Filling Climate Finance Shortfalls

The debate on global south vs global north is being heightened on the environment and climate justice. Climate equity or the fair distribution of the benefits and burdens of climate change and environmental degradation is a hot issue for both advanced and developing economies. The country with the highest global share of carbon emissions is China, accounting for 32.88 per cent, followed by the United States (12.06 per cent), India (6.99 per cent), Russia (4.96 per cent), and Japan (2.81 per cent). According to the world data update, annual CO2 emissions are 37.15 billion tones, and Nepal’s contribution is only 15.85 million tones, which is just 0.056 per cent of total shares.

The trade cost for the climate crisis is estimated at 6 trillion USD for developing countries by 2030. However, only $660 billion has been collected for climate finance so far. Climate finance is mostly for mitigating climate change and transferring knowledge and technology to developing economies, especially the most vulnerable economies. The current debate about climate justice is about how to finance the estimated amount of investment required for developing economies and the access and utilisation of global climate funds. On May 14, 2023, the government of Nepal presented its policy and programmes for the coming fiscal year, and the policy document also mentioned the smooth utilisation of climate funds and reaching out to the target community working for the environment and climate justice. 

Climate justice

The global target is to limit global warming to 1.5C for affordable damage to the earth. The earth can tolerate 260 gigatonnes (GT) of CO2 emissions, but the world already produces 40 GT of CO2 per year. The UN Secretary General said on March 20, 2023, that the world should work towards net zero by 2050. As per the Paris agreement for the net zero target set by 140 countries in 2015, many countries set net zero targets. The USA by 2050, China by 2060, Russia by 2060, India by 2070, and many other economies have also set up their targets. 

Under UNEP and global consensus, there are many climate financing funds established in order to work for environmental and climate justice across the world. For example, in 2009, the Global Climate Fund pledged to mobilise $100 billion per year to assist developing countries in their climate justice efforts. Given the need for financing for the climate crisis in developing economies, developed countries should be responsible for investing in mitigation, adaptation, and transition to a low-carbon economy. Similarly, at Cop27 in 2022, countries agreed to establish a Loss and Damage Fund that provides financial assistance to climate-vulnerable economies, and the fund was officially operationalised at Cop28 in November 2023. 

Beside these main climate financing funds, there are a few other funds, such as the Green Climate Fund, Clean Technology Fund, Global Environment Facility, Least Developed Countries Fund, Forest Carbon Partnership Facility, Pilot Programme for Climate Resilient, Adaptation Funds, and a few more to name. From these, international-level multinational funds can generate trillions of dollars in global funds for climate finance, and under UNEP, the global north and mostly developed economies are liable to contribute financial resources to established funds. 

Climate change’s impact is always disproportionate because of the geographical and tropical situation, socio-cultural dynamics, ethnographical factors, economic structure, political commitment, and motivation towards climate justice. Nepal is at the top 7th position of vulnerability due to its geographical location, socio-cultural background, and natural resource-based livelihood. 

Nepal has highly prioritised climate justice issues and initiated significant and impactful initiatives. In order to implement the different climate justice agreements done as a signatory member nation, Nepal has prepared a National Adaptation Plan (2021–2050) and a Nationally Determined Contribution (2030) with an estimated investment of $47.4 billion and $33.04 billion respectively. Nepal’s contribution under NAP will be $1.5 billion by 2050 and it has set 64 priorities.

In addition to this, the government of Nepal has been implementing climate change budgeting practices. According to the economic survey report (FY 2079/80), the last five-year average of direct climate change beneficiaries is 5.35 per cent and indirect climate change beneficiaries is 28.10 per cent, and in total, the last five-year average is 33.35 percent of the total fiscal budget of Nepal. Through climate coding, the federal government directly transfers 80 percent of the budget to the local level.

At the outset of the climate justice debate, developed economies are claiming that the funds contributed to developing economies are the same as those for climate finance, but the funds set up for climate finance under the GCF and others are separate. Therefore, the understanding of climate financing for underdeveloped and developing economies is contradictory. About 61 per cent of total international climate funding for Asia goes to five countries: India, Indonesia, Bangladesh, China, and Mongolia. 

Climate governance framework

Nepal has taken on small-scale projects that cannot significantly contribute to climate justice in comparison to its vulnerability and its liability for CO2 emissions. However, so as to get the benefits of climate financing funds, Nepal should focus on the following areas: (1) Nepal’s prime agendas for climate justice and scientifically need assessment to implement consciously screened agendas; (2) the climate governance framework should be setup to provide clear and responsible jurisdiction for local- and federal-level agencies; (3) necessary preparation for climate financing fund access, including country rating, project accreditation, and vulnerability validation. 

(4) Capacity development for proper utilisation of funds, project negotiation, technological and knowledge transfer, and understanding the need for climate justice. (5) The climate justice programme should be a regular responsibility of concerned agencies and should not be projectisation. (6) Nepal should design big projects for financing grants, not loans. Scatter and small projects cannot contribute significantly to climate justice. So far, Nepal has taken out loan financing, which is not rational in comparison to CO2 emissions, and (7) Nepal’s development work should be environmentally and climate-responsive. 

Hence, receiving the climate financing resources to meet the resource gap for Nepal is an opportunity, and it is equally challenging to meet the eligibility criteria as well. The world knows Nepal is among the most vulnerable in terms of climate change loss and damage, but it is still behind due to a lack of knowledge, negotiation capacity, technology, climate governance, and motivation to work for climate justice.

(The author is an economist and a former member of the Lumbini Province Planning Commission. sudankumaroli@gmail.com).