Vaishnavi Rathore

Published: November 17, 2021

Topic: Stories

The curtains have fallen on COP26, the global climate negotiations that took place in Glasgow over the last fortnight. A conference that started off smoothly, with ambitious targets set by many countries, ended with two days of heightened tensions and frustration. As COP26 President Alok Sharma inched closer to putting down the gavel, negotiators shared photos of their children and grandchildren for whom they want to make the world better, while Greenpeace pinned a “Not for Sale” sign on the iconic globe at the COP26 venue. 

At the end of the negotiations emerged the Glasgow Climate Pact or the ‘cover decision’, the most important document coming out of COP26. Drafted by the United Kingdom’s Presidency on behalf of all the gathered Parties, it builds on the 2015 Paris Accord to present the pathway for combating climate change in the coming years. On climate adaptation finance—or money that needs to flow from developed nations to developing ones for them to adapt to the impacts of climate change—two more documents hold an important space. They are the texts on Long-term Finance and the New Collective Quantified Goal, various drafts of which were released from 10 November onwards. 

As the negotiations on the Glasgow Climate Pact moved closer towards the finishing line, reactions to its drafts evolved. Negotiators from developing nations and experts initially pointed towards the lack of urgency in a document that used terms like “requests” and “calls upon”, terming them just “polite request[s]” to developed nations to meet their climate finance and other commitments. 60 hours of late-night negotiations later, many found the revised draft of the Pact slightly more balanced, with its stronger language and demands. 

The final eight-page Pact “urged” developed countries to at least double their current levels of collective climate finance for adaptation to developing countries by 2025. But, two days earlier on 10 November, the European Union (EU), Canada, and the United States (US) proposed to delete the doubling reference, with the US further stating that such grant-based resources would be “bad for everyone.”

Hours before the Glasgow Climate Pact was finally adopted on 13 November, Diego Pacheco, Head of the Bolivian delegation, said, “there are concerning concepts [in the text] that will not [help us] move in the right direction and we refuse to get trapped in carbon colonialism.” However, he added, “in the spirit of compromise, we are able to support the texts.” 

Pacheco was speaking on behalf of the Like-Minded Developing Countries (LDMCs), which is a group of 25 developing countries, including India. This was a common sentiment apparent among the various stances of developing nations—the draft texts decided upon at COP26 are not perfect, but, we compromise and agree to them in the spirit of collaboration.

Diego Pacheco, Head of the Bolivian delegation, during the final informal stocktaking plenary at COP26 on 13 November; courtesy of the UNFCCC.

So, what transpired in the two weeks of negotiations regarding climate adaptation finance, and what are the key issues that the global community still did not reach a consensus on? Now, as the dust slowly settles on COP26, how should developing countries like India prepare to make use of international finance efficiently?   

What Happened at COP26: the Ambiguity of Climate Finance 

Even before the negotiations began, one fact was clearly established—that developed countries had failed to achieve their goal of mobilising US$100 billion a year from 2020 onwards for mitigation and adaptation strategies towards the developing world. The United Nations Environment Programme’s Adaptation Gap Report released at COP26 on 4 November made this amply clear: for both mitigation and adaptation, climate finance flows to developing countries reached only US$79.6 billion in 2019. 

In fact, evidence from the report suggests that in order for developing countries to meet their costs of adapting to the climate crisis, they need five to ten times more of the current levels of public finance transferred from developed countries. This gap, the report suggests worryingly, is widening. 

Not only have the EU and US failed to deliver the promised US$100 billion, they have also not agreed to mobilise US$600 billion worth of climate finance between 2021-25 at COP26, an estimate arrived at for developing nations during COP26. Instead, they slipped back to the previously undelivered goal of US$100 billion. 

“We must keep in mind, most of the finance that has been transferred to the developing world is in the form of loans which will have to be paid back with interest to the developed world,” says John Firth in conversation with The Bastion.  Firth is the Senior Director at the Climate and Resilience Hub at Willis Towers Watson, a British multinational insurance company. Data from the Organisation of Economic Co-operation and Development (OECD) on climate finance retrieved between 2016 and 2019 confirms this.

Climate finance per instrument. Source: OECD.

Be it loans, investments, insurances, or grants, the United Nations Framework Convention on Climate Change (UNFCCC) views all these instruments of climate finance under the same lens. This is because the Convention has no clearly established accounting rules of what constitutes ‘climate finance’. Unsurprisingly, this ambiguity has led to various conflicting estimates on how much developed countries are really giving to the developing nations of the world, as an insightful paper by Roberts et. al. shows. The accounting data is as inconsistent as OECD stating that US$37.9 billion of climate finance was provided by developed nations in 2013, while for the same year, India’s Ministry of Finance insisted that the number was considerably smaller, at US$1-2.2 billion.

