By Sharon Kimathi, Energy and ESG Editor, Reuters Digital
I’ve got good news and bad news for developing nations’ climate finance needs this week. First, the good news, as recent data has shown that developed nations may have achieved their promise of $100 billion to help developing countries cope with climate change in 2022. As for the bad news, well, it turns out that the figure is far below developing nations’ actual climate investment needs.
The Organisation for Economic Co-operation and Development (OECD) said that developed nations may have achieved their overdue promise of $100 billion to help poorer countries cope with climate change last year.
In 2009, developed countries promised that from 2020 they would transfer $100 billion a year to poorer nations hit by worsening climate change-fuelled disasters. Rich countries had previously signaled the target would not be met until 2023.
The goal is politically symbolic and failure to meet it has stoked mistrust in past climate talks, hampering other deals to tackle climate change as poorer nations argue the world’s economic powers are leaving them in the lurch.
The data come two weeks ahead of the United Nations’ COP28 climate summit, which starts in Dubai on Nov. 30.
Here are some other features that have caught my attention today:
Climate activists protest demanding that the World Bank stop fossil fuel financing on the first day of the annual meeting of the IMF and the World Bank. REUTERS/Susana Vera
$1 trillion per year
Finance is a sore point in U.N. climate talks, as developing economies say they cannot adapt to extreme weather or invest in cleaner energy without more support from the rich nations whose historical fossil fuel burning caused climate change.
“Based on preliminary and as yet unverified data, the goal looks likely to have already been met as of 2022,” said Mathias Cormann, Secretary-General of the OECD.
The $100 billion is far below poor nations’ actual climate investment needs, which by 2025 could total $1 trillion per year, the OECD said.
The OECD confirmed the target was not met in 2021. That year, wealthy nations provided $89.6 billion, an 8% increase from 2020 levels. Most of the 2021 money – $73 billion – was public finance and, of this, more than two thirds was loans.
This comes as a report by the London-based Centre for Disaster Protection said that the poorest and most vulnerable countries do not benefit enough from pre-arranged financing to cope with disasters and are most exposed to the losses and damage caused by climate change.
Pre-arranged financing (PAF) represents money borrowed by the issuer from capital markets, in the form of contingent credit, regional risk pools and catastrophe bonds, to be used if a specific event has taken place.
While PAF has grown in the last two years as a tool to address weather related losses, the center warned in a report that it forms only a small portion of international crisis financing and is unaffordable for highly-indebted countries.
Shouldering the fallout
“Many of the countries and communities bearing the brunt of impacts from climate change have done the least to cause it, and typically lack the technical and financial capacity to address loss and damage”, the report said.
It added that between 2017 and 2021 only $200.8 million, equivalent to 3.7% of international development financing for PAF, reached low-income countries.
Low-income nations’ access to PAF is complicated by difficulties in repaying the debt accumulated. The center has assessed that about 60% of beneficiaries of the Debt Sustainability Framework for Low-Income Countries, introduced by the International Monetary Fund and the World Bank, are at high risk of debt distress or already in debt distress.
Keep scrolling on for today’s ESG Lens from Reuters Breakingviews as they explore a recent study by British economists that show how developing countries need to invest around $2.4 trillion a year in order to decarbonise their economies by 2030.
Economists believe about $1.4 trillion of this can come from emerging economies themselves. But the remaining $1 trillion will have to be financed by external sources.
Mohamud Mohamed Adem stands in front of his home destroyed by floods, following heavy rains that led the Juba river to overflow. Jubaland State of Somalia. REUTERS/Feisal Omar
A quarter of Somalia’s population is forecast to face “crisis-level hunger or worse” this year due to drought and floods caused by climate change, the World Food Programme (WFP) said.
Gaza humanitarian crisis: The boy keeps asking for his parents, and he wants to get up and walk, but his parents are dead and his legs have been amputated. That is the plight of Ahmed Shabat, a four-year-old boy whose parents were killed when their home in the town of Beit Hanoun in the northeastern corner of the Gaza Strip was hit by an Israeli air strike. Abu Amsha said the force of the blast threw the boy into a neighboring house and killed 17 family members in total. The only other survivor was Ahmed’s two-year-old brother. Click here for the full Reuters feature.
