COP27: Climate Finance Needs More Transparency

During the 27th World Climate Conference (COP27) in Egypt, which is now going on for two weeks, climate finance is once again a leading subject.

At the 21st World Climate Conference (COP21) held in Paris in 2015, all countries concurred for the very first time to limit climate change with their reduction targets for greenhouse gases. Before that, just the developed nations had to decrease greenhouse gases– countries such as China, India, and South Korea were not obligated to do so.

In order to encourage developing and emerging nations to establish their reduction targets, industrialized nations had already vowed generous and continuing funds before 2015. Support for climate protection and adaptation was to reach 100 billion U.S. dollars each year from 2020. It was a core promise that made the Paris Climate Agreement possible.

During the 27th World Climate Conference (COP27) in Egypt, which is now going on for two weeks, climate finance is once again a leading subject. The reality that the funds have yet to stream as nicely as promised has caused a tense atmosphere in the run-up to the conference.

According to the OECD, in 2020, the highest level to date was reached with 82 billion U.S. dollars. Civil society has been slammed for some time that the payments reported by the donor countries are lagging behind the targets. Meanwhile, it has become progressively clear how much reality and promises have deviated.

Big funding gaps

It is necessary to understand that it is costly and challenging to accurately record international climate financing: For one thing, the term needs to be plainly specified. For another, donor nations identify what they determine as climate-relevant projects.

In research just recently published in Nature Climate Change, two colleagues from ETH Zurich and the University of St. Gallen and I have taken a more detailed look at the reported climate finance flows of the last 20 years. Using artificial intelligence, we examined 2.7 million bilateral development projects based on their description texts and categorize them according to their climate relevance.

The outcome: for the post-Paris period (2016– 2019), we identified around 40 percent less climate funding than officially conveyed by the donors. We conclude that donor nations are paying little less than pledged. However, they also recognize climate-relevant projects that have little to do with climate– and vice versa: projects with clear climate relevance are not counted.

The propensity towards unfinished promises is troublesome for the countries that depend on this assistance; for the conference, because skepticism concerning the matter directly affects negotiations; and for everybody due to the fact that the climate remains to heat up.

Required: A confidence-building roadmap

Whether COP27 will certainly go down in the history books as the promised “conference of implementation” relies on whether the states can agree on an ambitious funding agenda. However, there is now far more at risk than the promise of yesteryear. The following aspects are central in my sight:

Fulfilling the 100-billion-dollar target: Cooperation can only succeed if trust exists. The developed countries must show that they agree to maintain their promises. This requires that they give the absent funds and ensure a typical understanding and trust. This is where our analysis tool, Climate Finance BERT, comes in. By permitting all nations in principle, to review climate finance according to consistent criteria, creates transparency and enables discussion at eye level.

Laying the foundation for a brand-new financing target: An usual understanding and more trust can also assist in the existing expert dialogs for a brand-new and greater funding target from 2025. This still needs to be bargained at COP27, yet a clear commitment by the developed countries is required. The target needs to also include sub-targets for grants and adaptation finance, so poorer countries can benefit much more from the investments.

Aiding to handle climate damage: Developing countries require support for the damages triggered by climate change. Until now, donor nations had declined to explicitly finance the management of climate damage– just emission reduction and adaptation (the 100-billion-dollar target) were supported. This can now change. For the first time, notable donor nations like the U.S. are signaling support; and the concern has actually been included in the negotiations.

COP27

All countries need to decrease emissions: If the industrialized countries carry on the above points, the rising economies are likely to move also. The Emissions Gap Report reveals that China already discharges two times as much greenhouse gas as the U.S. If all countries understood their existing reduction targets, international exhausts would certainly fall by 5 to 10 percent by 2030. Nonetheless, at the very least 30 percent would certainly be required. This will certainly only be feasible with significant contributions from the emerging countries: by 2030, financial investment in exhausts reduction need to a minimum of quadruple in industrialized nations and triple in developing countries.

If COP27 succeeds in determining reputable paths for delivering the required financial investments, it would certainly be an important confidence-building success. We really hope that our research study will make climate finance reporting much more transparent– this would benefit the arrangements on funding targets.

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