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OECD’s Assessment Report on Climate Finance

By Amigos IAS

Why is it in the news?

  • The Organisation for Economic Cooperation and Development (OECD) has released a comprehensive assessment report on Climate Finance.
  • This report covers the period from 2013 to 2021 and presents aggregate trends in annual climate finance provided and mobilized by developed countries for developing countries.

 

Climate finance

·       Climate finance refers to financial resources provided and mobilized to support activities aimed at mitigating or adapting to climate change.

·       It includes funding for projects and initiatives that help reduce greenhouse gas emissions (mitigation) and those that help societies adapt to the impacts of climate change (adaptation).

 

About the Report

  • At the request of developed countries, the OECD has been assessing progress towards the goal of developed nations providing USD 100 billion of climate finance annually. This goal was established under the United Nations Framework Convention on Climate Change (UNFCCC) to support climate action in developing countries.
  • According to the report, developed countries may have met their overdue target of mobilizing $100 billion for climate finance.
  • In 2021, developed countries provided and mobilized $89.6 billion, which represents a nearly 8% increase compared to 2020. While this amount falls $10.4 billion short of the goal, preliminary data suggests that it will be met by 2023.
  • The majority (60%) of total climate finance provided and mobilized was allocated to mitigation activities, which focus on reducing greenhouse gas emissions.
  • Adaptation activities, which address the impacts of climate change, received 27% of the funding.
  • Cross-cutting actions, which encompass various climate-related initiatives, accounted for 13% of the total.
  • Notably, adaptation finance experienced a decrease of $4 billion (-14%) in 2021, resulting in a reduced share of total climate finance (from 34% to 27%). This drop raises concerns about the capacity of developing countries to address the impacts of climate change.
  • A significant portion of public climate financing was provided in the form of loans. This means that some climate finance is given to developing countries as loans, which can potentially exacerbate debt stress in these countries. Despite being loans, they are still counted as climate finance provided by developed countries.
  • The report highlights that developing countries will require substantial financial resources to address climate change.
  • By 2025, an estimated USD 1 trillion annually will be needed for climate investments. This need is projected to increase to roughly USD 2.4 trillion each year between 2026 and 2030. To bridge this investment gap, a mix of financial sources from public, private, domestic, and international sectors will be essential.
  • The report emphasizes the importance of increased involvement by international providers to meet the extensive financing needs of developing countries. Collaboration and support from developed nations, as well as private sector investments, will be critical to achieving global climate goals.

 

 

UN Framework Convention on Climate Change (UNFCCC)

·       The UNFCCC is an international treaty established in 1994 to address the global challenge of climate change.

·       Its primary aim is to stabilize greenhouse gas concentrations in the atmosphere to prevent dangerous human interference with the climate system.

·       The treaty has 198 member countries and convenes annual meetings called the Conference of the Parties (COP).

 

Other Climate Agreements

·       The Kyoto Protocol, adopted in 1997, set legally binding emission reduction targets for developed countries.

·       The Paris Agreement, adopted in 2015, builds upon the UNFCCC and aims to limit global warming to below 2 degrees Celsius above pre-industrial levels, with efforts to limit it to 1.5 degrees Celsius.

·       The Paris Agreement focuses on nationally determined contributions (NDCs) and encourages all countries to take climate action.

 

OECD

·       The Organisation for Economic Cooperation and Development (OECD) is an international organization founded in 1961.

·       It comprises 38 member countries (with India not being a member) and is headquartered in Paris, France.

·       The OECD’s objective is to promote policies that improve economic and social well-being, foster economic growth, contribute to world trade, and enhance the living standards of people in its member countries.

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