Climate Crisis: The $500 Billion Question – Can Rich Nations Deliver on Their Promise to Developing Countries

An analysis has shown that climate finance of 500 billion dollars (approximately 669 trillion won) is needed annually to support climate response in developing countries.

United Nations Framework Convention on Climate Change (UNFCCC) The Standing Committee on Finance (SFC) recently released a report on climate finance that included these findings.

The UNFCCC defines climate finance as all financial resources used for greenhouse gas reduction and climate adaptation.

The initial climate finance was aimed at developing countries by developed countries. Developed countries set a target of mobilizing $100 billion (about 136 trillion won) in climate finance annually by 2020. This was barely achieved in 2022.

But the committee explains that five times more climate finance is needed.

After reviewing the report on the 23rd, the committee predicted that the cost required for climate response in developing countries would reach up to 6.9 trillion dollars (about 9,235 trillion won) by 2030.

This only covers the costs required for 98 developing countries. In reality, the committee says, more climate finance is needed than this.

The report’s findings will be discussed at the 29th Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change, to be held in Azerbaijan in November.

　

　

“A huge amount of financial resources are needed for climate response in developing countries, including mitigation and adaptation” 💸

The committee prepared the report by analyzing various data submitted by developing countries up to June 2024 in accordance with the Paris Agreement.

And we have categorized the scale of climate finance needed by developing countries by sector: ▲Greenhouse gas reduction ▲Climate adaptation ▲Minimizing and resolving loss and damage, etc.

It is estimated that about 79% of the $500 billion needed annually for climate action in developing countries will be needed to reduce greenhouse gas emissions. Of this, 60% is focused on energy improvements, including improving the power grid and expanding renewable energy facilities.

The adaptation sector is expected to require about 16%. Conservation of biodiversity, protection of water resources, and improvement of public health were discussed. The remainder was covered by areas such as climate disaster management and minimizing and resolving losses and damages.

The amount of climate finance required also varies by region.

In the case of Africa, it is estimated that up to 1.9 trillion dollars (about 2,540 trillion won) will be needed by 2030. During the same period, Asia is estimated to need up to 4.9 trillion dollars (about 6,560 trillion won).

However, the committee added that “data collection was limited” and that “a small amount of climate finance does not necessarily mean that the actual climate response needs in the region are small.”

　

$500 billion per year? Climate finance needs vary by country and region 💰

Previously, the UNFCCC estimated that up to 5.9 trillion dollars (approximately 7,900 trillion won) would be needed by 2030 to respond to climate change in developing countries. This amount is estimated for only 48 developing countries in 2021.

This is why there are voices calling for more public funding through COP29. There is also growing support for the need to attract funding from the private sector.

It is reported that there was active discussion on this matter at the interim meeting in preparation for hosting COP29 in June this year.

These are the so-called ‘New Collective Quantitative Goals (NCQG) on Climate Finance’. It includes new climate finance targets, financing methods, and beneficiary countries after 2025.

This is a key and sharp issue at COP29.

At COP29, it seems likely that some countries will demand more funding than the Commission has proposed, as further evidenced by the document released by the UNFCCC recently.

The document contains the opinions presented by each country on the climate finance targets to be discussed at COP29. As of the 10th, a total of 18 individual countries and regional groups have submitted opinions.

　

▲ The Climate Policy Initiative estimated that climate finance of $9 trillion per year would be needed by 2030 to achieve the Paris Agreement. ©Greenium

India has so far claimed it will invest about $1 trillion (KRW 1,330 trillion) annually in climate finance from the public sector.

The European Union (EU) has drawn the line, saying in writing that collecting this publicly is almost impossible. Instead, it submitted its opinion that we should create climate finance of more than $1 trillion per year, including private funds.. He also urged China, one of the world’s largest greenhouse gas emitters, to step up its efforts to finance climate change.

Arab countries have called on developed countries to pool $441 billion in climate finance annually for developing countries. The goal is to exceed $1 trillion by 2030, including private funding.

African countries have said that $6.5 trillion (about 8,700 trillion won) of climate finance must be raised by 2030. That’s $1.3 trillion (about 1,740 trillion won) per year.

The U.S. has said it needs to raise more climate finance, though it hasn’t said how much. The Financial Times recently reported that the UK also did not mention a specific scale.

The Group of 77 (G77) and China stressed that new climate finance should not be spent on developing countries’ resources. They added that developing countries’ needs should be addressed first. The exact amount of climate finance was not mentioned.

It was confirmed that Korea did not submit a separate written opinion.

　

COP29, with many variables such as war, rising prices, and the US presidential election, what is the direction? 🤔

In other words, it is reasonable to view the annual $500 billion needed for climate response in developing countries as the baseline for the new climate finance target proposed by the UN.

Harjeet Singh, director of strategy at Climate Action Network (CAN), a coalition of climate and environmental groups, said the report “fails to capture the fiscal realities that developing countries face.”

He cited the trillions of dollars needed annually to transition to renewable energy and to address the growing costs of climate change.

In fact, according to research by the Climate Policy Initiative (CPI), achieving the Paris Agreement goals will require climate finance of approximately $9 trillion per year by 2030.

Meanwhile, major foreign news agencies such as Bloomberg, AP, and Reuters pointed out that COP29 is being held in an unfavorable environment.

This is because tensions between leaders have increased due to the war between Israel and the Palestinian armed group Hamas. Inflation (rising prices) may also have an impact as major countries have reduced their budgets.

The US presidential election to be held in November is also a major variable. The Associated Press expressed concern that “COP29 will begin immediately after the US presidential election,” and that “(the election results) could divert attention from the key tasks facing COP29.”