How does climate finance work? What does Africa need? What will negotiators be pushing for at COP28?
At the COP28 climate talks in Dubai, countless issues will be debated and discussed, but high up on the agenda of every country in Africa will be climate finance. Yamide Dagnet, director of climate justice at Open Society, spoke to our climate editor James Wan about the current state of climate finance, what's on the table and at stake at COP28, and what developing countries need to meaningfully address climate change.
See the rest of our series of explainers with experts outlining issues of importance for Africa at COP28 here.
When people talk of climate finance, what are they referring to? What is it needed for, and what is it distinct from?
Climate finance is money mobilised to support actions that will reduce carbon emissions and help communities tackle climate change impacts. This includes efforts to adapt but also deal with irreversible losses and damages. In accordance with the "common but differentiated responsibilities - respective capabilities" and the "polluter pay" principles historic polluters and richer countries (referred to as developed countries) have been asked to provide financial resources to developing countries to take these necessary actions. Climate finance can come from a range of sources, including multilateral and bilateral funding, philanthropic sources, and the private sector.
Climate finance is a very important negotiating agenda for developing countries. It is not about charity but commitments for shared prosperity. The world needs to keep emissions down to remain within 1.5C warming. Every inch of a degree of warming makes a significant difference in terms of climate effects. Financial supports are needed to power the shifts needed for a more resilient and low-carbon economy. The African continent is facing both extreme and immediate climate-related catastrophes as well as slow insidious shifts that have and will continue to lead to irreversible loss and damage. While funding to enable the continent to access to more renewable energy, tackle deforestation, and transform food systems is still inadequate, funding to support efforts to tackle climate impacts has long been deprioritised, although essential for Africa's sustainable development.
Climate finance is not the same as development finance, though it can be difficult to disaggregate given that climate change intersects closely with education, health, food, and energy sovereignty, while exacerbating poverty and inequality. Developing countries have consistently insisted that climate finance must be additional to other forms of financial support. And they have called for much more climate finance than has been forthcoming based on the various needs assessments undertaken.
How much climate finance has Africa received and in what form? And how much is needed?
African countries are estimated to need $2.8 trillion by 2030 - upwards of $250 billion per year - to meet their climate goals under their Nationally Determined Contributions (NDCs). Yet to date, they have received a tiny fraction of this figure - about 12% of the sum needed. Furthermore, in order to address climate impacts, developing countries need an estimated $200-250 billion every year by 2030 for adaptation. Yet just 24% of climate finance goes towards adaptation. Despite pledges to double adaptation finance by 2025 made at COP26 in Glasgow, there has actually been recent backsliding for adaptation finance.
In 2009, developed countries committed to deliver $100 billion per year in climate finance to developing countries by 2020. While close (according to the latest OECD report), they are only set to finally reach this target at some point in 2023. This commitment, which was supposed to be a floor, is not only meagre, but the type of funding and limited access to it has made it all problematic. Too much climate finance has come in the form of loans. This adds to African countries' existing debt distress and restrains their ability to make the necessary transformative investments backed up by incentivising policies. Many negotiators feel this is deeply unfair. Africa is barely responsible for climate change, accounting for 4% of emissions, yet is forced to disproportionately deal with its effects by taking on debt from - and making debt repayments to - the very industrialised nations that caused the problem in the first place.
A lot of climate finance is also channelled to African countries indirectly, for example through multilateral banks, NGOs, and private consultancies based in the Global North. A recent report found that less than a quarter of the UK's climate aid to Africa went to organisations based on the continent itself. When finance goes via intermediaries, these middlemen take a cut, reducing the sums that actually make it local projects. The process can also significantly slow down the process of disbursement. Finally, it should be noted that there are likely issues of double-counting when it comes to climate finance and that there have been many dubious instances of projects being counted as climate-related even if they seem to have little to do with adaptation or mitigation.
