A group of experts has called for negotiations at the Climate Summit, which is taking place in Baku, Azerbaijan, to focus on mobilize one trillion dollars per year by 2030 for developing countries in the form of external financing. As they have indicated, this must come from all sources for the necessary investments by emerging market and developing countries outside of China to comply with the Paris Agreement.
These are the conclusions reached by the independent high-level expert group on climate finance (IHLEG) in a report they presented this Thursday at a special event with Simon StiellExecutive Secretary of the United Nations Framework Convention on Climate Change. IHLEG has supported deliberations on the climate finance agenda under successive Climate Summit presidencies since COP26.
New financial goals
One of the central points of the discussions will be the New Quantified Collective Objective (NOCC) for beyond 2025. This element of the Paris Agreement establishes a financial goal to support developing nations in their climate actions. The current one is 100,000 million dollars a year and is considered insufficient. However, there is no consensus on the exact amount or what formulas to use to increase its ambition.
According to expert estimates, a global investment in climate action of $6.3 to $6.7 trillion per year will be needed by 2030 to meet the Paris Agreement. Of these, 2.7 to 2.8 will go to advanced economies; 1.3 to 1.4 will go to China; and from 2.3 to 2.5 to emerging countries other than China. In fact, the latter will represent the 45% of investment needs average incremental gains from now to 2030.
By 2035, around $7 to $8.1 trillion a year will be needed. In this framework, advanced economies will need between 2.6 and 3.1; China, between 1.3 and 1.5; and emerging developing countries other than China, between 3.1 and 3.5. Therefore, experts have concluded that a total of one trillion dollars per year will be needed by 2030 and 1.3 trillion by 2035.
«Additional pressure»
In the text, the authors have pointed out that these figures imply “a more than four-fold increase in total climate financing and a more than six-fold increase in external financing between now and 2030” to achieve the objectives of the Paris Agreement. In this sense, they have also warned that any investment deficit before 2030 will put “additional pressure” on the following years, that is, that larger amounts of money will need to be raised in a shorter period of time to achieve the “critical” objectives.
For their part, they have called for advanced economies to double bilateral climate finance, which currently amounts to 43 billion dollars a year. They have also urged multilateral development banks (MDBs), including the World Bank, to commit to tripling their lending capacity by 2030 as part of the NOCC.
Furthermore, they have pointed out that country-led and country-owned national platforms with the participation of all stakeholders, including development financial institutions (DFIs) and the private sector, can create the basis for more decisive policies and accelerated measures to unlock investments. and mobilize the necessary financing.
On the other hand, the authors have highlighted that «it is necessary to actively seek innovative solutions» to fill the current gap in concessional financing. For example, international taxation of high-emitting sectors, which he believes has the potential to raise significant amounts of revenue that could be used to fill the climate finance gap.
In this sense, they recalled that at COP28 the Global Solidarity Tax Working Group was launched to explore new avenues for international taxation to finance climate action and sustainable development, which would include taxation of international shipping, aviation , taxes on fossil fuels and a tax on financial transactions.
Finally, they stressed that the voluntary carbon market also has the potential to generate much-needed revenue for priority elements of the transition in emerging countries other than China.
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