AS COP26 TAKES ON FINANCE, THE WORLD HAGGLES OVER CLIMATE FUNDING

 The Washington Post 3 November 2021 - by Tik Root

© Yui Mok/Pool/AFP/Getty Images Britain's Prince William speaks on stage during the inaugural Earthshot Prize awards ceremony in London on Oct, 17, 2021. The Earthshot Prize gives five inaugural winners $1.4 million to pursue solutions to the world's greatest environmental problems.Wednesday’s COP26 theme is finance, with delegations, nonprofits and other stakeholders gathering to discuss — and haggle over — the economics of climate action. The intricacies of climate finance could prove crucial both to implementing solutions and avoiding disaster.“We’re in a very new place where climate risk is seen as a financial risk,” said Mindy Lubber, the chief executive and president of the sustainability nonprofit organization Ceres. “Climate change is as much an existential threat to the economy as it is to the planet and our people.”What are the central problems under this theme?

The fundamental goal of climate finance is to ensure there’s enough money, in the right places, to enable a transition to a lower-emissions future. Related problems — and opportunities — can be broken down into a few different realms.

A common theme at the COP26 climate summit will be the gap between developed and developing countries, and climate finance is no exception. “Emerging markets and developing countries is where the future of climate action is,” said Amar Bhattacharya, a senior fellow at the Brookings Institution. But they have to be able to afford to implement the changes. “Huge investment is required,” he said.

Meeting that need is rarely easy or simple. Over a decade ago, for instance, developed countries pledged to commit “USD 100 billion per year by 2020 to address the needs of developing countries.” As of that deadline, though, the world had fallen about $20 billion shy of the target.

The other major area where climate finance comes into play is around risk reduction. Developing the innovative technology needed to fight climate change can be fraught with economic peril — the path from idea to marketplace is sometimes referred to as the “valley of death.” Given the pitfalls, it can be difficult, if not impossible, for would-be entrepreneurs to access capital.

Experts say financing helps lower the risks and spur investment. “The solution set is invention and innovation together,” said Bhattacharya. “Finance is a means to support it.”

Another aspect of the climate finance movement is divestment, or shifting investments away from less climate-friendly practices, such as fossil fuel production or consumption. While divestment won’t necessarily be a core part of COP26 negotiations, it’s a topic that may come up in side events, announcements and other forums around the main talks.

What are potential solutions?

In short, getting more money to developing countries is the primary finance focus for COP26. Even if the $100 billion goal was met, a recent United Nations report said that amount “needs to be seen as a floor and not as a ceiling.” The means developed countries not only delivering on current pledges, but making even higher commitments.

The report urges the international community, from multilateral vehicles such as the Green Climate Fund to development banks, to “explore all options” to help fund the climate transition in developing countries. “The next five years are crucial,” it said, “starting with 2021.”

Grant, loan and incubation programs can be helpful in reducing risk on the innovation front. Last year, Prince William and British TV naturalist David Attenborough launched the Earthshot competition to find solutions to environmental problems. They announced the first five winners in the run-up to COP26. The projects ranged from a team farming coral in the Bahamas to an Indian outfit turning agricultural waste into fuel, and each won 1 million pounds.

The private sector must also play a role, experts say. “Governments can’t get to this alone. Neither can the private sector,” said Lubber. “There has to be public-private partnerships.”

There are other, more nuanced aspects of climate finance, too.

Conceiving viable projects and navigating the web of funding mechanisms can be a massive and technical undertaking, said Ben Bartle, a project director with RMI’s Climate Finance Access Network (CFAN). That makes capacity-building in developing countries critically important to closing the climate finance gap between the global north and south, he said.

The CFAN program trains advisers that embed with developing countries to help governments navigate those project and finance hurdles. It is set to deploy the first advisers to eight Pacific nations this year and aims to have 50 total across the Pacific, the Caribbean and Africa by the end of 2023.

“We’re trying to change the model of how climate funding is accessed,” said Bartle.

What solutions are already underway in the U. S.?

At last month’s U.N. General Assembly, President Biden vowed to double the amount the United States provides to developing countries to $11.4 billion annually. Although the move will require congressional approval, Biden hailed the step, saying it “will make the United States a leader in public climate finance.”

Domestically, the United States is also relying on Congress for many of its climate finance programs. The bipartisan infrastructure plan working its way through Congress contains tens of billions of dollars for initiatives such as improving the electric grid, expanding public transport and installing electric-vehicle charging stations. The $1.75 trillion reconciliation package also being considered would mark the biggest climate investment in U.S. history.

One climate finance source already in action is the Energy Department’s loan guarantee program for energy innovation. It is designed based on the idea that providing guarantees to renewable, nuclear or other pioneering energy projects can be a catalyst for those technologies and sectors.

What developments can we expect out of COP26?

From governmental funding commitments to corporate climate initiatives, both the public and private sectors should be releasing a flurry of announcements on finance day.

Bhattacharya expects there to be a lot of discourse around the $100 billion goal that developed countries missed. “It’s totemic,” he said, adding that there also needs to be a focus on how far countries are willing to extend their pledges. “We need the $100 billion and need to, indeed, go beyond the $100 billion.”

Lubber, with Ceres, said she would ideally like to see a move toward accountability mechanisms for not delivering on pledges. “There are not penalties, and I think there should be. It’s something that is being discussed,” she said. Regardless, she says finance day could be a telling moment for the direction of climate finance, and ultimately the planet.

“The risk financially is extraordinary,” said Lubber, “and the opportunities are extraordinary.”