When you look at global oil and gas industry's $4 trillion profits in 2022 or the nearly $90 billion that Africa loses each year in illicit financial flows, it is clear that a greater pool of financial sources must be mobilised and aligned to support adequately the transformation towards the resilience and decarbonisation objectives of the Paris Agreement.
How can climate finance be mobilised for Africa in sufficient sums and in a way that is just and equitable?
What I highlighted shows a lack of global solidarity -especially from the Global North. The priority of developed countries has always been on mitigation - i.e. reducing emissions. There hasn't been enough progress on this front either, but even if we were to keep global heating to 1.5C - we are on track for closer to 2.5C at the moment - there would still be enormous climate impacts, as we have already been seeing at 1.2C warming.
Getting sufficient climate finance in a just manner will require not just bigger sums and pledges but fundamental changes to the global financial architecture and the correction of structural injustices. Our current global financial system was designed 80 years ago to help the North recover after WW2. The world has changed since then and the financial system must too.
Multilateral development banks like the World Bank need to adjust their modus operandi so they integrate climate into development, poverty alleviation, and their objectives. More concessional finance needs to be provided rather than loans, especially for adaptation (while loss and damage would require grants). Credit ratings agencies need to be challenged. Africa needs to ensure the exploitation of its critical mineral doesn't follow the usual extractivist logic and instead secure shared benefits throughout the value chain and for communities on the frontline.
But ultimately, we need to shift our financial structures from ones that keep much the Global South in a spiral of debt to ones that foster cooperation, justice, inclusivity, accountability, and solidarity. We need to challenge our current false mindset of fear and scarcity to one of abundance, opportunities, and shared benefits. In the 1950s, a host of creditor countries agreed to cancel Germany's debts. This group included not just the US, UK, and France but the likes of Sri Lanka, Pakistan, Cameroon, and what are today the DR Congo, Malawi, Zambia, and Zimbabwe. So the world needs to remember and show the global solidarity and creativity we need today.
What is at stake at COP28?
As things stand, trust in developed countries has been broken. Many developing countries look at the Global North and see backsliding, double standards, and unfulfilled promises.
Numerous signals are needed to rebuild trust and show solidarity. For instance, we need to see the Loss and Damage Fund operationalised and start to be capitalised. Developing countries have made many compromises to ensure progress on this important fund that was agreed to last year at COP27. For example, they have agreed on the World Bank as the interim host of the fund despite their deep reservations. Now it is the turn of developed countries to show good faith.
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The commitment to double adaptation financing, which has been moving in the wrong direction, also needs to be put back on track. Part of this will involve agreeing on how adaptation is to be measured - the global goal on adaptation is currently less tangible than, say, the 1.5C target.
At COP28, we will inevitably see a lot of declarations and a lot of pledges, proposed solutions, new partnerships, and press releases. Many of these get plenty of fanfare as they are launched but then go nowhere or the funds never flow. Which is why accountability is such an important issue in this COP: we would like to better determine what is "declaration washing" and what is a genuine commitment. Ultimately, all these pledges will need to align with the signals emerging from the collective stocktaking exercise under the Paris Agreement called "Global Stocktake" and lead for "course correction" pathway.
How hopeful are you about the outcomes from COP28?
COP28 is going to be really difficult and there will be numerous barriers to overcome, but we have to enter COP with determination and a sense of hope. Those who don't care about climate change and the notion of shared prosperity and justice, or those who are pushing against climate action, are huge optimists. We need to be stubborn optimists too. And we are grateful that many of our grantees are and are pushing for just outcomes for this COP.
Yamide Dagnet is the director for Climate Justice at Open Society. She has deep, multiregional expertise on climate justice and experience in the private, nonprofit, and public sectors. Dagnet served as the director of Climate Negotiations at the World Resources Institute in Washington, D.C., focusing on the equitable implementation of the Paris Agreement and the United Nations Framework Convention on Climate Change.
