Saudi Leaders Skip Flagship Event, Highlighting the Urgent Need for Climate Finance
As the 28th Conference of the Parties (COP28) in Dubai focuses on the critical issue of climate finance, the United Arab Emirates (UAE) has made a significant commitment to green financing. The UAE, hosting this year’s conference, has pledged $270 billion in green finance by 2030 through its banking sector. However, the absence of Saudi Arabia’s leaders, the region’s largest economy and the world’s biggest oil producer, raises concerns about the commitment of oil-dependent nations to address climate change. The need for climate finance is vast, with a report estimating that emerging markets and developing countries will require $2.4 trillion annually by 2030 to meet climate goals and adapt to the challenges posed by climate change.
A Yawning Gap in Climate Finance
The amount of funding required for the energy transition, climate adaptation, and disaster relief is staggering. A report released at COP28 reveals that emerging markets and developing countries will need $2.4 trillion per year in investment to cap emissions and adapt to climate change. However, the lack of investment, particularly in these countries outside of China, is hindering progress towards the goals of the Paris Agreement. The urgent challenge is to accelerate and implement investment from various sources to bridge this gap.
Pleas for Urgent Action
Vulnerable countries already facing the devastating impacts of climate disasters are calling for billions of dollars in additional funding through a newly formed disaster fund. However, current pledges fall far short, totaling only around $700 million. Barbados Prime Minister Mia Mottley, a prominent voice in global climate finance discussions, emphasizes the need to move beyond voluntary pledges and consider alternative approaches such as taxes to boost climate funding. For example, a global 0.1% tax on financial services could raise $420 billion, while a 5% tax on global oil and gas profits in 2022 would have yielded approximately $200 billion.
Insufficient Pledges and Concerns
Despite the commitments made at COP28, there are concerns that the sums pledged will be inadequate to address the magnitude of the climate crisis. Activists from the Asian Peoples’ Movement on Debt and Development argue that the climate finance pledged at this conference falls short of what is needed. Pakistani activist Zaigham Abbas, whose country suffered from widespread flooding last year, emphasizes the unprecedented scale of the catastrophe and calls for substantial funding rather than mere charity.
Scaling Up Green Financing Efforts
The UAE’s banking sector has taken a significant step towards green financing by pledging $270 billion by 2030. This commitment aligns with similar efforts by banks in other regions to increase lending to green projects. The UAE’s pledge follows a separate commitment of $30 billion for climate-related projects from the oil-producing Gulf state. Additionally, France and Japan have expressed support for leveraging IMF Special Drawing Rights for climate and development through the African Development Bank. The European Bank for Reconstruction and Development plans to include climate resilient debt clauses in new loan deals with poorer countries. Danish investment firm Copenhagen Infrastructure Partners also aims to raise $3 billion for renewable projects in emerging markets.
Private Sector Engagement and Initiatives
This year’s COP28 features the largest-ever representation of businesses at the annual U.N. summit, signaling a growing interest in private investment towards climate causes. The emirate of Abu Dhabi has partnered with private sector entities, including BlackRock and HSBC, to launch a climate research and advisory hub, aiming to enhance financing options in the region. The involvement of the private sector is crucial in addressing the scale of the climate crisis and turning ambitions into actions.
As COP28 tackles the pressing issue of climate finance, the UAE’s banking sector has made a significant commitment to green financing. However, the absence of Saudi Arabia’s leaders raises concerns about the commitment of oil-dependent nations to address climate change. The need for climate finance is immense, with emerging markets and developing countries requiring $2.4 trillion annually by 2030. Urgent action is necessary to bridge the gap between the funding needed and the pledges made. By leveraging various sources, including taxes and private sector engagement, the international community can work towards turning climate ambitions into tangible actions.