ResearchPDF Available

Climate finance: loopholes and opportunities

Authors:

Abstract

Climate finance refers to all the funding on a national and international level that pertains to financing projects that have to do with adaptation to and mitigation of climate change. Briefly discussed below are some of the internationally available bodies and mechanisms that are put in place to collect capital for and manage climate funds. All of the mechanisms and/or bodies create opportunities, be it in favor of developing or developed countries, for use and misuse of the resources; thus, proposals for improvement of each are outlined after the description of the particular establishment. In continuation, stated are suggestions on and rationale behind usage of climate finance as compensation from polluters, mitigation of growing loss and damage, financing technological and know-how transfers – all of which on an international scale. Lastly, if the previously numbered uses are covered for on a national level, two recommendations are given on where climate funds can be allocated so as to provide for socially and environmentally sustainable solutions on a local and/or national level. To be kept in mind is that all of the described facilities and suggestions assume for oversimplification of the reference to rich (developed, or Global North, Western) countries that play the main role in providing the capital for climate funds for transfers to poor (developing, Global South) countries to adapt to or mitigate disastrous impacts of climate change, and with climate finance should be given the chance to develop in an environmentally sustainable manner.
Climate finance: loopholes and
opportunities
Simona Getova
MSc Environmental Sciences, Policy and Management
Introduction to International Environmental Policy
Fall 2014
Introduction
Climate finance refers to all the funding on a national and international level that
pertains to financing projects that have to do with adaptation to and mitigation of climate
change. Briefly discussed below are some of the internationally available bodies and
mechanisms that are put in place to collect capital for and manage climate funds. All of the
mechanisms and/or bodies create opportunities, be it in favor of developing or developed
countries, for use and misuse of the resources; thus, proposals for improvement of each are
outlined after the description of the particular establishment. In continuation, stated are
suggestions on and rationale behind usage of climate finance as compensation from
polluters, mitigation of growing loss and damage, financing technological and know-how
transfersall of which on an international scale. Lastly, if the previously numbered uses are
covered for on a national level, two recommendations are given on where climate funds can
be allocated so as to provide for socially and environmentally sustainable solutions on a
local and/or national level. To be kept in mind is that all of the described facilities and
suggestions assume for oversimplification of the reference to rich (developed, or Global
North, Western) countries that play the main role in providing the capital for climate funds
for transfers to poor (developing, Global South) countries to adapt to or mitigate disastrous
impacts of climate change, and with climate finance should be given the chance to develop
in an environmentally sustainable manner.
Climate finance establishments
To start off, the Global Environment Facility (GEF)is a body initially founded as part of
the World Bank, but as of 1994 is a separate facility where most of the global climate
financing passes through (UKYCC 2014). The majority of the funds going in the facility come
from developed countries and are supposed to be used to assist developing countries in
their struggles with impacts of climate change. On a positive note, if vested interests of
groups and individuals involved in the decisions pertaining to and transactions of GEF
finances are disregarded, the GEF can be a good basis for successful climate finance
transactions. Nevertheless, there is lack of guidelines and regulations on what does climate
finance consist of and this creates opportunities for dirty industries to receive part of the
climate funds in one way or another. Therefore, not surprisingly, it has been witnessed on
number of occasions that resources from this fund have been misused. The most recent
instance of ill usage of GEF climate money is Japan’s financing of costly new technology for
building a coal power plant in Indonesia (Bhatnagar 2014).Thus, proposal number one is
clear definition and list of what climate funds can be used for: investments in clean,
renewable projects, and no space for loopholes should be left.
The second suggestion is a good examination and cost-benefit analysis of the three
flexible mechanisms under the Kyoto Protocol (KP). The KP flexible mechanisms are Clean
Development Mechanism (CDM), Joint Implementation (JI), and emissions trading all of
which provide for ways of developing countries to slack on their own cuts of greenhouse gas
(GHG) emissions. Therefore, an extremely attentive analysis on the benefits of each project
under any of the three mechanisms should be conducted so that this does not end up being
yet another way for developed countries to cover up their pollution through creative
accounting.
Other than the above described establishments, a fairly new in the climate finance
arena is the Green Climate Fund (GCF).This is a fund for which countries, mostly rich
developed ones, pledge certain amount of financial capital that is to be used to tackle
climate change issues in developing countries. The amount promised at COP 15 in
Copenhagen has been $ 100 billion a year by 2020, but the current pledges sum up nowhere
near that. What has been pledged so far is only $ 10 billion and this amount should not even
