To mitigate environmental risks , we have to make costly adaptations. Nations need funds for this, making climate finance a vital resource
Every nation and individual is exposed to the risks of climate change and we have to make several adaptations to mitigate them. These largescale measures are costly. So nations need funds to implement them, making climate finance a vital necessity. Such a resource pool seeks to raise local, national or trans-national funds drawn from public, private and alternative sources. Recognising that it may be out of scope and capacity of several countries to initiate climate change measures, the Kyoto Protocol and the Paris Agreement call for financial help from parties with more resources to those that are less endowed and vulnerable.
In accordance with the principle of “common but differentiated responsibility and respective capabilities” set out in the convention, developed countries are to provide financial resources to assist developing nations in implementing the objectives of the UNFCCC (United Nations Framework Convention on Climate Change). The pact reaffirms the obligations of developed countries while encouraging voluntary contributions by parties.
Developed country parties should also continue to take the lead in mobilising climate finance from various sources, instruments and channels, through a variety of actions, including supporting country-driven strategies and taking into account the needs and priorities of developing country parties. Such mobilisation of climate finance should represent a progression beyond previous efforts. Overall, efforts under the Paris Agreement are guided by its aim of making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
Setting up of funds: A financial mechanism, which also serves the Kyoto Protocol and the Paris Agreement, was set up to provide financial resources to developing countries by entrusting one or more existing international entities. Since the Convention came into existence in 1994, the Global Environment Facility (GEF) has served as an operating entity of the financial mechanism. At the Conference of Parties (COP) 16, in 2010, parties established the Green Climate Fund (GCF) and in 2011 also designated it as an operating entity of the financial mechanism.
This module is accountable to the COP, which decides on its policies, programme priorities and eligibility criteria for funding. In addition, three more special funds have been established — the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF), both managed by the GEF; and the Adaptation Fund (AF) established under the Kyoto Protocol in 2001. At the Paris Climate Change Conference in 2015, it was agreed that the operating entities of GCD, GEF, SCCF and the LDCF shall serve the Paris Agreement.
A Standing Committee on Finance (SCF) was established at COP 16 to assist it in exercising its functions in relation to the financial mechanism of the Convention. Currently, the SCF has four specific functions: assisting the COP in improving coherence and coordination in the delivery of climate change financing; assisting it in rationalisation of the financial mechanism of the UNFCCC; supporting it in the mobilisation of resources for climate financing; and supporting it in reporting and verification of support provided to developing country parties.
The committee is also tasked with organising an annual forum on climate finance, provide the COP with draft guidance for operating entities, provide expert inputs during periodic reviews of the mechanism and prepare a biennial assessment and overview of climate finance flows. Furthermore, the SCF is designed to improve linkages and promote coordination with climate finance related actors and initiatives both within and outside the Convention. At the Paris Conference in 2015, it was decided that the SCF shall also serve the Paris Agreement.
In addition, the long-term finance process is aimed at progressing on the mobilisation and scaling up of climate finance of resources originating from a wide variety of sources. The COP decided on the following activities until 2020: organisation by the secretariat of annual in-session workshops; developed countries providing, on a biennial basis, information on strategies and approaches for scaling up climate finance and convening of biennial high-level ministerial dialogue on climate finance.Through the Cancun Agreements in 2010, developed countries committed, in the context of meaningful mitigation actions and transparency on implementation, to a goal of mobilising jointly $100 billion per year by 2020 to address the needs of developing countries.
When adopting the Paris Agreement, parties confirmed this goal, called for a concrete roadmap to achieve the goal by 2020 and agreed that prior to 2025, the COP shall set a new collective quantified goal of over $100 billion per year.
India’s position on climate finance: Since India is quite susceptible to the impacts of climate change, it is a huge challenge for us. Given its unique and distinct topography, variations in climate remain a steady feature and any changes in climate are likely to worsen the existing pressure on various sectors. With a growing Greenhouse Gas (GHG) emission profile, India is currently the third-largest discharger of GHGs globally, after China and the USA. However, according to a 2014 World Bank report, India’s per capita GHG emanations remain extremely low at 1.7 metric tonnes (MT) of carbon dioxide (CO2) per capita, as compared to China at 6.2 MT and USA at 17.6 MT.
Moreover, according to the Press Information Bureau 2009(b) report on emissions, it has been estimated that even by 2031, India’s per capita GHG emissions (likely to remain 4 MT of CO2 per capita) will continue to be lower than the global per capita GHG emissions in 2005 (4.22 MT of CO2 per capita).
Climate finance entered the dictionary of the official establishment with the release of the Economic Survey 2011-12, which contained for the first time a chapter on Sustainable Development and Climate Change and a dedicated section on Climate Change Finance and provided an overview of various domestic and international sources of finance, as well as private finance sources. An estimated Rs 230,000 crore was provided as the amount needed to fulfil the mission objectives under the National Action Plan on Climate Change (NAPCC) in the subsequent Economic Survey of 2012-13.
The Government responded by setting up the Climate Change Finance Unit (CCFU) in September 2011. In spite of the creation of the CCFU, there is no formal coordination mechanism around climate finance. As a result multiple processes for financing thrive within the country including the Centre, States, private sector and civil society actors, all playing significant roles in low emission and climate-resilient development.
Due to the well-defined national climate policy, climate-related finance is available through a variety of domestic, international, public and private sources. Domestic resources in India can be broadly divided into public climate finance and private climate finance. Public finance comprises budgetary support, taxes, subsidies and other market mechanisms. Private finance usually comprises clean development mechanism finance, debt instruments, equity finance and partial risk guarantee facilities. To realise the potential for greater and more effective action on climate change, given the diverse public and private actors engaged in climate finance at the national level, there are lessons to be learnt by India on how to engage with the international climate finance architecture, and the emerging GCF in particular. India can develop a long-term, coherent strategy around climate finance, by interfacing ongoing efforts on mitigation and adaptation with the emerging financial arrangements.
It would also be worthwhile to think of ways in which India could develop new, transformative ideas with a high mitigation or adaptation potential and use GCF financing to unlock a range of domestic financing and implementation capacity around such efforts. India needs to debate on the “readiness” for climate finance.
It has to identify and link existing pipelines of projects to the financial channels that have emerged, both domestically and through international flows. It has to create a new pipeline of domestically-owned projects that could seek international finance for their transformative potential.
To achieve this, several Government departments will need to work closely together not just on climate policy issues but also on operational questions around how to prioritise action.
(The writer is Assistant Professor, Amity University)
