Mobilising Green Funds

Mobilising Green Funds

Context-The final agreement at COP27 at Sharm El Sheikh, Egypt estimates amount of money required to transition to a low Carbon economy

  • Global transition to a low-carbon economy would likely require about US$ 4-6 trillion every year till 2050. About US$ 4 trillion would need to be invested annually in the renewable energy sector till 2030 if the net-zero emissions targets were to be achieved.
  • It means that at least five per cent of the global GDP would need to be directed into climate action every year.
  • It also shows how quickly the cost of inaction has been rising. Just a few years ago, the estimated requirements ranged between 1 and 1.5 per cent of global GDP.
  • The US$ 100 billion amount that the developed countries have promised to mobilise every year (Under Paris Agreement) represents practically the entire money in play right now. Even this US$ 100 billion has not yet been fully realised. Developed countries say they would reach this target by 2023.
  • Significant jump could come from businesses and corporations investing money into green projects.

Problems with Financing

  • In climate finance thus far, private investments have lagged behind public money. Barely 30 per cent of current financial flows are coming from private sources. But, private sector would only participate when it is assured of healthy returns. Here, enabling environment should be created by International Financial institutions and Governments.
  • The current rules and regulations of the global financial system make it extremely difficult for large number of countries to access international finance, particularly those with political instabilities, or weaker institutional and governance structures.
  • Climate finance flows through a maze of channels — bilateral, regional, multilateral. It is in the form of grants, concessionary loans, debt, equity and carbon credits. Hence, There are widely differing assessments of the quantum of climate finance currently being mobilise

Situation of India– According to India’s Long Term Strategy to reach net zero emissions by 2070, tens of trillions of dollars will be required by 2050. Separately, nearly $2 trillion will be required for just for adaptation purposes till 2030

What is India’s Long term Strategy to reach net zero by 2070?

Key Term-

Net Zero– It represents a stage when a country’s net contribution to greenhouse gas emissions is Zero

Way Forward:

    • Developed countries should ensure target of $100 billion by 2023 should be met in accordance with the principle of common but differentiated responsibility.
    • Adaptation finance should be given equal priority in accordance with demand of developing countries.

Syllabus- Mains; GS-3; Climate Change