While Hollywood celebrates the end of strikes by writers and actors, the multibillion-dollar economic toll on everyone from crew members to caterers will take months to tally. Striking writers and actors slashed spending, burned through savings and piled up debt to survive. Dry cleaners and other service industries laid off staff, while prop houses sold inventory or shuttered. Click here for a Reuters feature on the human and financial impact of the U.S. entertainment industry’s recent struggles.
Women in the European Union get paid 13% less than men doing the same job on average despite equal pay being part of EU law, the European Commission said.
Climate change harms Americans physically, mentally and financially, often hitting those who have done the least to cause it, including Black people facing floods in the South and minorities enduring searing heat in cities, a federal report said. Read more on the story by Reuters environment journalist Timothy Gardner.
Wider Image: Click here for an image-driven Reuters feature on how environmental changes impact Japan’s cormorant fishing legacy, making the fish ever more scarce and small, endangering the lifeline of the fishermen and their flocks.
Breakingviews: Economists including Professor Nicholas Stern, the British author of a landmark 2006 study on climate change economics, have been crunching the numbers. They calculate that by 2030, developing countries need to invest around $2.4 trillion a year in order to decarbonise their economies.
The problem is that the developed world has consistently missed targets to channel climate cash to less developed counterparts. The latest, a fund to pay for current damage stemming from climate change agreed at last year’s COP27 summit in Egypt, currently only requires rich-world countries to fill it on a voluntary basis. Read more about climate funding here from Reuters Breakingviews columnist George Hay.
Quote of the Day
“High interest rates are a massive blocker to unlocking climate finance, as the increased cost of finance has to be paid for, at a time when the consumer and governments are least able to support new decarbonisation investment.”
Adrian Scholtz, partner and global head of energy deals at multinational professional services firm, KPMG
River turtles sit in a plastic basin before being released into a river in the Peruvian Amazon, in San Jose de Lupuna, Peru. REUTERS/Alfredo Galarza
Today’s spotlight focuses on environmental challenges and the implementation of proactive measures to preserve, restore, or improve the natural environment in Peru and India.
In the Peruvian Amazon, an extended heat wave and drought have shortened the incubation period for thousands of turtle hatchlings released into the river by biologists as part of a local environmental program.
Around 3,200 yellow-spotted Amazon River turtles, known locally as taricayas, were freed as part of a plan to repopulate the species, which is threatened by hunting.
The tiny hatchlings were carefully carried in containers up to the shores of the river, then released with the help of local children. The baby turtles quickly scurried into the water.
“We’ve experienced a drought this year a little on the strong side; that’s why hatching has been a bit higher than in previous years since the sun is so strong,” said biologist Zabryna Pipa Perea of the Amarumayu Movement, a private initiative dedicated to protecting the Amazon’s native species.
Normally, their incubation period lasts from 60 to 72 days, which this year was cut to around 45 days, according to Pipa. “This is due to the high temperature and greater drought in the area,” she said.
People and vehicles are seen on a road amidst the morning smog in New Delhi, India. REUTERS/Anushree Fadnavis
Over in India, scientists plan to seed clouds for the first time to trigger heavy rain in some areas of New Delhi, hoping this will be enough to tackle the smog gripping the world’s most polluted capital for a week, the project’s head said.
Air quality dips in Delhi ahead of winter every year, when cold air traps pollutants from a variety of sources including vehicles, industries, construction dust, and agricultural waste burning.
Scientists expect some cloud cover over the city around Nov. 20 and are hoping this will be large enough – and with high enough moisture content – to trigger heavy rain via seeding with salts, said Manindra Agrawal, a scientist at the Indian Institute of Technology at Kanpur, who is leading the trial.
The project, estimated to cost 10 million rupees ($120,000) for 100 square kilometers (38.6 square miles), would involve spraying into clouds a mix of salts that include silver iodine, Agrawal said.
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