The definitional issue remained unresolved at COP26. By 9 November, the frustration of developing nations regarding the ambiguity of climate finance negotiations elevated. 

“Mr. President, all we hear in the negotiations’ rooms, corridors and statements is ambition, ambition, ambition [for mitigation, adaptation, and means of implementation],” said the LMDCs in a statement during the Stocktaking Plenary. “However, there does not seem to be any appetite from our partners to unleash ambition when it comes to the decisions which we have seen through the first week of COP26 [like the net zero targets].” 

This is despite the issue being directly raised in the first week of COP26, where India speaking for the LMDC said that it was “high time the new collective goal reflects ambition on [the] provision and mobilization of climate finance.”

Addressing this ambiguity, the first version of the draft decision on Long Term Finance released early in the morning of 12 November drew attention to the lack of a “multilaterally agreed definition of climate finance.” In the revised draft released a day later, the chair of COP26 requested the Standing Committee on Finance to continue deliberations on the definition, with the aim of providing a draft proposal for consideration at COP27 in November of 2022. 

“With countries using their own taxonomy of climate finance, it becomes very difficult to work on adaptation and mitigation projects without clear outcomes and metrics,” Anu Jogesh, Policy and Governance Lead for Acclimatise South Asia, tells The Bastion. “It becomes murky for receiving nations to track where this money is coming from, how much, and for what purpose. This is especially the case if it is flowing into the private sector, which has no database for such information.”   

On 10 November, the first cover decision draft was released, adding to developing nations’ fury, who found that it lacked severity. “‘Urging’, ‘calling’, ‘encouraging’ and ‘inviting’ [terms which the draft decision used] is not the decisive language that this moment calls for,”  said Ambassador Aubrey Webson, from the Alliance of Small Island States (AOSIS), in a statement. The African Group and LMDC, including India, then proposed that the developing world should deliver at least US$1.3 trillion per year between 2025 and 2030. 

But, the latest draft on collective quantified goal on climate finance, released on 13 November, shied away from specifying a number. It instead called to establish an ad-hoc programme from 2022 to 2024 which would be facilitated by two co-chairs—one each from a developed and developing country. In this time frame, the committee would deliberate on setting a new collective quantified goal. The clarity on quantified climate finance that is required is now subject to further deliberations over time, which is not good news for countries facing the worst of climate change.

Yet, despite the ambiguity surrounding climate finance, not to mention the unmet targets, whatever funds that do exist have been transferred from developed countries to developing ones. So, where does India stand as a recipient of climate funds?

India: More Mitigation, Less Adaptation

While the UNFCCC’s Green Climate Fund was expected to be the protagonist that directed public funds, currently, climate finance is being largely transmitted through more than 100 channels, including private banks, equity funds, and multilateral banks like the World Bank and Asian Development Bank. Between 2016 and 2019, Asia received US$30.6 billion—or 43% of international climate finance—ranking it first amongst all recipient regions. 

India is seemingly one of the largest beneficiaries within Asia; the yearly average for climate finance flows in 2015 and 2016 was US$2.6031 billion. But, this global finance from multilateral organisations, foreign impact investors, and philanthropies constitutes only 15% of the country’s overall share of green finance, according to Akshay M, a senior researcher associate at the climate finance vertical of LEAD at Krea University. 

“The provision of the majority of green finance in India—around 70%—is dominated by the national government through various policies and schemes, and commercial banks,” says Akshay, speaking to The Bastion in his personal capacity. Extending this exasperation regarding unmet climate finance targets to the global arena, India set a price to its commitments at COP26: its Nationally Determined Contributions (NDCs) to climate change worldwide will not be updated till there is clarity on whether India would receive its climate finance demands. In an interview with the Hindustan Times on 10 November, an anonymous delegate stated: “We will need [US]$1 trillion till 2030 mainly for renewable energy and storage; decarbonisation of [sic] industrial sector and adaptation. Let’s be clear that India will not update its NDCs till there is clarity on climate finance. We are in no mood to submit them until these issues are resolved.” 

But, as India makes these demands, a question arises—how is the country receiving global climate finance and utilising it domestically?

Within India, most of these climate funds are being disbursed for climate mitigation—or efforts to reduce greenhouse gases—instead of adaptation measures—or efforts to adjust to the impacts of the climate crisis. This mirrors the global status quo.

