NEW DELHI: At a time when the rich nations continue to be defaulters in terms of their collective pledge to extend financial support to developing countries to fight the menace of climate change, a new report from the Centre for Science and Environment (CSE) on Wednesday said climate ambition in the Global South cannot be unlocked without financial system reforms. It flagged that the multilateral development banks, an important source of concessional finance, are risk-averse and provide 80% of the climate finance as loans, which worsens the debt crisis.
The report – Beyond Climate Finance – comes just before the international summit on New Global Financial Pact which will be kicked off in Paris from Thursday. Flagging the report, the New Delhi-based environmental think tank CSE said, “Climate finance is not going where it is needed the most”.
Elaborating it further, Sunita Narain, director general, CSE, said, “We know that current climate finance is inadequate. We agree that the US $100 billion a year pledged in 2009 is too little, too late. But what we do not know and rarely discuss is that whatever is being given in the name of climate finance is not concessional – in the period 2011-20, only about 5% was given as grants and the rest were loans or equity.”
Developing countries need climate finance not just to adapt themselves from the climate crisis but also for transition towards a low carbon emission growth path. But most of the amount which they received was not concessional — money given on favourable terms such as grants or low interest loans. The CSE report underlined that only 16% of total climate finance can be termed as concessional even as emerging economies and developing countries (other than China) will need US $1 trillion in external finance by 2030 to meet their respective climate action goals.
“The money that is flowing towards climate projects is heavily concentrated in North America, Western EU and East Asia (predominantly China). This is where most of the growth in clean energy investment has been concentrated as well. So, the money is not going to the poorest, most vulnerable countries,” said Avantika Goswami, programme manager, climate change, CSE.
The report pointed out that developing countries face other financial handicaps that hinder their climate ambition — such as a growing debt crisis. “Data from Debt Justice, an UK-based non-profit, shows that in 2023, 91 of the poorest countries made external debt-service payments averaging 16.3% of their government revenues,” said the CSE, noting that many low and middle-income countries pay more in annual debt servicing costs than what they would need to spend annually to achieve their goals.
The report – Beyond Climate Finance – comes just before the international summit on New Global Financial Pact which will be kicked off in Paris from Thursday. Flagging the report, the New Delhi-based environmental think tank CSE said, “Climate finance is not going where it is needed the most”.
Elaborating it further, Sunita Narain, director general, CSE, said, “We know that current climate finance is inadequate. We agree that the US $100 billion a year pledged in 2009 is too little, too late. But what we do not know and rarely discuss is that whatever is being given in the name of climate finance is not concessional – in the period 2011-20, only about 5% was given as grants and the rest were loans or equity.”
Developing countries need climate finance not just to adapt themselves from the climate crisis but also for transition towards a low carbon emission growth path. But most of the amount which they received was not concessional — money given on favourable terms such as grants or low interest loans. The CSE report underlined that only 16% of total climate finance can be termed as concessional even as emerging economies and developing countries (other than China) will need US $1 trillion in external finance by 2030 to meet their respective climate action goals.
“The money that is flowing towards climate projects is heavily concentrated in North America, Western EU and East Asia (predominantly China). This is where most of the growth in clean energy investment has been concentrated as well. So, the money is not going to the poorest, most vulnerable countries,” said Avantika Goswami, programme manager, climate change, CSE.
The report pointed out that developing countries face other financial handicaps that hinder their climate ambition — such as a growing debt crisis. “Data from Debt Justice, an UK-based non-profit, shows that in 2023, 91 of the poorest countries made external debt-service payments averaging 16.3% of their government revenues,” said the CSE, noting that many low and middle-income countries pay more in annual debt servicing costs than what they would need to spend annually to achieve their goals.