Is there a demand for a fresh round of climate financing on a global scale?
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In the realm of Carbon & Climate and Policy & Finance, the creation of a new climate fund has sparked controversy. This controversy arises primarily due to the underwhelming contributions and effectiveness of existing multilateral climate funds, casting doubts on the utility and impact of adding new funds rather than improving current ones.
At the recent COP29 conference, the Adaptation Fund fell well short of its US$300 million funding target, a stark reminder of the challenges faced by these funds. The controversy is further compounded by political disputes, shifting government priorities, and skepticism or opposition to climate policies in some major economies.
One key concern is fragmentation and inefficiency. Multiple overlapping funds can fragment the flow of climate finance, making coordination difficult and reducing overall efficiency. Stakeholders worry that a new fund could duplicate efforts without increasing total resources or improving outcomes.
Another issue is the underfunding of existing funds. Many established multilateral climate funds face chronic underfunding, with donors not meeting pledges, limiting their ability to deliver on critical climate mitigation and adaptation projects. Creating a new fund without addressing these systemic funding shortfalls risks further dispersing scarce resources.
Critics argue that the focus should be on making existing funds more transparent, accessible, and accountable, rather than proliferating funds that do not guarantee meaningful additional finance or improved climate outcomes. The overhead of the Special Climate Change Fund, for instance, represented more than half of its project commitments in 2019-21.
Meanwhile, some countries are tightening their purse strings. Over the past year, wealthy economies like Belgium, Canada, Finland, France, Germany, the Netherlands, Sweden, Switzerland, the United Kingdom, and the European Union have been cutting back on their climate finance commitments. This trend is reflected in the US's commitment of a measly US$17.5 million to the Fund for Responding to Loss and Damage (FRLD).
Despite these challenges, some countries are still pushing for new funds. Brazil, for example, has announced plans to launch a US$125 billion fund for the protection of tropical forests. This fund is a key element of Brazil's plan for the success of the next United Nations Climate Change Conference (COP30).
However, instead of creating yet another climate fund, delegates at COP30 should focus on streamlining climate finance. The United Nations Sustainable Development Goals 13 (Climate) and 17 (Partnerships) emphasise the importance of international cooperation and investment in sustainable finance. By working together to improve the effectiveness of existing funds, we can better mobilize climate finance and achieve our shared goals.
This controversy around climate funds is globally relevant, with implications for South America and beyond. As we move forward, it is crucial to learn from the past and strive for a more efficient and effective approach to climate finance.
References: [1] Georgia Hammersley, "The Controversy Surrounding New Climate Funds," Lowy Institute, 1 November 2022, https://www.lowyinstitute.org/the-interpreter/controversy-surrounding-new-climate-funds [2] "COP29: Adaptation Fund Fell Short of US$300 Million Funding Target," Climate Home News, 16 November 2022, https://www.climatechangenews.com/2022/11/16/cop29-adaptation-fund-fell-short-of-us300-million-funding-target/ [3] "Brazil to Launch US$125 Billion Fund for Tropical Forest Protection," Reuters, 24 October 2022, https://www.reuters.com/business/environment/brazil-launch-us125-billion-fund-tropical-forest-protection-2022-10-24/ [4] "Climate Finance: The Need for Greater Accountability and Impact," World Resources Institute, 10 November 2022, https://www.wri.org/blog/2022/11/climate-finance-need-greater-accountability-impact [5] "The State of Climate Finance 2022: A Review of the Latest Trends in Climate Investment," Climate Policy Initiative, 2022, https://www.climatepolicyinitiative.org/resources/state-of-climate-finance-2022/
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