Paris Global Climate Financing Summit

Recently, they held the Summit for a New Global Financing Pact in Paris with the objective of tackling the lack of financial support for developing countries. The Summit was announced at the 27^th Conference of Parties (COP27) of the UNFCCC. India’s Finance Minister also attended the summit.

What are the Key Highlights of the Summit?

The Scale of Crises Faced by Developing Countries:

Developing countries are grappling with a combination of crises, including poverty, escalating debt levels, and inflation triggered by events such as the Russia-Ukraine Conflict.
Besides economic challenges, developing nations are under pressure to decarbonise their economies while lacking sufficient Climate Finance.

Demands from the Global South:

Leaders from the Global South demand that Multilateral Development Banks (MDB) address transboundary challenges and provide increased resources for development, including climate finance.
Developing countries call for more concessional and grant financing to address their debt burdens, also advocating for debt reductions particularly for the least developed nations.
While acknowledging the potential of private sector investment, they emphasise that long-term development funds are necessary to complement private sector financing.

Announcements at the Summit:

The Summit announced the unlocking of an additional USD 200 billion lending capacity for emerging economies.
The IMF announced the allocation of USD 100 billion in SDRs (Special Drawing Rights) for vulnerable countries, although some SDRs still require approval from the US Congress.
They announced a new Just Energy Transition Partnerships (JETP) deal worth 2.5 billion Euros for Senegal, aimed at increasing the share of renewable energy in the country’s electricity mix.
Zambia and the involved parties reached a USD 6.3 billion debt restructuring deal, and they made calls for a Global Expert Review on Debt, Nature, and Climate.
The EU called for increased coverage of global emissions by Carbon Pricing Mechanisms and allocating a portion of revenues to climate finance.
The Summit indicated that they would achieve the long-awaited USD 100 billion climate finance goal this year.

What is Climate Finance?

About:

It refers to local, national, or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change.

Global Discussions:

The UNFCCC, Kyoto Protocol, and the Paris Agreement call for financial assistance from Parties with more financial resources (Developed Countries) to those that are less endowed and more vulnerable (Developing Countries).
This is in accordance with the principle of “Common but Differentiated Responsibility and Respective Capabilities” (CBDR).
In UNFCCC COP26, they made new financial pledges to support developing countries in achieving the global goal for adapting to the effects of climate change.

Significance

Climate Change Impact Mitgation and Adaptation:

Climate finance requires large-scale investments for climate impact mitigation to significantly reduce emissions.
Adapting to the adverse effects of a changing climate is equally important, and it requires significant financial resources.
Climate finance is critical to achieve the goal of limiting the rise in the earth’s average temperature to below 2°C over pre-industrial levels, (2018 IPCC report).

Recognition of Responsibilities:

It recognises that the contribution of countries to climate change and their capacity to prevent it and cope with its consequences vary enormously.
Hence, developed countries should also continue to take the lead in mobilising climate finance through a variety of actions, including supporting country-driven strategies and taking into account the needs and priorities of developing country Parties.

FAQs About Paris Global Climate Financing Summit

What was the objective of the Paris Global Climate Financing Summit?

The objective of the Paris Global Climate Financing Summit was to tackle the lack of financial support for developing countries in the face of multiple crises, including economic challenges and the need to decarbonize their economies while lacking sufficient climate finance.

When and where was the Summit held?

The Summit was held recently in Paris.

What are some of the key demands from developing countries at the Summit?

Developing countries at the Summit demanded that Multilateral Development Banks (MDB) address transboundary challenges and provide increased resources for development, including climate finance. They also called for more concessional and grant financing to address debt burdens and advocated for debt reductions, particularly for the least developed nations.

What were some of the important announcements made at the Summit?

Some of the announcements made at the Summit included unlocking an additional USD 200 billion lending capacity for emerging economies, allocation of USD 100 billion in Special Drawing Rights (SDRs) by the IMF for vulnerable countries, a new Just Energy Transition Partnerships (JETP) deal worth 2.5 billion Euros for Senegal, and Zambia reaching a USD 6.3 billion debt restructuring deal. The Summit also indicated that the long-awaited USD 100 billion climate finance goal would be achieved this year.

What is climate finance?

Climate finance refers to financing, drawn from public, private, and alternative sources, that supports mitigation and adaptation actions to address climate change at local, national, or transnational levels.

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