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Paris climate summit may unleash billions in climate finance, but an elephant is still in the room

un conference room with illustration of a money tree
Image Credit: Frederic Köberl // Unsplash. Illustration by Nate Merritt. Graphic by Miquéla Thornton

At every United Nations summit, there’s an aging elephant in the room: the $100 billion pledge made by rich countries at the 2009 Copenhagen climate summit, aka COP15.

If anything, the conclusion of the Paris climate summit, which was co-led by France and Barbados over the last week, shows that to tackle the climate crisis, the global financial system needs an elephantine overhaul.

As we approach COP28 scheduled in Dubai for November, the elephant, still sitting in the room among world leaders, turns 14. And while elephants, the largest existing land animal, can live up to 70, the hopes are that this metaphorical one leaves the UN soon.

Since we’re sticking with this metaphor, its release into the wild would be the equivalent of unleashing a cache of billions of dollars to the nations hit hardest by extreme weather events fueled by climate change.

Most country representatives who attended the 2023 Paris climate summit agreed on one thing: in order to do this, multilateral development banks must be reformed.

Here’s what that means.

Multilateral development banks include the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and most recognizable, the World Bank.

These banks use money committed by member countries and loan it to borrower countries, existing to support developing countries in strengthening their economies and reducing poverty.

However, in our current age, these two goals converge at the climate crisis and smack dab in the middle of their Venn diagram is the money (or rather, lack thereof) needed to mitigate, adapt, and restore their environments.

For Ajay Banga, the new president of the World Bank, the climate-debt trap — an emerging vicious cycle where countries impacted most by extreme weather take on greater debt to deal with the damage, season after season — appears to be a top priority.

According to Banga via The Guardian, “My view is the World Bank’s vision has to evolve to say, yes, we will create a world free of poverty, but on a livable planet, meaning we tackle climate, pandemics, fragility, food insecurity, things that reduce our ability to have quality of life, and to have hope and optimism.”

That’s why talks at the Paris summit focused on deploying solutions around it, specifically around unlocking funds needed to ameliorate the burden of climate debt.

RDJ on FPC dollar bill
Illustration by Nate Merritt

Plenty of nuggets of good news emerged from this agenda, along with momentum around even bigger action. However, the summit as a whole, is not without criticism.

First, while it established timelines for other goals, it didn’t exactly establish a timeline for that elephant: the $100 billion pledge, which is now 3 years late, as past climate talks promised it would be fulfilled by 2020.

According to an OECD analysis, as of that year, the total stood at $83 billion. As French President Emmanuel Macron put it at the summit, along with a deluge of other hopes, he is “confident” that countries will finally reach the commitment this year, which is something to monitor as the world approaches COP28.

Amid talks of financing, several ideas were bounced around. One, by Macron who believes internationally taxing some of the top global greenhouse gas emitting industries including shipping and aviation, could help with the financing.

And he has a viable idea on his hands, as according to economic experts via the Associated Press, a tax on shipping alone could raise $100 billion a year.

“This is tax-free sector. And there’s no reason why it’s not taxed,” Macron said of maritime shipping which is responsible for a whopping 3% of global emissions.

However, according to the French president, the reason such a thing isn’t happening is because of opposition from the United States and China.

There are several countries on board, including Spain, Portugal, Norway, and many island countries all of which would see an increase in the cost of their imports as a result, however, “If China and the U.S. and several key European countries are not on board, then you would put a tax in place that would not have any impact,” Macron said.

​​Next week, the International Maritime Organization will meet to discuss the potential for this new shipping tax.

Despite the letdown of the lack of present momentum by key nations for a global shipping tax, other headlines of good news emerged from the summit.

For one, France committed to boosting the volume of the International Monetary Fund: a fund that has made $100 billion worth of assets — called Special Drawing Rights — available to certain vulnerable countries.

These Special Drawing Rights, or SDRs, are pulled upon in the event of emergencies, so that when a climate disaster hits, ideally, a developing nation does not have to completely empty their funds to mitigate the situation and take out loans they can’t pay back.

