COP28 Climate Finance Day Nets USD 12.5 Billion in Pledges

Day five of the COP28 climate summit in Dubai was the climate finance day, which was almost derailed after the UK-based The Guardian newspaper ran a story the day before highlighting COP28 President Sultan al Jaber’s statements from a November 21 online conference.

Al Jaber, the UAE oil chief executive, infamously said there is “no science” behind requiring the end of fossil fuels to limit temperature rise to 1.5C. He added that the phase-out of coal, oil and gas would take the world “back into caves”. Under immense pressure and global shock, he recanted on Monday, stating, “We very much believe and respect the science.”

Funding Climate Finance and Pledges Made at COP28 UAE

While COP28 UAE conference delegates, media and the general public were coming to terms with Al Jaber’s views and his apparently forced recant, work still moved ahead at the 28th Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC) on Monday, including important decisions on funding climate finance objectives.

By the end of the day at the UN climate change conference, at least 40 different financial pledges were made. Replenishment pledges for the Green Climate Fund (GCF) have now surpassed previous pledges. The second replenishment pledges now total some USD 12.5 billion – the largest ever.

A surprise was also in the works regarding the loss and damage fund. Some USD 720 million has been pledged to set up the fund. Loss and damage funds are integral to climate justice for developing countries. Loss and damage refers to the destruction caused by climate change that cannot be prevented or adapted to. After decades of pressure from vulnerable countries, rich countries agreed last year to set up a fund to address the costs of this destruction.

Reality Check

As promising as Monday’s climate funding pledges at COP28 Dubai were, at least USD 2.4 trillion is still needed for developing countries (excluding China) by 2030. However, adding even more complexity, some 54 developing countries are now in a debt crisis, hindering their economic development and energy transition to net zero.

At least 50% of the world’s poorest countries need debt relief now to avert a major systemic development crisis, a UN Development Programme report recently warned.

Both governmental and non-governmental organisations offer solutions to rectify the emerging crisis. However, a group of high-profile climate finance experts released a comprehensive analysis of what is needed from all parties involved, including developed countries, the private sector, multinational development banks (MDB), donors and philanthropic organisations. According to the analysis, such a full-scale effort and reform could unlock trillions in finance for developing countries by 2030.

Progress Being Made

A growing list of developed countries support the need to reform the financial architecture to fight climate change. This includes the need to include debt reform in any upcoming finance conversation.

On Monday, more support came from countries and MDBs – the World Bank, African Development Bank (AFDB), Inter-American Development Bank (IDB) and the European Bank for Reconstruction and Development (EBRD) – to put countries’ debt payments on hold when extreme weather events hit them.

Japan and France backed an earlier proposal to use the AFDB to re-channel the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) for climate and development. SDRs are rainy-day foreign exchange reserves held at the IMF but are seldom used. However, some were used during the COVID-19 pandemic. Allowing the SDRs to be used by development banks could bolster climate finance in developing markets.

Negotiation Developments

Some developed countries are claiming that they’ve likely met their obligations as part of the USD 100 billion in climate financing. However, developing countries are pushing back, questioning the lack of data behind those claims.

Avoiding Debt Traps

Developing countries are also keen to receive funds in a way that doesn’t add to their debt and doesn’t put them in danger of falling into more debt taps, while wealthy countries would instead raise money in a way that doesn’t permanently deplete their coffers.

Finance Flows and Global Temperature Goals

There’s also heated debate about Article 2.1c of the Paris Agreement. Article 2.1c calls on governments to “make financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. This is a pre-condition for achieving the agreement’s adaptation and mitigation goals, including limiting global warming to 1.5°C above pre-industrial levels.

World leaders of Developed countries are claiming that they’re working hard on the issue. However, developing nations are playing defence. They see this as a play to shift attention from the developed world’s climate finance obligations, while also voicing concerns as to whether the implemented finance would flow further to the Global North.

Who’s Going to Pay?

COP28 2023 host country United Arab Emirates made a USD 100 million pledge to the loss and damage fund, which it claims should set an example.

Other countries making initial commitments to the fund include Germany (USD 100 million), the UK (USD 75 million), the US (USD 24.5 million) and Japan (USD 10 million.) Pressure will now build for other wealthy countries, including fossil-fuel producer and heavy CO2 emitter Australia, to outline its commitments to the fund.

There was also a conversation about whether China and India should benefit from the climate change fund. China and India maintain that they, too, have vulnerable communities that will need financial support from such a fund.

However, the US and others pushed back, claiming that China and India should also make significant emissions cuts for meaningful global climate action and contribute to the fund to limit global warming.

China and India countered further, arguing their high emissions levels are a recent development compared to the historic emissions of developed countries like the US and the UK. China, the US and India are the world’s largest GHG emitters.