Finance a key element in battle against climate change

With global temperatures now more than one degree Celsius above pre-industrial levels, climate change and its already visible effects are quickly becoming a new reality across the globe, pushing countries toward reducing their emissions and implementing adaptation strategies. However, experts say that transitioning the economy onto a low-carbon path will require major financial investment, from both public and private sources. That’s why finance has now taken on a central role in negotiations over tackling climate change.

“Money is a key concern for many states seeking to finance climate action. There are now key discussions on who spends what and how the funds are used, seeking more transparency,” says Neydi Cruz, the deputy general director ofinternat ion al cooper at ion at Me xico’ s Environment and Natural Resources Secretaria tan da focalpointfort he EUROCLIMA+ initiative linking Latin America and the European Union.

Upon signing the Paris Agreement in 2015, developed countries committed themselves to providing US$100 billion per year, starting in 2020, to developing nations to assist them in dealing with climate change.

Investment needs are significant in developing countries, with levels of direct government funding still scarce. That is why developed nations, multilateral agencies and the private sector have a key role to play.

There are initiatives underway. The Euro pean Un io ni scurrentlyt he world’ s largest contributor of climate finance to developing countries and integrates climate change into its broader development strategy. The bloc is also the world’s leading aid donor, with collective official development assistance making up 0.51 percent of EU gross national income in 2016. Nevertheless, t her e’ sstil la longw ay togo. By 2020, approximately US$5.7 trillion would need to be invested globally annually in green infrastructure, according to the World Economic Forum.

In Latin America, there are at least 20 multilateral agencies involved in climate finance, as well as additional programmes by developed countries and the Green Climate Fund (GCF). But the region needs about US$30 billion per year to deal with the effect of climate change, according to the Inter-American Development Bank. A long road lies ahead.

“Climate actions needs strategic finance from the limited funds available at public and wide transformational investments to low carbon from the private sector, in order to implement the Paris Agreement,” says Ismo Ulvila, the principal administrator of the international climate finance at the European Commission. “The European Union plays a key role in that funding. Latin American countries have access to credit lines and can implement climate projects, something that isn’t sometimes the case for some other parts of the world.”

Among such programmes, in 2009 the European Commission established the EUROCLIMA+ initiative, aimed at helping 18 countries of Latin America to implement the Paris Agreement. Five EU and two UN agencies help implement the programme, allocating funds in areas such as sustainable urban mobility, disaster risk management and climate governance. For example, in Argentina, it’s helping the city of Córdoba to develop a more sustainable urban mobility plan.

Next week, from Monday to Wednesday, EUROCLIMA+ will hold its annual regional summit in Buenos Aires. Later comes climate summit in Poland in the first two weeks of December, known as the Conference of the Parties (COP), gathering all member countries to the United Nations Framework Convention on Climate Change (UNFCCC).

There, more than 190 countries will have to agree on the rulebook to implement the Paris Agreement, according to which they have to limit global warming under 2ºC regarding the pre-industrial era – a challenging goal that will require greater ambition on climate change, from across the globe.