Source: This post is created based on the article “We need innovative ways to fill the climate funding gap”, published in Live mint on 30th May 2023.
Syllabus Topic: GS Paper 3, Climate Change
Context: Rising carbon emissions and biodiversity losses is posing a grave threat to mankind, especially vulnerable sections. Handling it requires an innovative financing solution.
Financing of climate solutions is must for achieving SDG targets. SDG 13 (which covers climate action) calls upon states to take urgent action to combat climate change. SDG 15.5 calls for taking urgent action to reduce the degradation of natural habitats.
What are the initiatives launched for financing solutions for climate change?
At the 27th Conference of Parties (CoP17), a Loss and Damage (L&D) Fund was proposed to assist developing countries particularly vulnerable to the adverse effects of climate change.
It was especially established to assist developing countries that have been harmed and are ‘particularly vulnerable’ to the adverse effects of climate change.
15th Conference of Parties to Convention on Biodiversity resulted in a global commitment to raise international financial flows from developed to developing countries to at least $30 billion per year by 2030.
Some countries also committed to mobilise at least $200 billion every year from public and private sources for biodiversity related funding by 2030.
The G20 Bali Leaders’ declaration called for unlocking innovative sources of financing to support Sustainable Development Goals (SDGs).
A number of funds have been created over the last 30 years: like the Green Climate Fund, Adaptation Fund, and Special Climate Change Fund. However, there is a significant gap between requirements and commitments.
Many proposals have been moved to create Global Carbon Tax, Digital Services Tax, Property Tax, Airplane Tax, cesses on carbon emissions, biodiversity, climate resilience and climate adaptation, Financial Transactions Tax etc.
However, as usual, there is very little hope, due to past failures of rich countries in meeting commitments.
Role of private investment in climate financing
Private capital financing can play a significant role in plugging the gaps for global sustainable financing, particularly in emerging markets and developing economies.
Therefore, creation of an ecosystem that incentivises the creation of financial assets for emission reduction and biodiversity conservation, is necessary.
Private capital financing has increased over the last decade but needs to be scaled up significantly to meet agreed targets.