Who is going to 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 financial responsibility for climate change will take center stage.

Poor countries, which have contributed the least to climate change but are today the most vulnerable to its effects, are demanding 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 on the front lines of devastation.

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Pakistan suffered catastrophic flooding this summer, which scientists say were exacerbated by climate change.

A third of the country was flooded, killing 1,700 people and causing at least $40 billion in economic losses.

Extreme flooding this month has also flooded parts of Nigeria, and elsewhere in Africa a record drought has left millions on the brink of starvation.

At this year’s climate conference, known as COP27, developing countries are expected to pressure rich countries — historically the world’s largest emitters — to deliver on past promises of financial support and push them further and further.

Current commitments fall short

More than a decade ago, the rich, industrialized countries of the world — including the United States, Canada, Australia, Britain and Japan — committed to providing poor countries with $100 billion a year by 2020 (and through 2025). for climate adaptation and mitigation projects.

But rich countries have failed to achieve that 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 isn’t nearly enough to help poor countries avert the worst effects of climate change, let alone move away from burning oil, gas and coal.

“All the evidence suggests we need trillions, not billions,” said Baysa Naran, manager at Climate Policy Initiative, a research center.

The money has been used to finance mitigation projects that help developing countries move away from fossil fuels, such as building a zero-emission transit system in Pakistan. Money has also been spent on adaptation projects that help countries build resilience to climate risks, such as restoring mangrove habitats in Guinea-Bissau to protect against rising seas.

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

Some countries may also count certain types of projects in their contributions and others not, which can lead to overstating, says Sarah Colenbrander, director of the climate program at the Overseas Development Institute.

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

As a result, there is no requirement that specific countries contribute a certain proportion of the funds. Multiple analyzes have calculated that the United States, which contributed less than $3 billion of the $83.3 billion in 2020, is under tens of billions of dollars in 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 countries say the two should be more balanced. While mitigation addresses the root of the climate problem by reducing emissions, it does not help communities adapt to current or future risks.

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

A separate fund for ‘Loss and damage’

More recently, some of the world’s most vulnerable countries have intensified 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 proponents have described it as a form of climate recovery to pay for irreversible losses of income, culture, biodiversity and lives.

Rich countries have historically resisted the call for a loss and damage fund, largely out of fear it would expose them to legal liability. Last year in Glasgow the United States opposed language that would set up such a fund.

This year, while Egypt has vowed to put loss and damage on the formal COP27 agenda, representatives from the United States and European countries have indicated they may be open to talking about it.

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

“Countries are already paying for climate change, and the burning question is, can we let this continue?” said Sara Jane Ahmed, V20 financial adviser. “And the answer is, no, we can’t.”

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