Jide Akintunde, Managing Editor/CEO, Financial Nigeria International Limited
Follow Jide Akintunde
Subjects of Interest
- Financial Market
- Fiscal Policy
Africa and the Loss and Damage Fund 12 Dec 2022
Going into the UN climate conference in Egypt, otherwise known as COP27, last month, the most anticipated agenda was the establishment of a “loss and damage” fund. Loss and damage refers to adverse climate events caused by human activities beyond natural climate variability. Greenhouse gas (GHG) emissions from the industrialisation of the economies of the rich, Western nations have been linked to environmental losses and damages. Whereas adverse climatic events – including rising temperatures, drought, flooding, desertification, loss of biodiversity, and sea-level rise – constitute serious global threats, developing countries are least able to cope with their impacts.
Since developing countries contribute far less to the problem but are more vulnerable to it, countries that became rich by causing the problem are expected to fund climate disaster response in poor countries. The rich countries caused the problem. They are able to address its impacts in poor, vulnerable countries. Therefore, they should. This simple logic, however, faces a very complicated reality.
First, the rich countries were not enthusiastic about the establishment of the loss and damage fund. They relented in their opposition to the fund only at the 11th hour of the negotiations at Sharm El Sheikh, just before the curtain fell on COP27. Hardly surprisingly, it took nine years to get to this point. The Warsaw International Mechanism for Loss and Damage was established at COP19 in Warsaw, Poland. Even now, the framework for operationalising the loss and damage fund remains pending. A transitional committee to be set up will develop and present the operational recommendations for adoption at COP28.
Second, COP27 failed to agree on phasing out fossil fuels. The major oil-producing countries lobbied against such agreement. With fossil fuels and industrial activities accounting for 65% of GHG emissions, environmental loss and damage is set to continue – if not increase. This sets the scenario where the problem and its putative solution will continue to co-exist, with the former having the upper hand.
Third, many of the net-exporters of fossil fuels arguing against their phasing out, including Nigeria, remain classified as developing countries vulnerable to climate change. Making the argument for the loss and damage fund murky, they want to continue to make money from activities that harm the environment. While at it, they insist the rich countries should fund their climate actions. This, however, does not envisage a future in which the oil-producers would be similarly accountable for their climate change-inducing activities.
And fourth, rich countries have failed to meet their pledge of mobilising $100 billion yearly in climate finance in developing countries. Thirteen years since the agreement at COP15 in Copenhagen, the financing arrangement has failed to deliver on its set target, therefore leading to the extension of the framework beyond 2020, to 2025. Indeed, there is divergence between the real financing provided and the amounts being reported. For instance, Oxfam said it estimates between just $21-24.5 billion as the “true value” of public climate finance provided in 2020, against a reported figure of $68.3 billion the rich countries said they provided.
The loss and damage fund represents a beaten path that has led only to serial disappointment, especially for Africa. At the “Africa COP”, as COP27 was dubbed, Africa again advertised its helplessness. By hanging the hope for climate change emergency response on the rich countries, the continent was grasping at straws. Its helplessness has become perennial and largely disregarded.
What was evident at COP27 was nations – developed and developing alike – are not treating the climate emergency as a real emergency. The response to Covid-19 as a public health emergency was decisive, well resourced, and even superfluous considering the inflationary impact of the trillions of dollars spent by rich nations on financial interventions to mitigate the economic impact of the pandemic – China’s zero-covid policy being another example. As a juxtaposition, global average temperatures in 2019 rose to 1.1 degrees Celsius above pre-industrial levels, making the goal of limiting warming to 1.5 degrees Celsius, as per the 2015 Paris climate accord, unrealisable.
The ‘financialisation’ of climate action has been largely diversionary from effective and affordable solutions. Trillions of dollars are said to be required annually for climate finance. One of the lessons from Covid-19 financial response is that extra-ordinary fiscal spending could be inflationary and therefore unsustainable.
But more certainly, civic actions, which are well within Africa’s grasp, are either ignored or left to few sustainability-centric private sector organisations. People need information and education to change their environmental malpractices. Governments and environmental civil society organisations should be building networks of climate educators, volunteers, and programs in their countries. They should be supporting people on self-help and community-based, climate-friendly practices that are pertinent to preventing or limiting the impacts of adverse climate events in their localities. Such community-based actions have flourished in rural agriculture, finance, and security.
Ultimately, if the world were to escape a looming climate apocalypse, it would be because of climate-friendly innovations that deliver market-based solutions that are available and affordable. Africa, and more generally developing countries, should get involved in the innovation process. Policymakers should channel the resources they continue to waste – including on climate summit junkets – into fostering an eco-friendly, innovation-based economy.
The governments should use their plain vanilla annual budgets to signal a new environmental direction for their countries and thereby crowd-in private sector investment for green projects. Rather than depending on it, donor funding can support climate emergency management and disaster recovery.
Jide Akintunde is the Managing Editor, Financial Nigeria, and Director, Nigeria Development and Finance Forum