By Douglas Alencar (Federal University of Pará)
In the report of the fifth session of the Conference of the Parties (CMA.5), “Matters relating to the Standing Committee on Finance,” held under the Paris Agreement in the United Arab Emirates from November 30 to December 13, 2023, decisions were made regarding the progress and actions on climate change. Additionally, past targets were reviewed, and some actions proposed in previous conferences were reassessed. These actions are divided into topics such as mitigation, adaptation, climate finance, technology transfer, and capacity-building support. Key highlights include the outcome of the first global stocktake, adaptation targets, and the just transition work program (cma2023_16a01E).
Regarding climate finance, it was discussed that significantly larger resource volumes will be necessary for the transition to a low-carbon economy. It is estimated that countries will require between USD 5.8 and 5.9 trillion through 2030, both for mitigation and adaptation. In our view, this amount is still underestimated. Furthermore, even if this figure is accurate, there are no guarantees that developing countries will have access to these resources.
Even when a financing target is set, there are no mechanisms to ensure its fulfillment. For example, developed countries committed to mobilizing USD 100 billion annually by 2020, but this amount had not been reached by 2021. Despite the clear need for funding to support mitigation efforts and the transition to a low-carbon economy in developing countries, mechanisms that would secure the necessary resources reaching these countries are lacking.
It is estimated that developing countries will need between USD 215 and 387 billion per year for adaptation through 2030. Additionally, clean energy financing should reach USD 4.3 trillion annually by 2030, increasing to USD 5 trillion per year by 2050 to meet the target of net-zero emissions by 2050. Given that the USD 100 billion annual target was not met by 2020, it seems unrealistic to expect that developing countries will reach the estimated amounts.
According to the document, to support a fair and equitable transition in developing countries, the importance of highly concessional financing (i.e., with more favorable interest rates and terms) and non-debt-based instruments is emphasized. In this regard, we continue to stress the critique that current financial mechanisms and financial rules do not adequately enable access to credit for developing countries. Additionally, it is necessary to consider a macroeconomic model that facilitates these financings, as they are sometimes hindered by strict fiscal regulations.
In 2021, climate finance from developed countries reached USD 89.6 billion, and the Green Climate Fund received contributions from 31 countries, resulting in a nominal commitment of USD 12.833 billion for its second replenishment. Given the need for climate finance, this amount falls short of what was agreed upon and is insufficient relative to what is actually needed.
The report emphasizes the need to accelerate the implementation of climate policies but notes a lack of specific action plans and strict deadlines for countries to meet their climate finance and support targets. This lack of concrete actions and a detailed timeline is undermining confidence that developed countries genuinely intend to collaborate in the transition to a low-carbon economy.
There is also an urgent need for reforms in multilateral financial institutions, such as the World Bank, to support climate finance, particularly in the form of subsidies and concessional instruments. Without these reforms and without discussions on the fiscal rules that stifle developing countries, the transition to a low-carbon economy will be extremely difficult for these countries, and it is likely that all economic adjustments related to climate change will fall on the poorest populations.