account as a share for any year; it is merely there as an initiation of the fund itself. Although
the establishment of the GCF is a good start, way higher pledges by countries should have
been already made at the recent COP 20 in Lima where the text of next year’s COP 21 global
binding agreement was drafted. A hopeful proposal would be that pressure is put on
developed countries nationally to increase their pledges by March 2015, even though it is
my personal belief that it is highly improbable that this will be the case.
Compensation from polluters
The principle of using climate finance as reparations from polluters mainly refers to
financial transfers from Global North to Global South. The rationale behind that is that
developed countries have reached their levels of development by economic expansion
through polluting over the past hundred and fifty years and this has caused the dangerous
climate change we are facing now (Goodman 2014). Hence, climate finance should be
provided by rich countries not only to cover loss and damage of climate change that poor,
underdeveloped countries are most subjected to, but also for mitigating loss and damage
from becoming greater in these countries. If we are to prevent dangerous levels of GHGs in
the atmosphere, the less developed countries should be provided with the chance to
develop in an environmentally sustainable manner. If that is the case, it will not be only
developing countries that will gain from that, but it will be also a great step forward for both
poor and rich countries’ future generations’ chance for life on an environmentally stabilized
planet. That being said, I would invite all providers of climate finance to think of it not as
purely financial aid for poor countries, but also aid for developed countries to realize their
mitigation responsibilities and provide for their own descendants.
Everything discussed above ties in to the principle of technology transfers, again
from rich to poor countries. If undertaken properly, developed countries that are advanced
technologically and are able to develop technologies for renewables should provide for a
drop in patents and high prices of technology and transfer not only equipment, but also
know-how and best practices to underdeveloped countries.
Climate finance on a national level
Small scale farming has repeatedly shown to contribute positively to curbing climate
change in many ways. Thus, climate finance in the developing world should provide support
for small scale farmers that feed their families and the local community. Technological
advances that could improve efficiency, enhance disaster vigilance and provide easy access
to information about meteorological conditions for farmers should be put in place (Agweek
2014). Need for food security and enhanced resilience is of great importance when it comes
to negative impacts of climate change, and that is why I believe that this should be one of
the priorities for climate investment.
To finish off, there should be climate finance allocated in formal and informal
education and capacity building in both developing and developed nations. This would
provide for a much needed bottom-up approach in climate governance, as early
environmental education can indirectly curb many environmental urgencies we are facing
nowadays that could have been prevented having we had generations with more emphasis
on environmental learning from early childhood. Informal education through training by
environmental (youth) groups and NGOs, and framework support on a national level for
formal education should be financed so that children from early age are able to understand
the environmental urgency we live in now, and so that they do not keep repeating the same
mistakes that past generations have done. This would also provide for scaling up advocacy
efforts by the youth to national governments, and hopefully as a consequence, also on an
international level.
Conclusion
To conclude, if approached and used justly, climate finance can provide for solutions
to deeply rooted environmental problems. Closing the loopholes and creatively taking
advantage of the open doors for provision and allocation of climate funds can address issues
that would eventually close the gap between developing and developed countries. Finally,
transfers from Global North to Global South will not only benefit the developing countries of
the South, but the whole population of the world.
Reference list
Agweek. 2014. Divvying climate funds. Accessed Dec 21. URL:
http://www.agweek.com/event/article/id/24588/
Bhatnagar, D. 2014. Japan’s Misuse of Climate Funds For Dirty Coal Plants Exposed. Accessed Dec 21.
URL: http://www.countercurrents.org/bhatnagar081214.htm
Goodman, A., Huq, S. Nacpil, L. 2014. At Lima Talks, Nations Worst Hit by Global Warming Say
Climate Aid Isn’t Charity, But Reparations. Accessed Dec 21. URL:
http://www.democracynow.org/2014/12/8/at_lima_talks_nations_worst_hit
UK Youth Climate Coalition (UKYCC). 2014. 2014 UNFCCC Youth: 4) Cooperation and Contention.
Accessed Dec 21. URL: https://prezi.com/xmvnt-5cwg8m/2014-unfccc-youth-4-cooperation-
and-contention/
ResearchGate has not been able to resolve any citations for this publication.
Divvying climate funds
  • Agweek
Agweek. 2014. Divvying climate funds. Accessed Dec 21. URL: http://www.agweek.com/event/article/id/24588/
Japan's Misuse of Climate Funds For Dirty Coal Plants Exposed
  • D Bhatnagar
Bhatnagar, D. 2014. Japan's Misuse of Climate Funds For Dirty Coal Plants Exposed. Accessed Dec 21. URL: http://www.countercurrents.org/bhatnagar081214.htm
At Lima Talks, Nations Worst Hit by Global Warming Say Climate Aid Isn't Charity, But Reparations
  • A Goodman
  • S Huq
  • L Nacpil
Goodman, A., Huq, S. Nacpil, L. 2014. At Lima Talks, Nations Worst Hit by Global Warming Say Climate Aid Isn't Charity, But Reparations. Accessed Dec 21. URL: http://www.democracynow.org/2014/12/8/at_lima_talks_nations_worst_hit