Climate finance takes centre stage as COP28 approaches
A major theme of discussions leading up to COP28 has been the pressing need for global carbon pricing schemes and green fuel subsidies to offset the cost burden of climate change.
PHOTO: Clean energy investment needs by region, country in the Net Zero Scenario, 2022-2050. IEA
The COP28 climate summit in UAE is just over a month away, and targeted climate finance is at the forefront of the discussions.
Climate experts estimate that it will cost trillions to keep global warming below 1.5°C and that developing and emerging economies will bear the bulk of the cost burden. To alleviate this burden, climate experts and government authorities have called for targeted climate finance to ease the cost burden of climate transition and support all nations' climate ambitions.
As part of the EU's official position at COP28, the bloc has urged world leaders to enhance efforts to stimulate climate transition-related investments.
“Member states acknowledge the efforts by many countries and institutions to finance a host of solutions to address loss and damage from the adverse impacts of climate change. They recognise that the existing funding arrangements need to be strengthened and note the potential of the multilateral development banks and the international financial institutions in this regard,” the EU Council explained.
“When we talk about adaptation, mitigation, gender and all our thematic priorities, almost all of them cannot be progressed if we don’t have the financial instruments to be able to operationalise those plans and activities,” Nieu’s finance ministry’s director of project management & coordination unit, Felicia Talagi said.
“It is important we continue to fight for streamlining and simplifying accessibility for climate finance for us in the Pacific given that a lot of our countries have limited capabilities and technical capacity,” she added. Talagi is drafting the Pacific Small Island Developing States' official proposal for COP28.
“Ensuring the scale-up of decarbonised energy investment in emerging markets and developing economies must be a central focus of global collaboration and implies reform of our multilateral financial institutions,” the International Energy Agency (IEA) said.
Cost of climate transition
COP28 president-designate, Sultan Ahmed Al Jaber estimated in July that developing nations and emerging nations must invest a whopping $2.4 trillion/year to meet Paris Agreement targets by 2030. "To accelerate progress, we need to reform and harmonize regulatory systems, including agreeing on definitions for transition finance and disclosure of climate-related data, and unlock voluntary carbon markets,” he added.
The High Ambition Coalition, a global alliance of small island nations, developing countries in Africa and Micronesia and some EU countries, echoed this sentiment.
“The mobilization of finance for climate action must reach the trillions, and we must put in place financial system reforms to be responsive to the multitude of crises the world faces today,” the coalition wrote to the UN General Assembly in September.
Signatories to the letter were: Austria, Belgium, Denmark, Finland, France, Iceland, Ireland, the Netherlands, Spain, Vanuatu, Tuvalu, Samoa, Saint Lucia, Palau, Marshall Islands, Kenya, Federated States of Micronesia, Colombia, Barbados, Chile and New Zealand.
PHOTO: Global energy investment in clean energy and fossil fuels from 2015-2023. IEA
A similar call has been made by the shipping industry, where it is clear that massive investments are needed to facilitate a green transition in line with IMO's guidelines.
UN’s division of the Conference on Trade and Development (UNCTAD) warned that halving shipping emissions by 2050 could require an investment of approximately $1.4 trillion, while eliminating them completely is likely to require another $8-28 billion/year. It further forecasts that scaling up the production, distribution and bunkering infrastructure of carbon-neutral fuels to meet global shipping demand by 2050 could need an annual investment of $28-90 billion.
'Tax'ing times for carbon emitters
Many have suggested imposing penalties on emitters to reduce the hefty price tag of green transition for all sectors, including the shipping industry. A number of recommendations, including those from UNCTAD, that suggest economic measures such as carbon taxes or emissions trading schemes should be considered.
“Economic measures such as a levy or a carbon/GHG price can support the energy transition and incentivize investment in alternative fuels and green technologies for ships,” UNCTAD recommended.
African leaders have pushed for global carbon pricing as part of Africa’s negotiating position at COP28. They urged world leaders to invest in Africa's natural resources and come up with global carbon taxation as a new pricing mechanism at COP28.
EU Commission President Ursula von der Leyen has also stressed the need to develop a proposal for global carbon pricing and true carbon credits at COP28.
In addition, Pacific island nations demand accountability from major emitters. The “big greenhouse gas emitting countries must be held accountable and pay for the impacts climate change continues to inflict on lives in Pacific countries that are least responsible for the climate crisis,” the intergovernmental organisation Secretariat of the Pacific Regional Environment Programme (SPREP) said in a joint statement.
Subsidising the green transition
The EU has called for a global phase-out of fossil fuel subsidies that undercut support for energy transition "as soon as possible" without setting a specific date.
The International Energy Agency (IEA) has advocated redirecting fossil fuel investments into clean energy as part of its preparation for COP28 discussions.
Phasing out fossil fuel subsidies will reduce the cost burden on governments and part of the subsidies can be redirected towards reducing cost disparities associated with low- and zero-emission marine fuels and technologies, as recommended by the shipping non-profit Global Maritime Forum (GMF).
By Konica Bhatt
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