouse gas emissions globally in an equitable way. Cop stands for conference of the parties under the UNFCCC.

The UK will host Cop26 this November in Glasgow. In the Paris agreement of 2015, all governments agreed for the first time to limit global heating to no more than 2C above pre-industrial levels, and set out non-binding national targets on greenhouse gases to achieve that. However, these targets are insufficient, and if allowed to stand would lead to an estimated 3C of heating, which scientists say would spell disaster. For that reason, the Cop26 talks in Glasgow are viewed as the last chance for global cooperation on the emergency, with countries expected to come with tough new targets on emissions.

The negotiations will be led by environment ministers and civil servants, aided by UN officials. Nearly every country is expected to send a voting representative at the level of environment secretary or equivalent, and the big economies will have extensive delegations.

Each of the 196 nations on earth, bar a few failed states, is a signatory to the UNFCCC foundation treaty. The Cops, for all their flaws, are the only forum on the climate crisis in which the opinions and concerns of the poorest country carry equal weight to that of the biggest economies, such as the US and China. Agreement can only come by consensus, which gives Cop decisions global authority.

Fiona Harvey Environment correspondent

Mark Carney, the outgoing Bank governor, who will soon take on a new post as climate envoy for the UK, stressed the role of the private sector in generating funding for a low-carbon transition. Poor countries are concerned that the most vulnerable will miss out. Adow said: “For the very poorest people, much of this private-sector investment won’t reach them. It’s well known that there is more money to be made for the private sector in middle-income countries rather than those truly on the frontlines of the climate crisis.”

If the UK is to reach a successful outcome at Cop26 – Sharma said “all countries must commit to significant further cuts to carbon emissions by 2030 and to reach net zero as soon as possible” – then the support of all developing countries will be essential. Only clear pledges of finance that includes substantial public funding, to be directed at the poorest, will persuade them.

Saleemul Huq, of the International Institute for Environment and Development, said Sharma must also address how poor countries can be helped to cope with the loss and damage they are suffering from global heating. This is a vexed issue at the talks. Some countries see it as a form of compensation to the poor who are bearing the brunt of a climate crisis they did little to cause, but rich countries resist that interpretation.

Huq said: “Loss and damage clearly attributable to human-induced climate change is unaddressed – an example of how the negotiations around climate change are being made irrelevant by the reality of climate change around the world.”

Paul Bledsoe, a climate adviser in Bill Clinton’s White House and now a strategic adviser to the Progressive Policy Institute in Washington, said: “With governments offering little new money, what’s lacking is a dynamic vision for inducing the private sector to make the trillions in new investments needed to protect developing countries from crippling climate impacts while helping them transition to clean energy.

“Without such investments, developing countries ravaged by climate change will soon wonder just what they are getting from the Paris agreement, and begin to call more loudly for climate reparations.”

The first thing the UK will have to do to gain the trust of developing countries is to show that the $100bn goal is being met. In the run-up to Paris, a close ally of the French government produced a reportshowing that the world was broadly on track to meet the goal, though more was needed. This spurred further promises of funding from developed countries, giving the French government the ability to offer developing country partners reassurances and inducements.

At Paris, the French persuaded developing countries to agree that the $100bn goal should be allowed to stand until 2025. Fortunately for the UK – if not for poor countries and the planet – under that timetable the discussions on a larger goal need not conclude for another four years. Sharma made it clear that the UK would only “begin discussions” this year, which means the toughest decisions can be put off.

Even if the 2020 finance goal is met, however, and developing countries are won over, all the climate finance in the world will fail to reduce greenhouse gas emissions when vast sums are still pouring into fossil fuels.

Bob Ward, a policy director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, said: “We need to ensure that the trillions of dollars that are being invested around the world in new infrastructure, particularly in emerging-market countries such as China, India and Indonesia, is consistent with the goal of the Paris agreement. We need the world’s entire financial system to be aligned with Paris.”

Only governments can exert the pressure needed across the whole economy. Carney and Sharma face the task of not only wooing developing countries with the promise of new investment flows but also cracking down on the profit-hungry corporations that still see money to be made in ignoring the crisis.