Easing the burden of debt, the IMF initiative falls in line with Banga’s anti-climate-debt priorities, and with France giving away 40% of its SDRs, countries that need these funds most may now have greater access.

On top of that, the IMF announced that the Resilience and Sustainability Trust, a tool enabling developing countries to fund green projects, exceeded its $35 billion funding goal and with $41 billion now available thanks to the reallocation of some SDRs and money committed by France, Japan, the United Kingdom, and the United States, it has a new goal: $60 billion.

While the SDR is not a replacement for the $100 billion pledge since it was created for emergencies, it does begin to make up for where it leaves off.

Other pockets of money will be going to the right places too.

One big piece of good news is Zambia winning long-awaited debt relief, restructuring $6.3 billion worth of debt, which could put pressure on other negotiations including those from Ghana, Sri Lanka, and Ethiopia, each currently dealing with its own climate catastrophes, from Ethiopia’s prolonged drought to Sri Lanka’s sweltering heat.

The second piece of good news is that Senegal secured $2.7 billion to help swell its renewable capacity to 40% of its energy mix by 2030. As Bloomberg reports, the financing comes from G7 nations, and will make it the first country that doesn’t already rely on coal to get funding under the program.

Modeled after the program’s implementation in South Africa, as well as similar packages currently under negotiation for coal-dependent Vietnam and Indonesia, the Senegal program could lead the way for other countries to receive funding from the seven richest nations, like Malaysia, and perhaps other projects in sub-Saharan Africa.

The last piece of good news is the World Bank’s announcement of an “investment lab” that is like the G-7 program, but instead of opening the coffers of rich countries, it looks to increase and leverage funding from the private sector’s emerging markets for renewables and energy infrastructure.

As Banga puts it, “For years, the World Bank Group, governments, and other multilateral institutions have tried – and fallen short – to mobilize meaningful private investment in emerging markets.”

“Given the urgency and scale of our intertwined challenges, we must try a new approach — and the World Bank Group has a central role to play in this effort by using its resources, convening power, and knowledge to catalyze private capital more effectively,” he added in a statement.

plant growing out of coin
Illustration by Nate Merrit

While these three announcements, as well as the momentum behind other funding measures to address that growing elephant move the dial positively, many representatives at the conference said it did not go far enough.

“What is required of us know is absolute transformation, and not reform of our institutions,” ​​Barbados Prime Minister Mia Mottley, who co-led the summit with Macron, told leaders at the summit. “My plea simply now is to step up the pace, and let's get going.”

Still, where Mottley called for nothing short of an overhaul of global climate finance, many advocates wished for more radical steps with concrete timelines for implementation.

“It’s a disappointment. The summit did not go far enough to deliver for the people who bear the brunt of climate impacts,” Walter Mawere, an advocacy coordinator for Care International in Somalia said via The Guardian.

Somalia is currently undergoing its worst drought in 40 years, leaving 8 million people, or half of the population in need of immediate assistance.

“[We see] the harshest impacts of climate change every day,” he said. “What can I tell them when I get home tomorrow? These international technical conferences must respond to this reality and hear our messages.”

While the World Bank’s move will pause debt repayments for countries struggling with climate disaster, but only on new loans, with the United Kingdom implementing a similar pause for a dozen of its lendee countries, many argue that a pause is not enough, and when it all comes down to it, money needs to be siphoned into the loss and damage fund agreed upon last year at COP27.

The World Bank’s new investment lab, which targets developing economies, may not be a replacement for loss and damage, which if it’s anything like the 2009 $100 billion climate finance pledge, it may wind up being the next baby elephant in the room summit after summit, and COP after COP — especially without taxation to foot the bill.

Still, by aiming to tackle climate and poverty at the same time, it could mobilize finance for energy transitions where it's needed most.

“Business as Usual will not work,” Mark Carney, UN Special Envoy on Climate Action and Finance and co-chair of the initiative with Banga said in a statement.

“Public institutions can and must do more to mobilize private finance,” he added, “Investment in emerging markets and developing economies must scale fourfold.”


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