Has mission been accomplished then? Based on the estimates for 2022 from the OECD, the rich countries seem to have finally met their promise to provide $100bn a year of climate finance to poorer nations. However, this achievement comes two years after the original 2020 deadline. Additionally, it is worth noting that the OECD’s figures are still preliminary and may be revised.
Despite the delays, these estimates are expected to ease tensions between the rich and poor countries, especially ahead of COP28, this year’s UN climate summit in Dubai. The failure to fulfill the initial pledge had become a symbol of rich-world hypocrisy, as it urged poorer countries to transition away from fossil fuels without providing the necessary financial support. Therefore, even the tentative indication that rich countries have met the goal is better than none.
In response to these estimates, developing countries are expected to take a “trust but verify” approach. According to Joe Thwaites of the National Resources Defense Council, the OECD projections and data published at the Glasgow climate summit in 2021 suggest that the $100bn pledge may have indeed been met.
However, it is important to note that much of the money has come in the form of loans from multilateral development banks (MDBs) that poorer countries will eventually have to repay. This raises concerns that borrowing to fund climate investments will make their debt burdens less sustainable, especially as these countries already contend with high food and energy prices and a strong dollar. This concern was highlighted at the Africa Climate Summit, where African nations called for a “comprehensive and systemic response” to the incipient debt crisis.
Furthermore, the rich countries have also fallen short in “unlocking” private finance, as the amount of private-sector funding mobilized for climate change adaptation remains insufficient. The global south nations need trillions of dollars to adapt to climate change, yet the efforts to “crowd in” private finance have been limited.
The hope is that the recent deal over climate pledges between America and China will bring about a breakthrough, reducing the need for fraught arguments over money at the upcoming COP event in Dubai. However, rich countries must also agree on a new pledge by 2025, as the current framework is set to expire then.
Despite the progress made in meeting the $100bn pledge, there are still disagreements over the use and allocation of climate finance and what should count as climate finance. Moreover, the timeline and contributions for a new target remain topics of contention among donor nations.
While the overdue promises mark a positive step forward, the debates and disagreements over climate finance and the response to a warmer planet show no sign of ending anytime soon. Stay informed and updated on the latest economic, finance, and market news by subscribing to Money Talks, our weekly expert analysis newsletter.
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