An event banner outside the Green Zone during the COP28 climate conference at Expo City in Dubai, UAE Image Credit: Bloomberg

Throughout history, philosophers have often pondered the chasm between commitment and action. Aristotle noted that “excellence is not an act, but a habit,” suggesting that true commitment must be demonstrated through consistent action. Similarly, Immanuel Kant emphasised the importance of duty and moral law, arguing that commitments must be upheld irrespective of personal inclinations.

These philosophical insights resonate quite well when we consider the contemporary issue of climate change and the commitments made by nations at the Conference of the Parties (COP) summits.

Year after year, at these summits, nations, especially the developed countries, pledge to undertake significant measures to combat climate change. However, a recent report by UN Climate Change highlights a concerning trend: national climate action plans remain insufficient to limit global temperature rise to 1.5 degrees Celsius, as per the goals of the Paris Agreement.

Despite increased efforts by some countries, the overall action is lagging far behind what is scientifically necessary to avert the worst impacts of climate change. This gap between commitment and action is not just disappointing but also dangerous, as it undermines efforts to build trust in the Paris process and to increase resilience to climate impacts.

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The problem is exacerbated by the deficiency in climate-related financial support. Developed countries had committed in 2009 to the annual mobilisation of $100 billion by 2020 to aid countries susceptible to climate change impacts.

Regrettably, a deficit persisted beyond the deadline, with projections indicating the target would only be achieved in 2023. By 2019, the accumulation of climate finance was a mere $79.6 billion, displaying a stark discrepancy between commitments and actual disbursements.

The Organization for Economic Co-operation and Development (OECD) in a November 2023 report revealed that a year after the original target year, developed nations were still over $10 billion short. Before the COP26 in Glasgow in 2021, there were renewed and enhanced pledges of climate finance.

Climate actions and support mechanisms

The Adaptation Gap Report 2023 by UNEP, reveals that the financial needs for climate adaptation in developing countries are significantly higher than previously estimated. These needs are now believed to be 10-18 times greater than the current international public finance flows, which are more than 50% higher than previous estimates.

The first-ever global stocktake, a crucial assessment of global efforts to combat climate change, is nearing its conclusion. This stocktake, is designed to be a transparent and inclusive process involving both parties and non-party stakeholders. Essentially, it serves as a comprehensive evaluation of the world’s progress towards the goals set out in the Paris Agreement, highlighting areas of success and identifying gaps that require attention. In essence, it’s like taking a comprehensive inventory of our climate actions and support mechanisms.

However, preceding the COP28, a technical synthesis report of the first global stocktake was released in September. This report emphasises the critical role of finance, technology, and capacity-building, as recognised by the Paris Agreement, in enabling effective climate action.

Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates, stands for a photograph with Dr Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology, Director General of the Zayed Sustainability Prize, and COP28 President (3rd R), Sheikh Mansour bin Zayed Al Nahyan, UAE Vice President and Deputy Prime Minister (4th R), Miguel Diaz-Canel Bermudez, President of Cuba (5th R), Antonio Guterres, Secretary-General of the United Nations (7th R) and Ahmed bin Ali Al Sayegh, UAE Minister of State (L), during G77 meeting at COP28 UAE, Expo City. Image Credit: UAE Presidential Court

It also underscores the importance of aligning financial flows with low greenhouse gas emissions and climate-resilient development. The report further highlights the need for increased support for climate action in developing countries, emphasising the significance of public finance and the necessity to enhance access and effectiveness.

Moreover, it points out the growing role of adaptation finance and the importance of directing climate finance towards impactful activities. Additionally, the report emphasises the need to make financial flows consistent with climate goals and the critical role of private sector engagement in achieving climate-resilient development.

Finally, it calls for transformative measures to shift financial flows away from high-emissions activities and towards climate action, underscoring the need for a systematic approach and international cooperation to achieve the Paris Agreement’s objectives.

The Independent High-Level Expert Group on Climate Finance reports that an extra $3 trillion annually is required by 2030 for climate finance and achieving SDGs. This includes a quadrupled investment of $1.8 trillion in climate initiatives and infrastructure, and an increase of $1.2 trillion in health and education, marking a 75% rise from current levels.

India Prime Minister Narendra Modi speaks at the High-Level Segment for Heads of State and Government session during the United Nations climate summit in Dubai on December 1, 2023. Image Credit: AFP

Under India’s G20 presidency, strides have been made towards establishing sustainable climate finance, particularly to support the developing world. The G20 Sustainable Finance Working Group (SFWG) has put forth policy recommendations aimed at leveraging private finance through structured finance instruments and risk-sharing facilities.

These policies, designed to be adaptable to country-specific circumstances, advocate for the creation of regulatory environments that attract private investments into climate-related projects and the strategic use of fiscal resources.

Additionally, the recommendations highlight the importance of scaling up innovative risk-sharing mechanisms like Green Social and Sustainability bonds and fostering multi-donor investment facilities to enhance climate finance efficacy. These propositions should be deliberated upon at the COP28 summit.

Adopting “country platforms”

Reports by the Independent Expert Group under India’s G20 presidency advise that Multilateral Development Banks (MDBs) should contribute an extra $260 billion annually in official financing, with $200 billion as non-concessional loans, to leverage and stimulate the majority of the related private finance. To fulfil these objectives, MDBs will need to undergo extensive reforms.

Reforms for MDBs include adopting “country platforms” to bolster investor confidence and returns management, exemplified by the Just Energy Transition Partnerships. MDBs should centre operations on creating such platforms, prioritising SDGs and Global Public Goods (GPGs), and requiring adjustments in institutional design and technical assistance.

Additionally, MDBs must deepen collaboration, reform risk-averse cultures, and enhance private sector engagement, possibly tripling financing to $390 billion by 2030. This ambitious scaling requires leveraging all funding avenues, optimising balance sheets, and potentially sourcing capital from non-governmental investors.

COP28 can catalyse a sustainable future by prioritising climate finance and MDB reforms, transforming pledges into tangible actions, and emphasising the urgent need for enhanced, actionable commitments to meet the escalating financial demands for climate adaptation and resilience.

Aditya Sinha is Officer on Special Duty, Economic Advisory Council to the Prime Minister of India. Views Personal