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Cop28 in Dubai, climate finance is at the top of the agenda

Climate finance is key to making the transition fair and just

Climate science explains what policies are needed to address the climate crisis, sets targets to cut emissions, assigns a date to these targets, and gives an assessment of how the mix of solutions to be used might be composed. In short, it gives us the recipe for transition. But making this transition fair and equitable – so that no one will be left behind – will be the choice of climate finance policy.

For this reason, the issue of the resources to be allocated for policies of mitigation and, above all, adaptation to climate change is not only at the top of the agenda of the COP28 in Dubai: it is also one of the most difficult and divisive dossiers, along with that on subsidies and phase out of fossils. The most important points that will be discussed at the summit starting on November 30 are 2: the mechanism for losses and damages (Loss & Damage) and the new post-2025 climate finance target.

Arm Wrestle on Leak and Damage Mechanism

The Cop28 must reach, among others, a clear goal: to make immediately operational the Mechanism for Losses and Damages. This is a system set up last year, during the COP27 in Egypt, which should channel to the countries most vulnerable to the climate crisis financial resources made available by the richest countries.

Resources that should be used to prevent the multiplication of the damage caused by the climate crisis from condemning these countries, all with weak or very fragile economies and responsible for only a minimal part of global emissions, especially when calculated taking into account historical responsibilities.

Where are we and what are the prospects? Negotiations on the technical details of the operation of the Mechanism continued throughout 2023, but with little result. Only one knot is now loose, even if temporarily: the governance of the system losses and damages.

It will be controlled by the World Bank, a multilateral institution but strongly influenced by the United States and the West. But only for 4 years, then he will argue. Why? The agreement is a compromise between the advanced economies and the countries of the global South (led by China), with the latter preferring to place the mechanism under the aegis of the UN Framework Convention on Climate Change (UNFCCC)reducing the room for maneuver of Washington & co.

read also Climate negotiations, EU priorities at COP28

Two crucial points remain on the table at COP28 in Dubai: who must put the resources, and how much finance for the climate must be mobilized through the Mechanism. Points on which, for now, an agreement seems rather distant.

The wealthier countries would like to see a broad range of donor countries, including Beijing (now the second largest economy in the world, even though it is still listed in the UNFCCC classification – 1992 – as a developing country) and the major oil producers, although formally they are still developing countries. On the other side of the fence, the positions are based on the historical responsibility of the West in creating the climate crisis and we would like a much smaller donor perimeter. At most, countries that have sufficient economic resources will be able to contribute, but only on a voluntary basis (a point that China holds dear).

On what volume of climate finance to mobilize, then, the preliminary negotiations of the past months have not even reached a rough indication. Developing countries, in September, demanded at least $100 billion a year by 2030. A figure derived from the report of the UN Independent High-Level Expert Group on Climate Finance estimated the amount needed at 150-300 billion per year by the end of the decade. The rich countries, however, do not want to indicate an amount, not even a non-binding one.

Finance for the post-2025 climate

The second dossier on the climate summit table in Dubai concerns the new climate finance target to be set for the post-2025 period. The issue is complicated both in terms of the amount and the mode of delivery. Both issues have proved problematic with the current target of USD 100 billion per year by 2020 set in 2009 at COP15 in Copenhagen.

This target was probably only reached in 2022, with 2 years of delay, according to OECD estimates. And it continues to be characterized by a large share of financing in the form of loans rather than subsidies, with the risk of aggravating the budgets of the most fragile countries and triggering a kind of “climate debt trap”. In addition, much of the money goes into mitigation actions, less for adaptation (which is however priority for beneficiaries). At COP26, donor countries pledged to double their share of finance for adaptation.

The options on the table and the negotiating positions on this dossier are very varied. The EU wants to discuss a target that starts from the threshold of $ 100 billion per year but has not indicated a maximum target. The group of African countries would like to see the contribution of the rich countries become binding and flexible, in other words, to be reviewed as climate science advances and according to the growing needs of the beneficiary countries. A point, the latter, which finds broad consensus among the countries of the global South.

It is a global South which would like to specify the number of donors and restrict it exclusively to developed countries. While the latter, as for the Loss & Damage Mechanism, press to expand it to those who have the financial means to contribute. The developing and least developed countries also propose different options to ensure that a fixed or predominant share of resources is mobilised in the form of grants and earmarked for adaptation. The recent UN report on the gap in adaptation policies, on the other hand, calculated that resources in this area must grow 10-18 times and reach almost $400 billion a year by 2030.

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