Overview of climate finance
Climate change has been described as one of the biggest global challenges of the modern world. To reverse some of the effects of climate change, resources, especially financial resources, are needed to mobilize urgent action and implement solutions to this environmental and developmental challenge. According to the United Nations Framework Convention on Climate Change (UNFCCC), “Climate finance refers to local, national or transnational financing — drawn from public, private and alternative sources of financing — that seeks to support mitigation and adaptation actions that will address climate change.”
At the 1992 UNFCCC Earth Summit held in Rio de Janeiro, the Common But Differentiated Responsibilities (CBDR) instrument was formalized. The CBDR recognizes the common responsibility of nations to address climate change, however, these responsibilities are not equal among all nations. The developed countries are obligated to provide financial and technical resources to developing nations given the economic disparity between the developed and developing regions. The Kyoto Protocol, and more recently, the Paris Agreement also highlight the need for richer nations to support other nations; such as the Least Developed Countries (LDCs).
Climate finance inflows into Sub-Saharan Africa
Over the last two decades, there has been an inflow of climate finance into Africa through various sources for mitigation and adaptation. According to the Climate Funds Update, managed by the Heinrich Böll Stiftung Washington, and the Overseas Development Institute (ODI), shows that between 2003–2020, $24.8 billion has been approved as climate finance by various Multilateral Funds (MFs) including the Green Climate Fund, Global Environment Facility, Global Climate Change Alliance, Adaptation for Smallholder Agriculture Programme and many more. $6.19 billion has been disbursed for various projects in Africa, representing 25% of the global figures. Similarly, there have also been climate investments from the Multilateral Development Banks (MDBs) funded by the African Development Bank (AfDB), World Bank Group, and European Bank for Reconstruction and Development (EBRD) and others. The Joint Report on MDBs Climate Finance revealed that in 2020, Sub-Saharan Africa received $9.06 billion of the total reported $66 billion global climate commitments. The quota of climate financing into Africa is quite meagre in comparison to its climate vulnerability.
Current gaps and deficits in climate finance in Sub-Saharan Africa
While Africa has and continues to receive some of these funds under various instruments including loans, grants, policy-based financing, and some equity, there are still a few gaps in climate financing. Africa has been identified as one of the regions to be severely impacted by climate change. Research by the Notre Dame Global Adaptation Initiative (ND-GAIN) showed that 8 of the 10 most vulnerable countries are Sub-Saharan African countries with Niger and Somalia being the most vulnerable of the 181 nations ranked. The current finance inflow is not adequate for the continent to build the much-needed resilience to the impacts of climate change. The financial implications for climate resilience are enormous for technological, human capital, and infrastructural development.
Table 1 List of 10 most vulnerable countries to climate change.
Source: Notre Dame University, 2019.
There is also the activity gap to which climate finance is used on the African continent. Data from the Climate Funds Update on multilateral climate financing indicates that 45.23% is spent on mitigation (general and REDD), 38.10% for adaptation, and 16.67% of funds with multiple foci. Why then does the African continent receive more finance for mitigation rather than adaptation, given that the continent contributes around 3% of global GHG emissions? Climate change experts argue that this is largely due to easy emission reduction measurements in mitigation compared to adaptation, and adaptation finance is mostly grant-funding as it is not a profit-accruing endeavour.
COP 15 (Copenhagen Accord) saw rich nations pledge to fund $100 billion in climate finance to developing nations by 2020 to help mitigate and adapt to climate change. However, data suggests that the developed nations did not meet this pledge in 2020; this is also associated with a lack of proper tracking and measurement of climate finance disbursement. There is also the challenge of inflation of funding figures as well as lumping developmental aid as climate finance. A 2021 Oxfam report also projects a $75 billion shortfall between 2020–2025.
While the $100 billion seems to be a good starting point, it is not enough to help the developing world address climate change, as the economic costs of climate change are high for vulnerable states. Currently, climate change costs Africa up to $15 billion per year. A report by the United Nations Environment Programme (UNEP) suggests that the cost of climate change adaptation in Africa could increase to $50 billion per annum by the year 2050 even if warming is kept below 2 degrees Celsius.
Strengthening Africa’s position in climate finance at COP26
As the world gathers at Glasgow for the 26th Conference of Parties, Africa’s climate agenda must be a common one that seeks to protect the interests of the region, here are key points for the African States at COP. The African Group of Negotiators (AGN) on Climate Change must continue to promote the continental agenda; demanding the much-needed finance to build a climate-resilient Africa. Going forward, the terms of financing should be clear. For instance, one of the outputs of COP 15 was the “$100 billion annual pledge to developing countries raised from a wide variety of sources.” This is not clear whether it includes loans and private equity in cleantech which are profit-bearing investments. It is crucial that as various commitments and pledges are being made, the terms are clear and well-defined.
There is also the need for increased financing in adaptation as well as funding for irrevocable consequences of climate change; loss and damages as described in Article 8 of the Paris Agreement, to help vulnerable African states. Climate adaptation is of utmost importance to Sub-Saharan Africa, and as such at least 50% of financing should go into adaptation projects. African leaders must also build the partnerships and collaboration needed to access the technological and human capacity needed to address the complexities and bottlenecks around accessing green finance — this will aid future flows of financing to help the African Continent.
Oluwole Hammond* is the Assistant Manager, Environment and Climate Change, at Clean Technology Hub.