Climate Finance Is Critical for Mitigating Climate Change

by Navya Chamiraju

What You Can Do

  1. Write letters to your state senators about the pressing need to redirect assets to contribute more to global financing of climate change mitigation and adaptation projects.
  2. Educate others and also raise self-awareness of different climate change mitigation strategies and their benefits and costs through websites and resources such as the Global Environmental Facility. 
  3. Support established and growing environmental organizations that fight towards ensuring each country is held accountable for helping keep global temperatures from rising more than 1.5 °C.

Climate change’s impacts on the Global North and South are different and many countries face the worst of these impacts while contributing little to the cause itself because they don’t have access to the resources and support other countries have [1]. Climate finance is the financing done to help conduct mitigation and adaptation actions to address climate change. Global climate financing, which includes countries directing money to other countries with less resources and establishing regulations on budgets and environmental projects, is critical to helping countries in the Global South and everywhere combat the consequences of climate change while also helping reduce further impacts on the environment. 

Consequences of prolonged climate change include a 14% to 20% reduction in the availability of nutrients such as zinc and iron, which would cause an increase in lives lost globally as iron and zinc deficiency already cause 60 million people to die yearly due to related diseases (8). Health concerns such as diseases due to nutrient deficiencies, economic instability, poor water quality and living conditions are all repercussions of an increase in greenhouse gas emissions. These issues are amplified in the Global South due to the scarcity of resources and support (1). 

The Kyoto Protocol and the Paris agreement heavily focus on financial assistance for more vulnerable stakeholders globally. Climate finance is critical for mitigation and reduction of harmful gas emissions. Large scale investments are required to help reverse or simply stop the impacts of climate change globally (1). The financing provides money for important initiatives such as protection and welfare programs to improve water quality, health and wellbeing, safety, and other aspects of human life that are greatly impacted by climate change (8). An example of such initiatives is the Pacific Resilience Project that increases coastal protection to protect lives and property from inundation in the Republic of the Marshall Islands. 

A large-scale investment was attempted by global powers about twelve years ago at the United Nations climate summit in Copenhagen. More resource abundant nations promised to divert US$100 billion a year to less developed countries by the year 2020 (2). This pledge was taken to help countries in the Global South combat and adapt to climate change and mitigate rising temperatures and their consequences. More developed countries are responsible for a majority of greenhouse gas emissions, meaning they have a greater amount of responsibility when it comes to mitigation efforts (5). The OECD or the Organization for Economic Cooperation and Development estimated that more developed countries mobilized about $79.6 billion for less developed countries, meaning the $100 billion promise was partially met. However, the United States, Australia, and Canada, which are among the most developed countries, provided half their share of financial efforts, falling short of their responsibilities (5). The pledge made by developed countries is a minuscule amount of the financial support needed to help mitigate climate change. Trillions of dollars need to be pledged to meet the goal of keeping the spikes in temperature below two degrees celsius (1). But, the goal of $100 billion was not met, making a goal of $1 trillion or more nearly impossible to achieve given the current actions of countries.

Climate mitigation and adaptation efforts mainly take place within borders today (7). Money that is allocated for climate mitigation is primarily spent by private investors and sectors in wealthy nations on projects such as solar plants. These wealthier nations also put in place government subsidies and taxes to help reduce greenhouse gas emissions (3). Carbon taxes and private, institutional investors are two forces other than general government involvement that are considered important factors that can help mitigate climate change and its effects. Pressures from consumers and individual interests in the market can also fuel the mitigation of climate change as businesses try to shift to a more green and sustainable economy (3). These private and public efforts for mitigation and adaptation further benefit wealthier countries and don’t impact or even hurt less developed countries (7). Climate financing must be a global effort with funds being mobilized and traveling to different countries to ensure that more developed countries take initiative and responsibility towards mitigating climate change caused by their actions such as industrialization. 

Some developed countries are providing limited amounts of global financial assistance, but this support is primarily in the form of loans instead of grants. France, Japan, and Germany all provide financing through loans while some other countries primarily use grants (5). Grants are more useful for resource strapped developing nations as their adaptation efforts such as improving infrastructure, increasing water quality, or providing better healthcare are not initiatives that bring in a lot of profits (8). A majority of financial assistance has been used for climate change mitigation instead of adaptation (4). But, support for adaptation is crucial as less developed countries need to be able to sustain themselves through worsening natural disasters and more extreme climate and temperature fluctuations. Climate adaptation support is just as important as mitigation efforts even though it produces no profits as it ensures long term prosperity of developing countries, global markets, and individuals. 

Various financial economists, finance professionals, and regulators and economists from public institutions were surveyed, and it was determined that even though they found climate change mitigation to be a force that can greatly change and benefit society, they were wary of private-sector forces financially contributing very heavily towards the $100 billion goal. The financial experts that were surveyed emphasized that the burden of financial assistance for climate change is on state and country governments and requires a great amount of cooperation between countries and ability to mobilize large amounts of money in the form of grants and loans (3). 

Government assistance is crucial to help countries and individuals mitigate and adapt to climate change. The current level of assistance provided by various countries including the United States does not meet the level of financial support required globally to help and combat climate change.  To improve mitigation and adaptation efforts globally, developed countries must respond to the needs of developing countries and provide more support in the form of grants for adaptation efforts (5). If private finances met $20 billion of the $100 billion goal while the rest of the money is provided by public sources, each country would only approximately have to contribute 0.18 percent of their GNI (7). A balance between public and private interests and investments would allow developed countries to efficiently finance and protect their less developed counterparts.  Government entities in harmony with private sectors should take initiative to help developing countries adapt to the consequences of climate change because it is crucial for global development and prosperity. 

Works Cited 

Picture: United Nations Climate Action