The progress on committed finance by the developed world towards Global South has stayed well below the targeted $100 billion annually
As a global stocktake is conducted in COP 28; climate financing which is intended to support the twin pillars of mitigation and adaptation alongside the recently introduced loss and damage fund, needs an amplified focus. While mitigation targets emissions reduction pathways, adaptation strategies revolve around building climate resilience in communities and their built environment.
The progress on committed finance by the developed world towards the global south has stayed well below the targeted $100 billion annually and in particular, funds towards adaptation have been scarce. To put things in perspective, the UNFCCC standing committee on finance estimates that globally, adaptation funds stand at $49 billion, a staggering 38 times lower than the annual spending on environmentally harmful subsidies including those on fossil fuels.
Why adaptation is crucial: The World Meteorological Organisation reports, 2023 was the warmest year on record, the antarctic sea ice has been reported at its lowest, the increased frequency and longevity of cyclones, enhanced instances of wildfires, increased drought and flooding patterns when contextualised with a projected a 30% decline in global agricultural production, habitat losses due to rising seas which in economic terms may cost around $50 trillion per year 2050, the IPCC projection that at present 3.3 to 3.6 billion people are highly vulnerable to climate change and the fact that current emissions trajectory makes the 1.5? or a 2? warming limit - a pipe dream; clearly bring out the urgency of action on the adaptation front.
Structural distortions in adaptation finance :
The disparity within the deployment of climate finance between mitigation and adaptation is significantly skewed with only a support of USD 8.9 billion pouring in for adaptation versus USD 17.9 billion for mitigation. OECD data suggests adaptation finance is predominantly delivered through public grants and on its own, this grant-dominated scheme can only make a limited dent in the rapidly growing needs of the climate finance universe, as it offers a limited value and motivation for private sector involvement.
Seeding innovation with blended finance :
Blended finance can act as a catalyst for climate adaptation, when rolled out in the form of financial innovation, helping further the ‘beyond aid’ narrative and unlocking private finance flows, especially when used for structuring nature-based solutions for climate adaptation. As an example, an instrument like a debt-for-nature swap can adjust a state’s foreign debt against investments in nature conservation. In 2016, the Government of Seychelles bought back USD 21.4 m of its Paris Club debt at a discounted price, against marine conservation and climate adaptation work.
Participatory governance towards adaptation: Considering the inherently global nature of the climate, instead of a one-size-fits-all solution, adaptation models need to address the local needs using
Traditional knowledge systems. The remunerative ness of these models may be holistically built around the themes of reducing anticipated losses, enhancing socio-economic well-being and driving innovations in the creation of climate-resilient infrastructure to provide the required risk assurance to financing institutions. As an example, the Global Commission on adaptation estimates that a marginal 3% increase in climate-proofing of infrastructure may result in a robust 4:1 cost-benefit ratio. Similarly, the opportunities for research in climate-resilient crop varieties or technology development towards early warning systems, promise to attract private initiatives. The social impact assessment where in India has developed a lot of expertise as it administers its targeted public welfare schemes or the learnings from the National Disaster Management Authority may be taken up for wider application.
The call for urgency of investments in adaptation is an obvious one, particularly in light of recent losses of $6 billion in India due to extreme climate events, the destruction of a quarter of Bahamas’s GDP from Hurricane Dorian and the value extinction of over AUD 20 billion from Australian wildfires. Global prosperity will continue to hang in balance unless the financial viability of investments is assured by indispensable adaptation investments.
(The writer is Deputy Chief Mechanical Engineer, North Western Railway and UK Commonwealth Scholar; views are personal)
