COP26: What do developing countries need to fight the climate crisis

As world leaders meet in Glasgow on Sunday to debate how to keep the planet in livable condition, a fundamental bone of contention between more mature and developing economies remains how to finance the battle against the climate crisis.

Al Jazeera’s senior commercial producer, Megha Bahree, investigated that question with Arunabha Ghosh, founder and CEO of the New Delhi-based Council on Energy, Environment and Water (CEEW), one of the leading research think tanks. policy of Asia.

Ghosh discussed the great gulf between the richest and poorest nations, the need to be much more ambitious with the current net zero targets, and even presented some pragmatic solutions to help developing countries secure the funding they need to meet. climate goals.

This interview has been edited for clarity and length.

Megha Bahree: What is the objective of the next United Nations Conference on Climate Change (COP26)? And what are the different negotiating positions?

Arunabha Ghosh: The most important objective of COP26 is that it offers the means by which countries can reach the [climate] goals that have been set.

There is another goal here, which is to increase the ambition of what countries can do. These two objectives are projected by different groups of countries.

The developed world would like COP26 to focus primarily on meeting the means by which existing commitments can be met. And herein lies the dilemma. Because while the planet has a unique carbon budget, each country wants its fair share in order to grow.

MEGABYTE: Is it the debate about what is the fair share?

AG: Actually, the debate doesn’t even focus on that. The debate is on whether he will acknowledge that the planet is in danger and therefore increase his ambition, versus whether he will acknowledge that the planet is in danger and therefore provide the finances for us to be more sustainable.

So all parties recognize that the planet is in danger. But the solutions there range from the here and now to the very long term.

MEGABYTE: Can you explain what the two positions are?

AG: One position is that the only way to keep the planet on a sustainable path, that is, to have the ability to keep temperatures within two degrees or 1.5 degrees above pre-industrial levels, is that all countries now raise their ambition beyond what they had. promised in 2015. And this heightened ambition should include things like a target year for net zero emissions and also what they would do in the near term.

The other narrative is that developing countries can only fulfill their ambitions if they have the right investment and access to technology. Some of that funding has to come in the form of grants. But what developing countries are also asking for is a really tough investment that goes into building the clean energy infrastructure their economies need. And if that investment is not available, if the technologies are not accessible, if the interest rates are too high, then promising higher ambitions is really a moot point, because you can keep saying things you want to do without having the resources to do it. do it.

MEGABYTE: Is there an approximate dollar amount on what resources are required? and for what purpose?

AG: One estimate is that the developing world needs around $ 3.5 trillion until 2030 just to reduce emissions, install renewable energy infrastructure, etc. Each country makes its own calculations of how much is needed.

What is clearly evident is that the promise of the developed world – to pay developing countries from 2010 onwards an amount that was to be increased to annual inflows of $ 100 billion – has not only not been fulfilled, but it should be a floor and not a ceiling for the kind of climate finance that is needed.

Arunabha ghosh [Photo courtesy of the Council on Energy, Environment and Water (CEEW)]

MEGABYTE: It is quite alarming that there is such a wide gap and there does not seem to be a way to reduce it.

AG: Indeed. What has happened is that we are stuck in what I call a negotiated maximum and a delivered minimum. So we keep insisting on that $ 100 billion instead of thinking about what the innovative mechanisms will be through which that much larger amount of money can flow.

The cost of financing in emerging economies around the world is very high because investments in these areas are considered risky. Not because the technology is unknown. It is the same solar panel in Norway as it is in New Delhi. But investors think that putting renewable energy or electric mobility or energy efficiency in industrial projects in developing countries will face all kinds of risks, including currency, politics, politics, etc.

And if you try to cover all that, the cost of finance becomes excessively high. So you need an international mechanism that can reduce investment risk.

MEGABYTE: How does it work?

AG: The idea here is that you create a pooled fund that manages to offer a first loss guarantee against risks associated with currency fluctuations or a political or policy change over which the project developer has no control.

