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Developing countries are increasingly concerned that their need for financial assistance to cope with the climate crisis will go unmet, as leaders of the world’s biggest economies meet for a virtual White House summit on the climate.
Joe Biden, the US president, is hosting more than 40 world leaders virtually over the next two days to discuss ways of fulfilling the 2015 Paris climate agreement, and to encourage leading economies to bring forward plans for cutting greenhouse gas emissions in the next decade.
Such plans will be crucial to limiting global heating to 1.5C above pre-industrial levels, in line with scientific advice. But alongside these pledges, developing countries are seeking strong new commitments on another crucial area: climate finance, the flow of money from public and private sector sources in the rich world to help the poor world reduce emissions and cope with the intensifying impacts of extreme weather.
Lidy Nacpil, coordinator at the Asian Peoples’ Movement on Debt and Development, said: “We are at a point where we know what needs to be done to reverse the climate chaos and it boils down to this simple principle: wealthier countries, who emit more now and historically, can and should do more with their emissions reductions and delivery of climate finance.”
Poor countries were promised $100bn a year in climate finance from 2020, more than a decade ago at the troubled Copenhagen climate summit in 2009. But that longstanding commitment, repeated in the landmark 2015 Paris agreement, was not met last year.
The Covid-19 pandemic has meant rich countries are facing rising financial pressures, as countries struggle to recover from the health impacts and lockdowns. But for poor countries, the situation is yet more dire: their economies have been battered by the global Covid recession, at the same time as they have lost large amounts of the remittances sent home by their citizens working abroad that many rely on, and they face mounting debt as the cost of finance has increased.
This leaves some of the most vulnerable countries without the means to cope with the intensifying impacts of climate breakdown, let alone invest in a low-carbon future. Many are also in danger of taking on new investments in fossil fuels, offered by coal, oil and gas companies and by some countries, including China, Russia, Japan and South Korea.
Laurie van der Burg, senior campaigner at Oil Change International, said: “At home and abroad, these [rich country] governments need to move public money out of fossil fuels and into the solutions that can create the jobs required for a green recovery from Covid-19. That includes providing debt-free and increased climate finance to low-income countries.”
The US has made some key pledges on climate finance ahead of the summit, but they fall short of what developing countries have been hoping for. Biden has asked Congress to approve $2.5bn in overseas climate finance, including $1.2bn for the Green Climate Fund.
However, this only restores some of what was lost under Donald Trump. Barack Obama had pledged $3bn to the Green Climate Fund, of which only $1bn was paid before Trump took office and suspended further payments.
A senior Biden administration official stressed that private sector sources would have to take on an increasing role in climate finance: “It’s very clear that finance is a core part of the solution. Not only public finance but private financial institutions have to come to the table. We will bring both sides to the table, and hear from states and national agendas, and the private sector.”
At the summit, business leaders including Bill Gates and Michael Bloomberg will address political leaders, along with the chief executives of major financial institutions, including: Jane Fraser, chief executive of Citigroup; Marcie Frost, chief executive of the pension fund Calpers; Oliver Baete, chief executive of Allianz insurers; and Brian Moynihan, chairman and chief executive of Bank of America.
However, private sector money usually comes with strings attached, in the form of loans, debts or other investment where interest is payable, profits are returned to the lender, or penalties can be incurred. Developing countries are already facing mountains of debt, increased by the Covid crisis, and need ways to cut this urgently.
Achim Steiner, the UN’s development chief, told the Guardian: “The debt issue is constraining them. We are asking a lot from developing countries [at Cop26] that are under great debt distress, when their cost of borrowing is so much higher than industrialised countries.”
Another problem is that private sector money tends to flow where the potential profits are easiest, such as renewable energy projects in middle-income countries, not to the most vulnerable places that need it most. Projects that build resilience to climate breakdown, such as early warning systems for storms or flooding, regrowing coastal mangrove swamps, or water storage systems, can save lives and protect livelihoods, but are hard to fund.
Boris Johnson, prime minister of the UK, will address the White House summit in a plea to world leaders to make Cop26 a success. However, Johnson faces a particular issue with credibility at Cop26, because of his government’s own actions: the decision to slash overseas aid, from 0.7% of GDP to 0.5%, from this year. Major figures in climate diplomacy have told the Guardian they are increasingly concerned about its impact, and said it created serious problems for the UK in winning over developing nations.
Rachel Kyte, formerly a top World Bank official at the Paris climate talks who is now the dean of the Fletcher School at Tufts University in Massachusetts, said: “This decision is the single worst self-inflicted injury in this kind of diplomacy that most of us have seen for a very long time.”
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