Green Climate Fund for Scaling up Adaptation Finance Must, Says UNCTAD

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Calling 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, UNCTAD in its latest Trade and Development Report, 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 in Glasgow, United Kingdom, the reportcitesestimatesindicating that annual climate adaptation costs in developing countries could reach USD 300 billion in 2030 and, if mitigation targets are breached, as much as USD 500 billion by 2050. Since the current funding is less than a quarter of the 2030 figure, 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 USD100bn 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 per cent ODA target in 2020, an additional USD155 billion would have been available to meet development goals.

– Debt relief and restructuring: 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.

– Multilateral development banks: They need additional capital to fund climate adaptation through grants and extremely concessionalloans. 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: Although they are one way to help raise long-term financing, 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 correspondinglevels of financing and staffing, at national and international levels.

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MakeTrade Work for Climate Adaptation

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. The report 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.

USD15 Billion Annual Loss for Poorer Countries

UNCTAD warns that the push to liberalise trade in environmental goods and services will benefit mainly exporters in developed countries and constrain fiscal space in developing countries. It estimates that developing and least developed countries will lose USD15 billion per annum in tariff revenue if this approach is pursued.

Further, 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.