CLIMATE FINANCING
Climate finance refers to the funding of activities and projects which is aimed achieving progress against climate change and its impacts on the global community.
Climate finance could also be seen as financing channeled by national, regional and international entities for climate change mitigation and adaptation projects and programs. They include climate specific support mechanisms and financial aid for mitigation and adaptation activities to spur and enable the transition towards low-carbon, climate-resilient growth and development through capacity building, and economic development.
Finance is sourced from public, private and public-private sectors and can be channeled through various intermediaries, notably BFIs, MFIs, development cooperation agencies, the UNFCCC (various funds including those managed by the Global Environment Facility), non-governmental organizations and the private sector.
The objectives may focus on:
Mitigation: To limit or reduce emissions of greenhouse gases (GHGs) to the atmosphere to reduce the risks and hazards of climate change.
Adaptation: To help communities, societies and economies adapt to the adverse impacts of climate change.
Climate finance has been recognized as crucial to achieving significant progress towards climate objectives, as this often requires large-scale infrastructure and the engagement of large portions of populations, both of which can require high levels of investment.
CLIMATE FINANCING IN NIGERIA
According to Nigeria’s commitment to the Paris agreement, Nigeria has embraced the issuance of green bonds as an innovative and alternative means of raising climate finance. Nigeria also planned to reduce emissions by 20 per cent by the year 2030, with the aim of raising the target to 45 per cent, with support from the international community.
Currently, the African Development Bank (AfDB) remains the major driving force of green economy across the African continent. This is evident in the previous supports with over $7 billion in fostering low-carbon growth and her renewed dedication of enhancing climate change adaptation and mitigation in Africa by raising the climate finance status to $5 billion a year by 2020.
The Green Climate Fund (GCF) is another key player in providing adaptation finance for developing countries – with about $10.1 billion in its coffers.
Africa Development Bank (AfDB), Africa's premier institution for mobilizing resources for African economic and social development, is committed to providing and leveraging well-placed finance for climate action as a cornerstone of development.
Beyond political interests/affiliations as well as economic enrichment, the onus now lies on Africa leaders, climate negotiators, civil societies and policy makers to put their mind off the funds promised by developed countries and look inward by internalizing and mobilizing resources – albeit through innovative finance mechanisms.
This is thus, a clarion call for Africa to fully take charge of addressing her climate challenges and develop a proactive master plan towards achieving a greener Africa.
For a sporadic clean energy revolution, Africa should take a cue from Bangladesh which set up a Climate Change Trust Fund and invested over half a billion dollars in addressing adaptation and mitigation projects using its own funding (self funding).
FACTORS RESPONSIBLE FOR THE IMPROPER EXECUTION OF CLIMATE FUNDS
In accordance with the principle of common but differentiated responsibility and respective capabilities set out in the Convention, developed country Parties (Annex II Parties) are to provide financial resources to assist developing country Parties in implementing the objectives of the UNFCCC. It is important for all governments and stakeholders to understand and assess the financial needs. Governments and all other stakeholders also need to understand the sources of this financing, in other words, how these financial resources will be mobilized.
Equally significant is the way in which these resources are transferred to and accessed by developing countries. Developing countries need to know that financial resources are predictable, sustainable, and that the channels used allow them to utilize the resources directly without difficulty. For developed countries, it is important that developing countries are able to demonstrate their ability to effectively receive and utilize the resources.
In addition, severe punishment and arrest should be made by inappropriate utilization of climate funds by political office holders in developing countries or countries where such funds are being sent. There need to be full transparency in the way the resources are used for mitigation and adaptation activities. The effective measurement, reporting and verification of climate finance are keys to building trust between Parties to the Convention, and also for external actors.
Furthermore, funding supposedly provided by the developed countries is erratic and inadequate. This is further marred by the strenuous and cumbersome process of accessing funds within the coffers of climate financing institutions.
BENEFITS OF THE IMPLEMENTATION OF CLIMATE FINANCE IN CURBING THE IMPACTS OF CLIMATE CHANGE ON VULNERABLE COUNTRIES
Climate finance is crucial to addressing climate change, because large-scale investments are needed for the significant reduction of greenhouse gas emissions and for the adaptation to the adverse effects of climate change. As the capacity to prevent and cope with the consequences with climate change varies vastly among countries, countries with more resources should deem it fit to provide financial assistance to the less endowed and more vulnerable countries.
The EU remains committed to contributing its fair share towards the developed countries’ goal of jointly making available USD 100 billion per year by 2020 to support developing countries.
As part of the Paris Agreement, this goal was extended until 2025, prior to which a new collective goal will be set.
The funding will come from a wide variety of public and private, bilateral and multilateral, and alternative sources of finance in the context of meaningful mitigation action and transparent implementation by developing countries.
The Green Climate Fund (GCF) was set up in 2010 at the Cancún climate conference (COP 16). This UN fund has a central role to play in channeling financial resources to developing countries and catalyzing private climate finance.
EU Member States have pledged nearly half of the fund's resources: USD 4.7 billion.
Countries need to attract additional public and private financing to transition to a climate-friendly economy and drive sustainable economic growth. International climate finance should be used as a lever to incentivize climate-resilient and low-carbon investments, complementing domestic resources in developing countries.
WAY FORWARD/POSSIBLE RECOMMENDATIONS
The majority of climate finance will come from private sources, but public funds are also required for many activities that are unlikely to attract sufficient private finance. In addition, public climate funding can be used as a leverage to open channels for private investments.
Transparency of public climate funds should strictly be adhered to by relevant stakeholders involved in the execution of the funds.
In addition, specifically applicable to climate change adaptation, is a focus on vulnerability. The benefits of climate finance as well as its access should be distributed equitably. Vulnerable groups should be prioritized, and special funding provisions should be made for the Least Developed Countries (LDCs).
Furthermore, Integrated as well as innovative funding strategies should be adopted by funding organizations, donor agencies, international NGOs or private stakeholders. Examples of such strategies could include polluter pays principle (carbon-tax or eco-tax) which is common in some developed countries of the world. This principle is applicable to industries that pollute the environment as well as other environmental offenders.
Introduction of Climate Change Club (CCC) to primary, secondary and tertiary institutions of learning, as this will help disseminate information about climate change, climate change finance and the importance of investing of climate change. This will help curb issues associated with inadequate climate funding as proper climate education is necessary for private investors to see the benefits of making investments aimed at reducing the impacts of climate change and the importance of climate finance.
Lastly, there is an urgent need for Africa to explore other means of climate finance and optimally utilize wide arrays of innovative finance mechanisms like project finance, taxes, public-private partnerships, bond and equity finance from capital market; while seeking for climate finances from the developed countries.