Then your financing cost goes down, and then your fee for solar power, battery storage, or electric mobility. This allows international institutional investors to also enter emerging markets and provide a large volume of capital.

MEGABYTE: What you just explained sounds pretty straightforward: it takes care of this problem and that should open the floodgates. Why is this not happening?

AG: There are two reasons for this. One is an emerging economy blind spot within institutional investors because most of them, whether they are Norwegian-based pension funds or California-based pension funds, are basically looking to invest in their home countries or regions with the ones you are familiar with. although 88 percent of the new demand in electricity for the next two decades will come from emerging markets.

The second reason is that while multilateral financial institutions have offered some risk reduction solutions in the past, they have done so in country-specific contexts and are not looking to other countries.

MEGABYTE: Works with governments around the world. What do they say when you suggest this idea? Isn’t this of interest?

AG: The short answer is that it is of interest, and we have had a version of the common risk mitigation mechanism that was formally endorsed by President Macron. [France] and Prime Minister Modi [India] and President Kagame of Rwanda in 2018. And there is an awareness that something fundamentally different has to happen in reducing risk. And yet we need a political pioneer, or a set of political pioneers. Until the political signal for this arrives, the technocratic wheels do not begin to turn.

MEGABYTE: What are they waiting for?

AG: I think this goes back to the fundamental variation in the objectives of COP26, as I put them at the beginning. Because if you basically come from the field that says the only way to save the planet is to increase ambition, then you are not thinking about how to fulfill that ambition. On the contrary, if you come from the camp that says the only way to save the planet is to get money, then you are focused on that $ 100 billion marker instead of thinking about what it will take to get a much larger amount of money. . entering these. So, as a result, the most pragmatic responses to this challenge lie between the gap between these two different political narratives.

MEGABYTE: What is your expectation of this COP26?

AG: I like to call it a wish list.

Number one, I want developed countries to say that we will reach zero net emissions long before 2050. Because if the planet has to reach zero in 2050, developed countries cannot reach zero in 2050 too, since in that case the law of averages won’t work and then everyone has to reach net zero by 2050. That’s like saying everyone wins the marathon at exactly the same time.

Second, this $ 100 billion should be treated like a floor, not a ceiling. And there should be some kind of mechanism to increase public funds associated with this in the years to come.

Third, we need a finance deal that focuses on reducing risk, because otherwise you will never get that large volume of institutional capital that is needed to turn the curve.

Fourth, we need some kind of protection against climate impacts. Because today, if a single-year pandemic can return 100 million people to poverty, climate risks will only worsen year after year. And the poorest communities in the poorest countries have nothing to lean on. And when a perfect concussion storm hits, you have a public health shock and then you have a food shock and you have a natural disaster shock, you can’t expect a country in sub-Saharan Africa to suddenly drop all that money from their country. non-existent fiscal reserves. I call it a global resilience reserve fund that is paid to bolster the fiscal reserves of countries that are being hit by shocks that they never did anything to create.

And finally, we need a very different way of thinking about technology. For example, if you look at something like hydrogen, a lot of the research on it is taking place in Europe. However, much of the demand will come from Asia. But Asian countries are almost completely absent from any kind of hydrogen-related technological association. We need to unite technology developers and markets.

Similarly, when we think of the cheapest technologies, which are aimed at the poor, we have no mechanisms by which the cost of a solar-powered textile unit, or a solar-powered flour mill, or a solar can be reduced. -driven irrigation pump. The market opportunity for these is in the tens of billions of dollars. In India alone, distributed energy can drive livelihoods in a market size of $ 53 billion in rural areas. In sub-Saharan Africa, solar irrigation alone is a almost $ 12 billion chance. But for it to take off, you need to make working capital and consumer finance easily accessible to small entrepreneurs, small households in rural areas.

MEGABYTE: What are the chances that they will see some of that?

AG: I’m still hopeful that at least some elements of this type of arrangement, some of these packages, can still be put together. But it is also possible that everyone is stressed and then of course it is a missed opportunity.

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