COP27 Latest: Positive steps on climate finance raises hopes at COP27

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COP27 Latest: Positive steps on climate finance raises hopes at COP27

Several steps on climate finance at COP27 suggest a positive shift could be happening on a critical issue at the climate summit. The UK confirmed it would allow some debt payment deferrals for regions impacted by climate disasters. At COP27, New Zealand and Austria announced funding for loss and damage, referring to the incurred costs of rebuilding from climate impacts in poorer nations.
The funding plans from richer polluting countries to those more vulnerable that have done little to drive the climate crisis is critical to momentum and success at COP27. To reach our climate targets requires everyone to take action but without progression in finance, developing nations will lack the confidence in richer countries, and this ideology of global collaboration will fail.

The UK confirmed at COP27 that its export credit agency, responsible for lending money to overseas customers of British products and services, will become the first agency to incorporate climate resilient debt measures in its lending. This movement includes halting debt payments for up to two years for those directly impacted by a climate disaster. This would enable those affected to utilise their funds to handle an emergency situation.

UK Treasury Minister James Cartlidge explains that climate impacts are increasing in frequency and severity, which is why it’s critical to support those severely impacted. In a climate disaster, countries face the challenge of managing debt repayments while rebuilding their communities.

The announcement gained strong support by many island nation states, including Avinash Persaud, special representative to the PM of Barbados and a considerable voice toward reforming the global financial system. Persaud explained that integrating these debt measures represent the most impactful way of making international finance equipped and capable for our global future.

There are three types of climate finance, one for reducing emissions, the other is adapting to climates, and the third for loss and damage. The last measure has gained controversy and has been hindered somewhat by developed nations concerned that they will be liable for significant compensation. Scotland was the first country to open up this area and provide loss and damage money, followed by Denmark, Belgium and Germany. At COP27, Austria followed a similar path by committing £44 million towards loss and damage. New Zealand has also confirmed a $20 million climate fund for land and resources lost by developing nations.

Emily Wilkinson, a representative of the ODI thinktank, explains that the increasing number of pledges toward loss and damage funding are welcomed and represent a significant change in climate finance. Wilkinson believes more countries will follow suit during the climate summit, and will place additional pressure on negotiators to implement a more appropriate financing mechanism.

Creating a loss and damage fund is a top priority for developing countries at COP27. While the recent announcements is a positive step, the millions pledged falls short of the financial support needed, which could reach $1 trillion a year, according to some studies. Some industry experts have called for a tax on rising fossil fuel profits to support loss and damage.

Studies by campaigners at Global Justice Now suggest that the big five oil businesses – Chevron, ExxonMobil, BP, Shell and Total should be contributing $65 billion annually based on their global carbon emissions to date. A recent study indicated that the oil and gas industry had generated an average of $1 trillion annually in profit for the last 50 years.

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