On climate finance to developing nations
Context:
The article discusses the state of economically developing countries which are amongst the most vulnerable to climate change and the need to fight against it.
Relevance:
GS03 (Conservation)
Dimensions of the Article:
- What is Climate Finance?
- Why developing countries need them?
- Suggested Measures and the Way Forward
What is Climate Finance?
- United Nations Framework Convention on Climate Change (UNFCCC) defines Climate Finance as a local, national, or transnational fund, which is sourced from public, private, or alternative streams, that mainly seeks to help mitigate climate change.
- In simpler terms, it is that fund which a country utilizes to deal with climate change by reducing emissions or adjusting to the impacts.
- Since, it is difficult for the developing countries to balance development and climate action, the developed countries contribute in the form of grants and loans.
- This flow of funds from the developed nations to developing nations are published by the Organisation for Economic Co-operation and Development (OECD).
Why Developing Countries Need Climate Finance
- Generally, developing countries have smaller domestic financial systems relative to their GDPs and face higher costs of capital which makes it difficult to balance development and climate action.
- Developing nations are exposed to the severe impacts of climate change like rising sea levels, droughts, and extreme weather events. Considering their limited resources to tackle these problems, and, since, their dependency on climate-sensitive sectors like agriculture, and other activities, they are among the hardest hit as compared to developed nations.
- According to the Intergovernmental Panel on Climate Change (IPCC), developed nations have been responsible for 57% of emissions since 1850, while the developing world continues to bear the brunt of the consequences.
- Climate finance helps developing nations to balance between economic growth and climate action.
- In 2009, Developed nations committed to providing $100 billion a year by 2020 to aid developing countries.
- While that goal has not yet been fully realized, it’s clear that external funding is crucial for countries with competing priorities.
Suggested Measures and the Way Forward
- With the COP29 approaching, the new climate finance target- New Collective Quantified Goal (NCQG) must be more ambitious, ensuring that these funds are actual disbursements, not just promises.
- For instance, India has a target to reduce emissions and boost renewable energy and generate 500 GW of power from non-fossil fuel sources and produce five million metric tonnes of green hydrogen annually, by 2030. For this ambitious dream to come true, India needs consistent and reliable funding.
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