Scaling up climate adaptation finance must be on the table at UN COP26
Dhaka October 29 2021 :
Estimates indicate that annual climate adaptation costs in developing countries could reach $300 billion in 2030 and, if mitigation targets are breached, as much as $500 billion by 2050.
The second part of UNCTAD’s Trade and Development Report 2021 published on 28 October outlines reforms of the international financial system to get more climate adaptation funds flowing to developing countries.
Released ahead of the upcoming UN COP26 climate summit, the report calls for a transformative approach to climate adaptation, with advanced economies ensuring that multilateral institutions can support developing countries to manage the pressures from a changing climate without compromising their development goals, according to UNCTAD release on October 28 2021.
Estimates indicate that annual climate adaptation costs in developing countries could reach $300 billion in 2030 and, if mitigation targets are breached, as much as $500 billion by 2050. But current funding is less than a quarter of the 2030 figure and the report warns that relying on private finance will not deliver on scale or to the countries most in need.
UNCTAD Secretary-General Rebeca Grynspan said: “Fulfilling the $100bn a year pledge for the Green Climate Fund is a must at Glasgow. But aligning ambition and action will require a concerted reform effort at the multilateral level to ensure adequate funding for developing countries to adapt to the worsening impacts of ever-increasing climate change. Climate change has no borders, so our strategy to adapt to it must be globally coordinated.”
The UNCTAD report recommends that reforms should focus on the following:
- Official Development Assistance (ODA) commitments need to be met and exceeded, to increase the proportion of additive finance designated for climate change adaptation and resilience building. If the G7 countries had met the 0.7% ODA target in 2020, an additional $155 billion would have been available to meet development goals.
- Debt relief and restructuring for developing countries should be put firmly on the climate agenda. An obvious place to start would be the debt of the V20 group of climate-vulnerable countries but the link between the climate and debt crises highlights the need for more systemic reforms to the international debt architecture.
- The multilateral development banks need additional capital to fund climate adaptation through grants and extremely concessional loans. These could be financed by a green bond and a tax à la Tobin, or through the repurposing of fossil fuel subsidies.
- Green bond markets are one way to help raise long-term financing. Yet regulatory standards lag the growth of these market and greenwashing is rife. Given the scale of the challenge, the regulatory framework for the green bond market needs to be supported by corresponding levels of financing and staffing, at national and international levels.
Making trade work for climate adaptation
The report worries that many of the reform initiatives gaining momentum in the international trading system continue to downplay the deep divisions and asymmetries that structure the contemporary global economy.
It suggests that national trade policy can at best play a complementary role in achieving climate goals while poorly designed international trading rules will hinder a green transformation.
Expanded policy space with legal tools such as waivers and peace clauses at the World Trade Organization (WTO) can better help developing countries to develop capacities to move towards climate goals.
Poorer countries face $15 billion annual loss
UNCTAD warns that the push to liberalize trade in environmental goods and services will benefit mainly exporters in developed countries and constrain fiscal space in developing countries.
The report estimates that developing and least developed countries will lose $15 billion per annum in tariff revenue if this approach is pursued.
It cautions against a Carbon Border Adjustment Mechanism (CBAM) that would only compound the damage from climate change in many developing countries by undermining their export capacities and making structural transformation more challenging.
UNCTAD says critical green technologies should be classified as public goods and their access made affordable for all.
The international community could support initiatives to transform rules governing intellectual property rights, expanding flexibilities in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) for developing countries in relation to climate-related goods and services, such as through a WTO ministerial declaration on TRIPS and climate change.
This could provide a basis for innovative mechanisms for promoting access to patent-protected critical green technologies to support adaptation and mitigation efforts.
The first part of the Trade and Development Report 2021 report was released in September.
UNCTAD supports developing countries to access the benefits of a globalized economy more fairly and effectively and equips them to deal with the potential drawbacks of greater economic integration.
It provides analysis, facilitates consensus-building and offers technical assistance. This helps countries use trade, investment, finance and technology as vehicles for inclusive and sustainable development.