Will the richest nations hand over the cash?

At last year’s conference, British Prime Minister Rishi Sunak, then chancellor, promised more funding for climate change

At this year’s UN climate change summit COP27, money will be high on the agenda and is sure to be a sticking point in the negotiations.

Over the past 12 months the developing world has faced serious climate-related crises – from floods in Pakistan to drought in East Africa.

They want developed nations like the US, the UK and those in the EU to pay for the “loss and damage” they have suffered.

They also want help making the transition to cleaner energy and infrastructure.

So, will they get finance?

What do countries want money for?

Money for climate action is generally divided into three buckets.

The first is for mitigation – this is money to help developing countries move away from fossil fuels and other polluting activities.

Many countries still have coal-fired power plants that have not yet reached the end of their lives. They need support to build clean energy infrastructure to replace them, such as solar farms.

The second type of funding is for adaptation. This is money set aside to help developing nations prepare for the worst effects of climate change.

These impacts vary depending on where in the world the country is, but can include:

  • creating stronger flood defences

  • relocation of populations at risk

  • developing a storm-resistant roof

  • by distributing crops that are more resistant to droughts

All countries agree that funding should go towards mitigation and adaptation.

But the third type of financing remains highly controversial. This is known as “loss and damage” financing.

This money will be used to help developing countries recover from the effects of climate change they are already experiencing.

These nations already receive disaster money through humanitarian aid – but it can vary from year to year.

Developing countries want guaranteed compensation from developed countries – which they say are historically responsible for climate change.

But developed countries see that as a red line – and say the deal would mean accepting responsibility for the disasters.

What money has been given so far?

In 2009, the richest countries agreed to provide $100 billion (£88 billion) a year to developing countries for climate action by the end of 2020. By the end of that year the total had reached just $83.3 billion ( £73.21), but the target is expected to be reached in 2023.

The majority, 82%, of this funding came from the public treasury, while the rest was drawn from the private sector, according to the OECD.

However, the analysis, commissioned by the UN, finds that the private sector could deliver 70% of the total investment needed to meet climate commitments.

Following this, the Glasgow Financial Alliance for Net Zero (GFANZ) was launched last year. Now, a coalition of more than 550 private companies has committed to directing $130 trillion in assets toward this agenda.

Climate finance chart including estimated data for 2021 and 2022

Climate finance chart including estimated data for 2021 and 2022

Are developing countries getting enough money?

Not only are existing pledges for climate finance not currently being met, but developing countries argue that these targets are too low.

At last year’s climate summit in Glasgow, China’s G77+ alliance of developing countries called on the richest nations to mobilize at least $1.3 trillion (£1.14 trillion) by 2030. They argued that this should be split equally between reducing emissions and preparing for climate change.

Currently, only 34% of climate finance is earmarked to help developing countries adapt to climate change, according to the latest OECD figures.

Also, the majority of public financing, 71%, is still provided in the form of loans rather than direct grants to countries – which can increase the debt burden of poorer countries.

Nafkote Dabi, Oxfam’s Head of International Climate Policy called this “deeply unfair”.

He said: “Instead of supporting countries facing worsening droughts, cyclones and floods, rich countries are crippling their ability to deal with the next shock and deepening their poverty.”

Will we have an agreement for compensation for loss and damage?

At last year’s conference, losses and damages were not even on the agenda.

After a series of smaller negotiations this year, it will now be discussed in Sharm el-Sheikh.

An agreement on a financial sum is unlikely, but nations could move forward with specific details, such as how the money will be paid.

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