“The current data shows that a large focus of the utilisation of these funds is on clean energy generation through renewables, promotion of green transport, and energy-efficient technologies,” explains Akshay. “When we were interviewing key stakeholders for our Green Recovery project in September of 2021, they told us that since they look for immediate outcomes from their investment, short-term mitigation strategies [like renewables and e-vehicles] become more fruitful than long term adaptation or resilience strategies.” 

For Willis Tower Watson’s John Firth, this disparity between adaptation and mitigation is “morally unacceptable”. He explains that “for the developing world, which has contributed so marginally to the greenhouse gas emissions historically, it is unjust to keep financing projects for them [developing nations] to reduce their emissions. Their [developing nations] problem at hand is currently adaptation and resilience to the problems the developed world has created.” Firth notes an important caveat: “but, this does not mean reducing the funds for mitigation. Instead, it means increasing funds for adaptation [in parallel].”

The COP26 draft proposal also urges developed countries to achieve a balance between mitigation and adaptation. “Closing this disparity has been spoken of in the past COPs too, but this time, it is even more important,” Firth adds. “This time, it’s code red for humanity, as the latest 2021 IPCC report suggests. But the drawback is that none of these [treaties] are binding on countries. So, while they may discuss this today, they might pull out later.” Firth’s comments are reminiscent of the Trump administration’s 2017 move of withdrawing the United States from the 2015 Paris Agreement.

However, when it comes to finance for mitigation measures, India has also witnessed another counterproductive challenge—land and forest conflicts. 

Mitigation = Renewable Energy, But Hydropower ≠ Green 

On 6 November, the Global Day for Climate Action and also when protesters swarmed the streets of Glasgow demanding climate action, a group of 30 youngsters marched through the steep ranges of Kinnaur, in Himachal Pradesh. A banner announced their cause of protest: ‘hydro projects are not clean and green’.

“We heard about the COP26 Summit that is taking place and the associated talks about reducing carbon emissions,” Budha Sain Negi, a resident of Kinnaur, tells The Bastion. “While we all agree this is important, we were also demotivated that they include hydro projects in clean and green energy solutions. Our experience has been completely the opposite.”

A protest march in Kinnaur, Himachal Pradesh; courtesy of Buddha Sain Negi.

Negi is referring to the four other hydro projects in Kinnaur—and the others scattered across the rest of the Himalayan state—that are funded by the multilateral Asian Development Bank under its “Clean Energy Investments for mitigation” project.

“In Kinnaur where such hydro projects have been installed, the socio-environmental impacts have already been documented—the indigenous and near-threatened chilgoza pine forests have been felled, and our natural springs which were once our source of drinking water have diminished. These hydro projects in Kinnaur require tunnels, which are constructed by blasting the landscape, triggering massive landslides,” Negi adds. For him and fellow residents of Kinnaur’s Jangi village, this past experience is of immediate concern—an 804 MW hydroelectric project is proposed to be constructed in his village, which would impact five neighbouring panchayatsincluding theirs.

“When multilateral development banks provide funding to developing countries, they tie-up with national governments. This does not allow them to go down to communities to ask them what type of projects they might benefit from,” says Anu Jogesh. “In addition to these organisational constraints, [there] are also the state or city-level politics which affect what projects those funds will be used for. So, states like Uttarakhand and Himachal Pradesh, for instance, depend on large hydropower projects to attract funding into the state. This political economy also impacts the use of international funds.”

Akshay adds to this. “Financial flows should align with the local stakeholder’s vision and motivations to ensure that the interventions are grounded,” he says. Otherwise, it may lead to what he calls a “tunneled view of climate”. “When my colleague Shreya Bedia was working on her masters’ thesis on the agricultural sector in Gujarat, she found that those who owned solar pumps used much more water than those who had diesel pumps, owing to the low operational costs of solar pumps. Promoting solar then, came at the cost of [using more] water. Funding for such climate change projects needs to be mindful of such trade-offs. Additionally, a built-in mechanism to protect and secure investments needs to be envisioned for sustained impact [in terms of time and ecology] from climate finance, as professor Dr. Nawn has pointed towards. In its absence, the impact of such finance will be short-lived.” 

Albeit technical, high-level negotiations which took place at COP26 have direct implications on people’s lives and livelihoods. What kinds of funds are being allocated, through what channels they’re flowing to countries who need them the most, and who is benefitting from them on the ground are all important concerns which will need an accounting and monitoring mechanism—at both the global and domestic levels. COP26 may have wound up in Glasgow, but countries, whether recipients or providers of climate finance, must keep this conversation going and hold each other accountable.

This story was originally published on The Bastion, with the support of Climate Tracker.