Global leaders should keep in mind that the benefits of climate financing far outweigh the costs of implementing them.
Climate events can turn on a dime, and go from bad to worse. Business as usual will only intensify global warming, and worsen floods, droughts, and heatwaves. Money and action are needed at scale to turn the tide.
Developing countries need between $5.8 trillion and $6.8 trillion by 2030 to implement their climate goals. This works out to about $1.3 trillion per year, which is the new collective quantified goal (NCQG) on climate finance set by the African Group of Negotiators (AGN) that wealthy nations – heavy polluters – must offer developing nations from next year.
The NCQG is expected to be formalised at the ongoing COP29 climate talks in Baku. It will replace the previous commitment of $100 billion per year, which was clearly a drop in the ocean.
What is in the said trillions? The three pillars of climate action: adaptation, mitigation, and loss and damage.
On adaptation, developing nations need between $215 billion and $387 billion per year to adapt to the vagaries of climate change and build resilience. And yet, they only got $28 billion in 2022 – the latest data shows – leaving behind a huge funding hole that continues to derail their development plans, especially for African nations who are paying for the environmental sins of rich nations. Studies indicate that Africa alone may need more than $100 billion per year for adaptation – the highest of any region.
On loss and damage, the economic costs of changes that people cannot adapt to in developing countries alone swing between $447 billion and $894 billion every year through 2030. This is without factoring in loss of human lives and cultural heritage, among other non-economic setbacks.
On mitigation, hundreds of billions of dollars are needed annually in investments in renewable energy resources, as well as in modernising and decarbonising grid networks, buildings, transportation and industries. All these measures serve to cap carbon emissions, and possibly bend the curve.
But it is not just about meeting climate goals; it is also a matter of welfare. Nearly 600 million people lack access to electricity in Africa, meaning increased finance and investment in the sector will reduce poverty and power growth.
A responsive, high quality NCQG
The $1.3 trillion goal is obviously not cast in stone. It is to be regularly reviewed to reflect the evolving needs of our countries.
More importantly, we expect it to be concessional finance and grants, especially for adaptation and loss and damage. Africa has contributed the least to climate change but finds itself in the eye of the crisis due to geography, historical injustices, and low investments as a result of a skewed global financial landscape.
The continent has the smallest carbon footprint, with large carbon sinks such as the Congo Basin. Its vast solar and wind power resources, alongside critical minerals and a vibrant clean-tech startup scene, uniquely position it as a frontrunner towards net zero.
The NCQG should be flexible enough to respond to the global economic shocks, high capital costs, and debt sustainability issues. It should contain predictable, time-bound, and reliable financial commitments from each of the developed countries to enable less developed countries to plan and implement their long-term strategies effectively. But it does not end with finance. Developing economies also require support around technology development and transfer, and capacity building.
The $1.3 trillion mobilisation target should have public finance at its core, preferably $800 billion per year, topped up with additional finance such as private finance.
And this brings us to the next pressing issue: global financial reforms.
Reforming the international financial institutions (IFIs) and multilateral development banks (MDBs) to address governance issues, finance terms, and develop instruments to enhance the quantum of finance consistent with the objectives of the Paris Agreement is long overdue. The financing architecture has to be tailored to the unique needs of Africa and other developing countries, and it must address pertinent fiscal challenges, in particular be more responsive to debt distress and high cost of capital.
Similarly, developed countries, led by the US, should provide climate leadership, unlock more climate funds, and work to restore trust in the multilateral system.
Global leaders at COP29 should keep in mind the fact that the socio-economic, ecological, and developmental benefits of climate financing far outweigh the costs of implementing them. Finance for climate is about the survival and thriving of humanity in a rapidly changing climate.
H.E. Dr Joyce Banda is the former president of Malawi. She is a member of the International Advisory Committee for COP29.
