Who will pay for climate change?

When world leaders gather in Sharm el-Sheikh this week for the annual United Nations climate summit, the debate over who bears the financial responsibility for climate change will take center stage.

Poor nations, which have contributed least to climate change but are among the most vulnerable to its effects today, are seeking more financial commitments from rich countries, many of which have grown their economies by burning fossil fuels.

The effects of global warming are already unfolding, with developing countries often at the forefront of the disaster.

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Pakistan experienced devastating floods this summer, which scientists said were exacerbated by climate change.

A third of the country was left under water, leaving 1,700 dead and causing at least $40 billion in economic losses.

Extreme flooding also submerged parts of Nigeria this month, and elsewhere in Africa, record drought has pushed millions to the brink of starvation.

At this year’s climate conference, known as COP27, developing countries are expected to press rich nations – historically the world’s biggest emitters – to fulfill earlier pledges of financial support and push them even further.

Current commitments are in arrears

More than a decade ago, the world’s rich, industrialized countries — including the United States, Canada, Australia, Britain and Japan — pledged to give $100 billion a year by 2020 (and by 2025) to poor nations for climate adaptation and mitigation projects.

But rich countries have not achieved this goal.

Nations will need to agree on another funding target of at least $100 billion a year before 2025, so negotiations at this year’s summit will begin to shape that goal. Most estimates have suggested that $100 billion is not nearly enough to help poor countries stave off the worst effects of climate change, let alone move away from burning oil, gas and coal.

“All the evidence shows we need trillions, not billions,” said Baysa Naran, director at the Climate Policy Initiative, a think tank.

The money has funded mitigation projects that help developing countries transition away from fossil fuels, such as building a zero-emissions transit system in Pakistan. Money has also been made available for adaptation projects, which help countries build resilience to climate risks, such as restoring mangrove animal habitats in Guinea-Bissau to protect against rising seas.

Critics point out that funding often takes the form of loans rather than grants. This has increased the already unsustainable debt burden of many poor countries, said Alina Averchenkova, climate policy fellow at the London School of Economics.

Some countries may also count certain types of projects in their contribution that others do not, which can lead to inflated numbers, said Sarah Colenbrander, director of the climate program at the Overseas Development Institute.

The $100 billion target was “carefully crafted” to be deliberately vague – the result of highly politicized negotiations at COP15 in Copenhagen, said Preety Bhandari, senior adviser at the World Resources Institute.

As a result, specific countries are not required to contribute a certain percentage of the funds. Multiple analyzes have estimated that the United States, which contributed less than $3 billion of the $83.3 billion in 2020, suffers tens of billions of dollars more when taking into account its relative emissions, population size and wealth.

In addition, mitigation projects have generally received twice as much funding as those focused on adaptation, although many experts and representatives from vulnerable states say the two should be more balanced. While mitigation addresses the root of the climate problem by limiting emissions, it does not help communities adapt to current or future risks.

An agreement reached at the end of last year’s climate talks in Glasgow urged rich countries to “at least double” adaptation funding by 2025 to $40 billion.

A separate “loss and damage” fund

More recently, some of the world’s most vulnerable nations have stepped up calls for new funds from the world’s richest economies to offset the damage caused by climate change.

The issue is known in climate negotiations as “loss and damage” and advocates have described it as a form of climate reparations to pay for irreversible losses of income, culture, biodiversity and lives.

Rich countries have historically resisted calls for a damage and loss fund, largely out of fear that it could open them up to legal liability. In Glasgow last year, the United States opposed language that would create such a fund.

This year, as Egypt has pledged to put the loss and damage on the official COP27 agenda, representatives from the United States and European countries have said they may be open to discussing it.

A group of small island states first raised the issue of loss and damage in 1991, highlighting the irreparable damage they faced from rising sea levels. Since then, these countries have attempted to quantify the costs of crushing. The V20, or Vulnerable Twenty group of finance ministers from 58 nations, estimated that its member states have lost $525 billion, or about a fifth of their wealth, over the past two decades to climate change.

“Countries are already paying for climate change now, and the burning question is: Can we let it continue?” said Sara Jane Ahmed, economic adviser to the V20. “And the answer is: No, we can’t.”

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